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We have to be realistic about SA’s prospects

Changes are being made and will lead to improvements, but we should not expect the fixing of the economy to be a swift process.

In the eight years before the global financial crisis, from 2000 to 2008, South Africa’s average GDP growth rate was 4%. Since 2010, the country has only managed to grow its economy at an average of 2% per year.

This has fallen even lower in the last four years. The country has not realised GDP growth of more than 1.5% since 2014, and this year will not be any better.

Source: Stanlib

For many South Africans, this continued stagnation in economic growth is somewhere between frustrating and alarming. Despite changes to leadership in the ANC and the election of a new president, it seems the country’s fortunes have not changed.

As Stanlib chief economist Kevin Lings pointed out at the Allan Gray Investment Summit in Cape Town on Monday, if you look at SA’s GDP growth on a 10-year rolling average basis, the decline since 2010 is clearly apparent – and it hasn’t halted.

Source: Stanlib

However, Lings argues that the general expectation of a swift reversal in SA’s fortunes just because Jacob Zuma is no longer the president have been unrealistic. The problems that the country is dealing with are too substantial to remedy in a short space of time.

The depth of the damage

“We need to have realistic expectations of the turnaround of SA,” says Lings. “I think people put way too much faith in President Cyril Ramaphosa – an expectation that we elected him and he will just fix this.”

Lings points out that if we were analysing a company rather than a country, we would be far more sanguine in our expectations.

“If there was a company that was almost bankrupt and you put a new CEO in charge, how long would you give that CEO to turn around that company? Would you give them weeks or a couple of months? No, you would say realistically that they have the next two to three years.”

This is a complex country, and we are only starting to appreciate the full depth of the damage that was done to the economy over the past decade.

Everybody is aware of the headlines around growing unemployment, corruption, and mismanagement at state-owned enterprises (SOEs). While this certainly feeds the sense of urgency in wanting to correct these problems, it also fosters a sense of helplessness that they may be unfixable. This is particularly true of the debt problem the country has created for itself.

SA’s national debt has increased by R3.8 trillion since 2010. That is a 106% increase over that period.

“What do we have to show for it?” asks Lings.

The obvious answer is: very little to nothing. A lot of that money has been wasted or looted.

Signs of a turnaround

Solving this problem is, however, a complicated and lengthy exercise.

“We are creating unrealistic expectations of how quickly this can turn around,” says Lings. “What you have to ask yourself is: is anything happening to make it better? And the answer, unequivocally, is yes.

“Where we get disappointed is that it’s just taking too long.

“It’s much easier to damage an economy than it is to fix it.”

While it may not yet be reflected in the country’s growth statistics, there are meaningful efforts being made to change SA’s fortunes. Stability has been returned to National Treasury and the South African Revenue Service. New boards have been installed at many SOEs. The Hawks and the National Prosecuting Authority are being revitalised.

“There is a turnaround going on,” says Lings. “I have confidence that Cyril Ramaphosa and his administration will start to make changes. They already have. And that those changes will lead to an improvement.”

One should not, however, expect this to be swift.

“We have been damaging this economy for the last nine or 10 years,” Lings said. “It’s going to take a minimum of another nine or 10 years to fix it. Which means that if in the next 10 years the growth rate gets up to 3%, I would be thrilled.”

What’s significant is that the destruction has been halted.

“To me, we have seen the worst,” said Lings. “The bad news is behind us.”

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Great realistic article.
We also need to give Cyril space as he is clearly able to do this job given time.

I have been a fervent DA supporter, however believe the DA is coming across as petty and weak by constantly targeting Cyril.

The DA needs to sort itself out and win municipalities rather than pick on Cyril. It is Petty and they will lose more votes.

Cyril is the right person to lead our country into a country we can be proud of again. We all need to support and encourage him.

The problem I foresee is that CR does not have 9-10yrs.. more like 3yrs realistically.. and even that is an overestimate as they, the corrupt elements in the ANC, will no doubt try to unseat him this December.

So yah.. until he takes out his opponents i don’t see this working. And while we try and deal with the infighting drama of a political party on a national stage, US is getting ready to cheapen it’s dollar yet again which may lead to another slump in currency for the rand.

Add on threats of sarb nationalization, prescribed assets, overstaffing at most SOEs and we have better chances winning the lotto

I agree. Saffas place too much hope on ONE person, Cyril. WHO will replace CR when he steps down after his term, or his health fails?

Agree on DA. Its time Mmusi and company used some intelligence before whining in parliament looking for cheap brownie points. They doing more damage to the party at every session. Give CR a chance if he may have reformed although the “boiling the frog” comment is still worrying behind the scenes.

They (DA) have totally lost their way. Picking the wrong battles under present leadership


If the president of Venezuela stood up today and said: It’s not what your country can do for you but what you can do for your country.

Would you support him and give him a chance? What’s the difference with this administration who has ruined the nation?

Actions speak louder than words, and yet after some 2+ years, there has been no visible action by CR to talk of other than a roadshow of R100bil investment pledges that haven’t come through.

Why did that old saying: In the land of the blind the one-eyed man is king” come to me when I read this?

“The DA needs to sort itself out and win municipalities”
What a great tactic.
The DA should use that as their strategic focus to become a real force in SA.
At this time the DA tries to win over voters from the ANC, but they have nothing to offer and in the process they are alienating their current supporters on a grand scale.
Focus on municipalities, winning more and more municipalities, keep the national presence and when you have enough localised support expand the national focus.
A party that can deliver on the municipal stage will have something to offer
Wlll take many years to achieve or you can slowly waste away as a non entity. (ala Cope, Holomisa etc )
So, DA take this to your strategy meeting.

Sorry; you are simply shooting the messenger and doing nothing about the real issues the DA is highlighting. Saviour Cyril (and his chum Gordhan) is just like his mirror image in Zim; the VP that supported the rotten Zuma all the way, through thick and thin. Now you expect this obscenely wealthy ego tripper to save you and SA?

Dream on. Way better to put your weight behind the DA to unseat the ANC, regardless of what Peter Bruce, Max du Preez and Melania Verwoerd whisper in your ear.

But too late I fear.

Never put your faith in any single person!
Unfortunately the rot is rooted too deeply. CR is not in control and the damage has been done.
Any one with a sound mind will realist that the state of SOE’s and high government debt (which will lead further increase in taxes), high unemployment, high crime, terrible economic growth, general disinvestment from SA will NOT be turned around in the next 10 years. Where will CR be then?
Maybe SA must just become a tourist destination, but oh no the high crime rate is preventing that as well!

Cant agree.

Our dearest president was part of the team that is responsible for the destruction. Why is there the expectation he is going to fix it. It is obvious he is not even in charge. He is not a business person either. He is a professional beneficiary.

It wont take 10 years to fix. How can it when your population growths faster than the economy?

How many corrupt cadres have been locked up? None. They are all still sitting in parliament and in municipalities all around the country.

These economists have to come up with some nonsense to try and protect their clients investments in SA and convince people now is the time to invest in SA INC.

Its not.

This is the real issue-population grows ahead of the economy so we all get poorer. The middle class is being robbed silly-VAT at 15%, fuel levies, rates through the roof, electricity more than triple inflation over the last 10 years, income tax at 45% at slightly over USD 100k, high Capital gains tax, medical aid limited to a tax credit, and plans for NHI and a wealth tax.

So the young and skilled (and old and rich) leave here and stop paying taxes putting more pressure on an unskilled, resources driven third world economy. One can live in Portugal close to tax free (and low tax in Mauritius or Malta or Israel or the uK) and spend 180 days here and pay SARS no income tax and CGT only once-when you flee these unhappy shores

Spot on – We do have to be realistic, but we are NOT being realistic by leaving the same people in charge and thinking anything will change. I also take exception to statements like :”We have been damaging this economy for the last nine or 10 years,” and “This is particularly true of the debt problem the country has created for itself.” I guess standing up in front of all those investment professionals, government representatives, industry players and peers makes it difficult to speak truthfully and frankly and saying that its the ANC and it’s voters who have been doing damage to this country, and that its the ANC and its voters who have created this debt problem, NO ONE ELSE!!! Stop making this everyone’s fault Lings! Ordinary people are now expected to pay for the injustices of apartheid AND the injustices of freedom (read: ANC looting) and then we must find comfort in your words that the worst is behind us when NOTHING HAS CHANGED and your statement is founded on your own hopes and dreams? Perhaps Lings has political ambitions….why else blow so much smoke….

The ANC is not interested in fixing this country, they are only interested in preserving their position of power and control over the country’s purse strings so they can abuse it at will. People keep expecting the ANC to change but why should they? They abused this country’s coffers to their heart’s content for 9 long years and still received a mandate from no less than 57% of the voting public.

What possible motive do they have to change now? Now if they had just scraped in, that would be a different matter. The voters had their chance to show that they would not accept corruption from their leaders and they blew it. Either people in this country are simply too ignorant to be entrusted with a vote or they enjoy having any prospect of a better future being systematically stripped away.

If anyone can offer an explanation for the mystery that is the ANC voter, I would love to hear it.

According to this website the average IQ of South Africans is 77. The Wechsler Intelligence Scale classifies an IQ Score of 77 as borderline intelligence which is also considered borderline mental retardation. So when South African’s do unexplainable things, now you know why.

A turnaround CEO’s job is made infinitely more difficult, if not impossible, if a section of his management and staff is actively trying to undermine and sabotage him and his project. The same principle would apply to our President.

The economic and political analyst Peter Attard Kontalto (?) said that at the DTI there is no sense of crisis, no sense of urgency.

That can be said of every government department. The ANC had 57% of the vote and now they are going to sleep again.

CR is slowly bringing about much needed reforms. However, we need leadership, hard work and accountability at all levels.

Some good news: The Investigating Directorate, who will prosecutes the State Capturers, is busy appointing experienced senior counsel from private practice to assist with asset forfeiture and prosecution.

Let us also not forget that our education system is a stinker and has been for much of the past 25 years. Who, then, must take over and lead the country to nirvana, when the produce of the education system can’t read or write. We’ve had one Prez with a standard 3 and look at how he cocked it up. Imagine having millions more who are functionally uneducated. Where will the expertise come from that we need in the private and public sectors to rebuilt our broken down country? Political will is extremely important, but without the requisite skill and expertise it will remain a pipe dream for many more decades.

If it took 34 year old Thomas Sankara 4 years to turn around things in Burkina Faso, why cant CR do it here. He needs to show true leadership… that is what South Africa needs.

Eskom is a wonderful metaphor for SA. Without a big brother to bail it out, it’s game over. There is no big brother to come to SA’s aid.
The issues are deeper seated. The debt to GDP issue (including the debt of parastatals) is one thing. Add to that 2 school generations who – if the maths pass rate were set at 50%, 80 % would have failed – and reverse globalisation, who the hell is going to employ these people?
The masses will become increasingly disaffected, and politics will lurch to the left.
Ramaphosa is one man. Perhaps even a good man. But he has no chance. The 10 lost years were the nail in the coffin.

A recent article in the Daily Maverick, written by a political risk consultant in Lagos, has insight into Africa (which SA is part of…obviously).

Some alarming similarities between past African leaders on the continent, and our own ANC. (..and then CR talks about SA’s “prospects”….)

Want to know what lies ahead for SA??? Read further:

Thanks for the link to this excellent article!

You’re welcome Beachcomber. A hard-hitting article (albeit a bit long, but in easily read style)

Am sure CR (and other senior leaders) are well aware that private investment is THE KEY (…i.e. creating the policy certainty, the correct policies which should lead to investment & business confidence SA needs)

The big question remains, not that if CR and his party leaders know it (…or do they care?) but has this wisdom sunk in with the average majority voters? I doubt it.
I anticipate that the majority of voters will keep stretching their arms out, “chosen out of free will” to be handcuffed by ongoing poverty…. Choose your “king” wisely, I say….

Ramaphoza is an avowed communist…..that should be South Africa’s concern!

“This is a complex country, and we are only starting to appreciate the full depth of the damage that was done to the economy over the past decade.”

If I may correct Mr Lings – that should be “damage done over the last 25 years”. And installing “new boards” hasn’t worked for many years; why should it now? Where were these brilliant, dedicated managers hiding for so long?

I think we should be told…

I have seen it many times. A business can be changed around in one day. The bankrupt farmer sells his farm to the successful farmer today, and tomorrow that farm is profitable.

The problem we face is that the bankrupt owners of this country are clinging to the land. They do not want to concede defeat and hand the land to the successful political opposition who proved their success in the metros. The country will remain bankrupt for as long as the current owners are living with their heads in the sand. The bank won’t force them off the land because they own the printing press. They print their own cashflow.

I have never seen the owner of a bankrupt farm turn his business around by simply employing a new manager. The new manager will simply implement the failed models of the owner. Ramaphosa is the ANC, my friends.

Wise words Sensei but as a (fellow?) farmer one knows that taking over a farm that has been hollowed out by decades of over grazing (soil erosion and population growth), lack of long term fertlisation (education), zero maintenance on fences (security) and irrigation systems is a challenging prospect. I look at Johannesburg and Pretoria, destroyed by the ANC with corrupt cadre traitors infiltrated into the system and I despair.

SA is borrowing to fund ANC corruption. Certainly not sustainable.

A trillion here, a trillion there, soon we’ll be talking real money!! (just wait until the cadres get their hands on the printing presses)

It took the ANC 25 years to cripple the economy and the country. With the ANC in power it will never be fixed again. Yes CR is their best candidate but he is only a puppet presidency due to internal politicking of the ANC. Fact is neither the DA nor the EFF nor the FV+ is capable to govern the country any better. Fact is labour unions has more power than the ANC government

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