The South African economy is in urgent need of a recovery programme that lifts the rate of investment, stimulates growth and begins to create jobs at a faster pace. This is possible if all social partners work together on a common programme for investment, growth and jobs.
We will be able to unleash a wave of investment if we act boldly to remove political and policy uncertainties, root out corruption and reassert the positive, long-term fundamental strengths of the South African economy.
We need to balance two potentially competing objectives:
1. We need to stimulate demand to increase economic activity, and
2. Bring our public finances under control to avoid a debt trap and the related loss of policy sovereignty.
Objective 1: if we can boost demand in the economy through restoring confidence and removing obstacles to investment, we will begin to create more jobs, improve consumer confidence and lay fertile ground for further investments. We also need to increase the numbers of foreign tourists and expand our exports to a wider range of trading partners.
Objective 2: we need to stabilise our public finances by cutting back expenditure and increasing certain taxes. This fiscal consolidation will have the undesirable effect of dampening demand in an economy already suffering the effects of a prolonged period of low growth.
The surest way to counter this impact of fiscal consolidation is to stimulate new sources of demand through boosting private sector investment. In other words we must take active steps to ensure that we bring dynamism to the South African economy over the next few years by unleashing a massive new wave of private sector investment.
This macro-economic vision for South Africa will be more readily achieved if we undertake a range of complementary micro-economic reforms. These reforms will be best identified, discussed and agreed to by social partners from government, labour, business and communities. They should form part of a New Deal for our country which is capable of unleashing our competitive and entrepreneurial energies.
We must urgently break the ongoing deadlock on the regulation and transformation of the mining sector. South Africa enjoys world-class mineral resources – but these are not being properly utilised. It is imperative that we begin to attain higher levels of mining exploration and investment, which will assist us in creating jobs and boosting export revenues.
After years of de-industrialisation, our manufacturing sector needs specific support measures. We must improve tax incentives for research and development, energy efficiency, small manufacturing enterprises and special economic zones.
We must boost manufacturing exports through better management of port tariffs and plans that integrate our manufacturers into global production processes. We must emulate the industrial policy success of the motor industry in other sectors, while expanding the number of black industrialists producing high-value manufactured products for domestic and international customers.
Buy and build local products
We must strengthen our ‘buy and build local’ campaign to boost demand for manufactured products. We can achieve this through strict adherence to government local procurement policies and by placing positive pressure on businesses and consumers to be more Proudly South African in their choices. Within the rules of the World Trade Organisation, we must use government’s procurement muscle to bolster manufacturing, while targeting specific areas where we can replace imports with local products.
Support small business
We will need to review all regulatory requirements on new start-ups to encourage entrepreneurship, increase innovation and accelerate growth. Similarly, we must reduce the cost of doing business for all enterprises, but especially smaller firms and township businesses.
Land redistribution has to be accelerated, together with systems that improve land productivity and support for farming activity by black commercial farmers. We need greater investment in irrigation, and we need to support small-scale farmers to assist them to gain profitable access to markets for their products.
South Africa’s tourism potential is world-class, and we must strive to increase the number of visiting tourists by millions each year. To unlock our vast tourism potential visa requirements should be simplified, marketing efforts should be expanded, and the safety and security of tourists must be regarded as paramount. It is critically important that more black South Africans are empowered to participate fully in owning and managing tourism assets.
Financial and services sector
South Africa’s services sector, including financial, consulting and professional services, enjoys very strong capabilities. There is vast potential to grow this sector both internally and through expansion into other countries, particularly the rest of Africa. Continued expansion of the services sector, as well as building stronger links to the productive sectors of farming, construction, mining and manufacturing, is a priority. Also a priority is the transformation of this sector to ensure growth opportunities for black South Africans.
South Africa has world-class renewable energy resources, and the uncertainty hanging over our solar and wind projects must be removed. We can then position our country aggressively for energy-intensive investments based on our green energy advantage.
What is urgent is that we restore good governance at all state-owned companies, whose networks and services are crucial investment enablers. An immediate task is the appointment of boards and executives who are skilled and experienced in a mix of relevant disciplines, have impeccable credentials, are incorruptible, and are committed to public service and transformation. State-owned companies must be restructured and more effectively regulated where necessary in order to take pressure off the fiscus and improve efficiency, competition and social outcomes.
We must also focus attention on improving the delivery of public services. Recent statistics on the reading competencies of our young learners are very troubling, and provide a clear signal that the standard of basic education urgently needs to be improved. Similarly, the quality of our public health services urgently needs to be addressed. Unless we repair the functioning of the developmental state, we will not be able to transform the lives of our people.
The public sector cannot, on its own, lift investment to the NDP target of 30% of GDP. Rather, the public sector must shift much of its focus to creating an investor-friendly environment and infrastructure for a great increase in private sector investments.
We have it within our powers to rebuild confidence – particularly as much of the prevailing negativity is the result of political and policy uncertainty. A restoration of confidence is the quickest and cheapest form of stimulus available, especially in light of our fiscal constraints.