At our recent CEO Engagement, Attracting Investment to Grow the Economy, with Standard Bank CEO, Sim Tshabalala, it was emphasised that the structural reforms required for the country’s growth and prosperity are arguably more important than the ratings pronouncement in December. Irrespective of the ratings decision, current GDP growth rates require stimulus and sustained action. Continued growth at sub-3% levels is a recipe for disaster as unemployment and social strife would escalate rapidly, as costs soar and high levels of debt become unserviceable. Our low economic growth is largely due to the lack of business confidence resulting from policy uncertainty and political risk. A discordant government lacking fiscal prudence and unable to ensure sound governance at SOEs is wreaking havoc with our economy.
Sim highlighted the need to keep our debt-to-GDP ratio below 50%, and that SA needs action for growth including labour reforms for more flexibility, reviewing the economic sense of the national minimum wage, implementation of mineral and resources legislation and lastly, that the governance and balance sheets of SOEs must be turned around. He also emphasised that business leaders must get involved directly as well as through organised business to engage government, and make a case for the type of business environment needed for prosperity. Business is concerned, however prepared to play its role in driving the economic growth required for everyone’s benefit. This requires political stability, policy certainty; and a well-governed environment with institutional integrity, respect for the rule of law, and constitutionalism.
The collaboration between business, government and labour is arduous but gaining traction, and four key work streams have emerged, namely; avoiding a sovereign ratings downgrade, funding and supporting of SMEs, youth employment, and driving key investment projects in targeted industries.
Focusing on the fourth work stream which includes SOEs, Sim said that sectors of the economy that have the greatest potential for accelerating growth and creating jobs were identified. These include:
- Education: led by ABSA, this sub-stream tackles challenges related to funding of the built environment in higher education; as well as driving collaboration between business, education authorities, and teachers’ unions to identify innovative ways of incentivising star teachers and increasing the use of ICT in schools.
- Health: led by RMB, this team is focused on improved private sector training of nurses and medical specialists.
- Pharmaceutical: also led by RMB, focus areas for this sub-stream include legislative changes to encourage local manufacture of pharmaceuticals, and discussion around the proposed NHI scheme.
- Manufacturing: led by Standard Bank, this team is fighting for better alignment of National, Provincial and Local infrastructure. Challenges include increasing competition from labour imports, increasing labour costs, high energy costs, and regulatory uncertainty.
- Mining: mineral and resources legislation urgently requires finalisation and is getting serious attention.
- Agriculture: led by ABSA, driving collaboration between government and private companies to identify investment opportunities that could be unblocked through funding and regulatory change, particularly given our current draught situation. There is also the urgent need to resolve uncertainty around water and property rights.
- Tourism: another initiative led by Standard Bank, some of the changes being debated here include visa free travel for business people to and from major trading partners in Africa and other emerging markets. Currently, government is considering Visa on Arrival for India, Russia and China,
- Governance and funding of SOEs: ideas have been developed on the governance and funding of SOEs and these are currently in debate.
In closing, Sim said that there is no need for paralysis or panic. Our country is maturing at a fast rate and it is modernising. We have reforms to make and we are aware of what they are. With collaboration between business and government greater than before, he is hopeful about what is possible.