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Time to implement reforms running out – FirstRand chair

‘Economic change has become inevitable.’
FirstRand has a long history of allowing its chair to use the annual report as a platform to weigh in on matters of national importance. Image: Dwayne Senior, Bloomberg

FirstRand chair Roger Jardine says the “socio-economic fallout of the Covid-19 pandemic has brought forward the inevitable inflection point that our country was bound to eventually face”.

“Confronted by an accelerating unemployment rate, falling economic activity and an ever-rising government debt burden, economic change has become inevitable as the weight of these developments is becoming too heavy for the current system to carry.”

Writing in the banking group’s 2020 annual report, Jardine says the country still has “the opportunity to choose how we would best effect the changes necessary to reverse the trajectory”.

“These choices cannot be wasted and need to be executed in a manner that optimises the roles of each of the social partners. The government should set the rules of the game by fostering an environment characterised by sound fiscal management, safety and security, intolerance for corruption, certainty of property rights, delivery of common goods, and protection of the poor and vulnerable.

“This will create an environment for businesses to play their part in delivering goods and services through employing skills, capital and technology. Labour should play its part by ensuring that South Africa has a highly competitive labour force.”

Jardine warns the “time to implement these choices is running out”, given the state of the economy and government finances.

Signal of intent needed

“However, by executing on a few reforms, such as fiscal restraint, successful auctioning of spectrum, allowing business to generate electricity and attracting highly skilled people from the international labour markets, the government will send a strong signal of intent which can gain us some valuable time to implement the rest of the necessary reforms.

“The good news is that most of these measures have been suggested by government, it is now simply a matter of implementing them.”

Roger Jardine. Image: Moneyweb

FirstRand has a long history of allowing its chairs to use the annual report as a platform to weigh in on matters of national importance.

These letters are often blunt and openly critical of government.

Last year, Jardine questioned “government’s apparent unwillingness to champion the private sector as a growth engine” and called it “mystifying”. In 2018, he used his letter to comment on land reform, income inequality and what he described as “broken” state-owned entities.

Read: FirstRand chair mystified by government

Jardine says it took a “once in 100-year crisis” – the Covid-19 pandemic – for “government to ‘crowd in’ the private sector to assist building much-needed capacity”.

Read: SA shed 2.2m jobs in the second quarter

Rapid scaling of solutions

This was the central topic of his letter last year, and the response to the pandemic “proved how this partnership can rapidly scale solutions across the country”.

He says it is “extremely important that as we move back to some level of normality we do not lose this momentum”.

“South Africa is in a parlous state and needs to rapidly rebuild.

“Government cannot and should not do this alone as it is now in a worse fiscal position with depleted capacity.”

One area offered as where an immediate impact can be made is infrastructure. While he acknowledges work done to date, Jardine says progress “has been slower than originally anticipated and needs to be accelerated”.

“The country’s use of PPPs [public-private partnerships] as a percentage of the total infrastructure budget currently sits at 2%, which is well below the global average of 5-15% for countries with a robust PPP framework such as ours.”

Shift required

He continued: “As the country finds itself in a low-investment, low-growth trap, the public sector needs to urgently leverage the private sector to create an ecosystem of shared risk, accountability and a deeper pool of skills and expertise. A shift is required in the current government and private sector engagement model.

“While the private sector is willing, able and deeply capacitated to partner with government, it cannot be a model based on crowding out the private sector wherever possible and only finding a useful space for the private sector when convenient or in times of desperation (for example, the current health pandemic).”

Jardine is realistic, however, citing the fear that large projects “become vehicles for graft” as an obvious obstacle to government’s ambitious infrastructure programme.
“If our assumption is that corruption is endemic in both the public and private sector, this also makes a strong case for more PPPs where the potential for the abuse of tender processes is significantly reduced.

“Depressingly, corruption continues to be an ongoing and toxic reality for the country, and even more distressing is the absolute callousness demonstrated during the Covid-19 pandemic, with the disappearance of personal protective equipment (PPE) and food for the poor.

Read: Ramaphosa appoints ministerial task team to tackle Covid-19 corruption

“I am fully supportive of the President’s absolute and public commitment to rid the government of rent extraction and corruption. The granting of the International Monetary Fund loan is one indication that the President has convinced some external funders that he is serious about this topic and he has certainly made some progress.

“Until corrupt people, both in the public and private sector, are successfully prosecuted and punished appropriately, the pervasive culture of looting will persist. It is therefore very important that the criminal justice system and the National Prosecuting Authority be properly resourced to enable them to do their jobs without any institutional constraints.”

Seeing people being brought to account “will be extremely positive for the country’s psyche”.

“It would also be an important signal for inward investment which is another much needed impetus for economic recovery.”

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Roger can’t say things like ‘sunset bee’, but that would be a key reform.

Alternatively, everyone should be getting how to manage in a default tips from the Argentines.

It should be obvious to Mr. Jardine that the ANC / Commies that worked so hard for so many years on engineering the economic disaster we now sit on might not exactly be the guys that are part of a speedy solution. There cannot be a sane solution if these destroyers have still anything to say.

How on earth can those who created the problem be the solution? Thats ridiculous!

The best predictor of future behaviour is past behaviour

Don’t hold us for fools ANC

You put us on this trajectory, we the tax payers blind folded and oblivious to your lies!

Till now!

One begs the question if your modus operandi is ultimately socialism?

Judging by your actions, we cannot believe otherwise!

All to often we hear the words “ Revolutionaries” by a certain party.

A favourite socialist decree

And mum is the word from you the ANC!

All collectivists are under the false impression that “the economy” is a force similar to nature. Socialism relies on the misperception that resources are abundant. No matter how much they exploit, overgraze, mismanage, plunder, neglect or erode the land as a shared resource, the sun always shines the next day, it rains again, the grass regrows, the cow calves and gives milk, and the seasons follow one another.

This is how the ignorant socialist perceives the “economy”. At the very basis of the collectivist theory is this fallacy that the economy is an infinite resource, to be infinitely divided, and shared. This is far from reality because first-year economy students learn that it is the scarcity of precious resources that forces man to fix a value to every resource, making the price a barometer of its scarcity. The market system does not protect resources from overgrazing, neglect, exploitation and plunder, out of morality or virtue, the system protects the resources because it has an economic value. The economic value of the resource motivates and forces the owner of the asset to protect it.

The collectivist cultures are not more immoral and destructive than everybody else when they inevitably destroy the economy. They simply don’t have a mechanism to determine the value of the resources, and therefore they simply overexploit and neglect the means of production until famine resets the system. It is clear, therefore, that all socialist ideas are based upon ignorance and stupidity.

This is the most basic reason why economies always grow under the system of the private ownership of property, and always fall apart under socialism.

This concept is so simple, yet so few understand it?

I am not so sure that it is based on ignorance and stupidity. In all socialist countries we have two classes: the ruling politburo and the proletariat. The politburo controls information. Stalin once said “Ideas are more powerful than guns. We would not let our enemies have guns, why should we let them have ideas”? If you control information, you can tell the populace how lucky they are and how terribly they would be suffering under a fascist imperialist capitalist regime. Under a command economy, there are no pricing signals. Goods are either over or under produced. Coal and machinery to make more goods machinery were over produced in the USSR. Basic staples were under produced. This must be readily apparent to the ruling class but why would they willingly abandon something that suits them, if not the proletariat? The aim would be to prolong the plunder as long as possible. Of course there were special shops for the politburo members where shortages or empty shelves were not something with which one would concern oneself.

It is for this reason the ANC will not relinquish control of the SABC. Marxist mindsets, relentless propaganda, an ignorant uneducated population and handing out the product of someone else’s labour are the stock in trade of the ANC. To prolong the plunder, protect the position of power at all costs.

I have a friend married to a Russian. She never had a toaster as a child but complains bitterly about the fact that medical care is not free. She does not make the connection. I once did some business with a Mozambican chap in 1987. This was during the dark days of the apartheid regime. One day after the driver had fetched him from the airport, I asked him where his luggage was. He just smiled, somewhat slyly.

This government has been flattening the economic curve with a hand compactor since the previous global financial crisis. Then along came the following global crisis, in the form of a pandemic, which handed them the keys to a steamroller!

‘The government should set the rules of the game by fostering an environment characterised by sound fiscal management, safety and security, intolerance for corruption, certainty of property rights, delivery of common goods, and protection of the poor and vulnerable.’ And this is a man in charge of a large financial institution that still thinks this is even worth writing as something that should/can happen. South Africa is intellectually defunct at the highest levels certainly of government but seemingly of private enterprise as well. Unreal.

THanks Moneyweb for restricting comments

You have biased Moderator!!!!

Full marks to Mr Jardine for a hard-hitting statement.

End of comments.





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