South Africa is facing economic headwinds and should change tack

South Africa is experiencing economic doldrums. Low growth, budget deficits, and ratings downgrades are amongst the challenges. Nhlanhla Nene, our Finance Minister, admitting that we have almost reached rock bottom. But South Africa is not without solutions – provided that government and business change tack by collaborating in the delivery. Earlier in 2014, Pravin Gordhan confirmed that SA’s private sector generates 70% of GDP and that business should be responsible for driving the economy with the state playing a facilitating role. Minister Nene has reinforced this message of collaboration.

Government’s requirements of business are clear which are to generate jobs, profits and tax revenues for inclusive development. Business requires Government to establish a business-friendly environment to be able to innovate and expand. To encourage investors and foreign direct investment, South Africa needs a clear message that we are ‘open for business’ with consistent policies and labour market reform. Pragmatic ways in which government can more effectively facilitate growth, include:


South Africa’s energy constraints shave 0.5% off GDP growth each year. Projects such as Medupi are behind schedule and over budget, but fortunately production is expected soon as according to the IMF, economic growth could increase by 3.6% in 2015 with increased power supply. Fortunately Eskom is also investing in renewable energy and a focus on the Gas Master Plan could improve energy security.


46% of privately held businesses were negatively affected by crime in 2012 and SA’s rampant corruption is equally damaging. Government must make a clear stance on how it will address this issue to demonstrate, to local and global markets, that SA is ‘open for business’.


Government’s progressive infrastructure plans need to be implemented. Connectedness is pivotal and this include flights, broadband, public transport and migration policy. For flights, Government should seriously consider introducing an ‘open skies’ policy as being able to connect directly to Africa and other global cities is essential to help drive growth. Similarly, broadband needs to be cheap and fast because an increase in connectivity increases GDP – up 0.25% – 1.4% according to the World Economic Forum. An open migration policy is also needed to attract skills required for innovation and growth, and to build capacity.


Above all, government can help by establishing greater investor certainty. A stable, predictable economic environment would not only unlock the long term growth plans of local firms, but also attract more multinational corporations. The public and private sectors need to collaborate again – to enable a transition to growth despite the headwinds. The National Development Plan (NDP) sets the long-term vision – now is the time to act to ensure its effective and consistent execution.

This article by Chris Whelan featured as When Facing Headwinds Change Tack in Business Report of the Cape Times, Star, Mercury and Pretoria News

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