Why Repairing South Africa’s Value Proposition is Imperative for a “New Dawn"
By Musa Mdunge
South Africans once again have heard depressing economic news that the South African economy contracted by -3.2%, which represented the biggest quarterly economic contraction in a decade. However, even with the nightmare we have, the African National Congress has continued to be at the centre of providing policy uncertainty. You had the ANC’s Secretary-General of the ANC, Ace Magashule announcing that the ANC had taken a decision to review the mandate of the South African Reserve Bank, to include, explicitly economic growth as the central mandate of the Sarb, beyond its price stability mandate at its recent ANC NEC Lekgotla.
However, the ANC’s Head of Economic Transformation, Enoch Godongwana and the Finance Minister, Tito Mboweni were quick to contradict Magashule's statement, pointing out that the views expressed by Magashule were not government policy. This has left the media, investors, civil society and ordinary people confused about the where policy decisions are made and have once again reinforced concerns over the MEDIUM policy uncertainty risk posed to businesses operating in South Africa.
Our weak growth numbers even in sectors that don’t require much electricity in their inputs, highlights that the fixed investment freeze that has gripped the country for the past 11 years is likely to remain the status quo. Investors who make fixed investment decision based on the long-term outlook, fear that South Africa’s failure to move swiftly to introduce economic reforms in the economy will stifle a return to healthy economic growth and a reduction in South Africa sovereign debt risk.
According to the famous South African entrepreneur and public speaker, Vusi Thembekwayo, South Africa’s issue is “not a job creation failure but value creation failure.” South Africa has failed to make a value pitch that would compel both local and international businesses to invest in South Africa and by virtue of establishing interests in South Africa, create new jobs.
As South Africans, how can be that we live in a country that is home to Africa’s largest port (Durban), pre-eminent, African financial capital (Johannesburg), one of the leading African tourist attractions in the world ( Cape Town), leading African automobile manufacturing hub (Port Elizabeth) and yet we are struggling to leverage our economic potential. Perhaps, it the political leadership deficit we have that had led to us facing a triple deficit storm (balance of payment deficit and budget deficit). Both deficits paint the picture of an economy too weak to compete globally and a public purse that lacks the capacity to stimulate the economy back to life.
What can be done to fix this?
President Cyril Ramaphosa and the ANC at large will need to make a concerted effort to sing from the same hymn book. While the ANC foundation of policy innovation, the government must be effective machinery of policy implementation of policies, with no fear or contradictions. Moreover, greater coordination between all levels of government must be emphasized, with the local government often being blamed for making doing business in South Africa so difficult.
Widespread financial reform must be the order of the day, with legislative authority being used to increase financial risks tolerance of state-owned financial services for the funding of small and medium businesses in South Africa, with the objective of supporting black industrialists to become export players. In this regard the recently signed African Continental Free Trade Agreement must be used to leverage greater access to Africa’s 1.2 billion markets for local businesses seeking to expand their consumer base because let’s face it South Africa’s 57 million population is just not big enough.
Labour reform is needed to attract the best continental talent into the country’s productive sector, while education policy reform is needed to improve local skills. All of this will create value from which South Africa can once again be the hope of the world. If our value was the 1994 political miracle and the Mandela magic that followed, the “new dawn’s” value proposition is an economic question! What will be our answer? Your deicide!