Growth has been slowing down since 2011, and “erratic politics” is not helping the situation. Instead it undermines business and public confidence and perpetuates uncertainty, said Deputy Finance Minister, Mcebisi Jonas.
Jonas was speaking at the Association of Black Securities and Investment Professionals (Absip) Financial Services Conference, held in Sandton on Tuesday. He explained that South Africa needs “exceptional leadership” within government and business to achieve inclusive growth and transformation.
“We need exceptional management in government, business and labour throughout all of society,” he said. In 1994, the exceptional leadership was at the heart of decision making which steered the country forward. This leadership managed to reduce poverty levels, improve access to basic services and created and grew the black middle class, he explained.
“To mobilise citizens behind projects, we need exceptional leadership,” said Jonas.
Fragile economies such as Brazil, Turkey and South Africa compare poorly to resilient economies such as South Korea and China, explained Jonas. These emerging economies are too dependent on unreliable sources of foreign investment to finance development and are vulnerable to external shocks. “Due to the structure of these economies, they fail to implement economic reforms where needed.”
South Africa is struggling with low growth and the outlook for 2016 and 2017 is subdued. The country has low levels of gross domestic savings as a percentage of GDP at 16%, compared to saving levels in South Korea at 44%.
“Government is highly indebted. Debt servicing is the fastest growing budget item of government and households,” he said. The value of debt servicing could finance the budget of two provinces or fund tertiary education for the next five years, said Jonas.
Compared to resilient economies which have higher levels of fixed capital investment, South Africa’s investment stands at 19%, whereas China’s capex is at 47% and South Korea’s at 53%.
“We must increase private sector and public sector investment in fixed capital to grow the economy,” said Jonas.
Resilient economies also differ in that they have diversified and higher levels of manufacturing and value added.
The country is in the habit of increasing social expenditure in low growth situations, but this does not solve the problem, said Jonas. “Unemployment continues to rise.”
He said that a new national consensus is needed. This includes renewed growth and vigour. “The growth narrative is weak in the country. We are even weaker when it comes to programmes.” He added that it is necessary to construct a government that is “stronger, capable and less corrupt”.
South Africa should also focus on education and skills development, while access to education should be improved and must be targeted and aligned with the labour market and the economy’s requirements.
“Exceptional leadership in government and business is non-negotiable,” he reiterated.