Publication: Print Media: Sunday Times
Author: Colin Coleman, Zingiswa Losi and Mxolisi Mgojo
Publish Date: 09 June 2024
Now that the elections are over, South Africans must reflect on the critical issues a seventh administration must face up to. One issue stands high above all else: driving higher levels of economic growth in South Africa.
In the last decade, South Africa has recorded dismal economic growth rates of under 1%, below our population growth rate. With 16.7-million citizens employed today, our official unemployment has expanded to 8.2-million South Africans, or 33% (rising to 12.1-million jobless, or 41%, when including those who have given up looking for work). South Africa’s economy can be characterised as being in a semi-permanent low-growth, job-destroying, structural trap.
Our dollar GDP is lower today than it was in 2011. Our GDP per capita is $2,700 (about R51,00) per person less than it was in 2011. By comparison, since 2011, Poland grew the size of its GDP by over $160bn. This lost GDP robs our nation of resources to educate our people, to police the streets and service our hospitals. Businesses, workers, investors, households, the unemployed and all South Africans are worse off, with inequality, crime and corruption rising as a direct response to the desperation of those facing hunger and poverty, representing around half of our nation.
Added to this picture, the JSE all-share index returned just 2% a year in dollars over the last 10 years, compared to the S&P 500’s 12% annual return. International investors describe South Africa as a bond market dream and an equity market headache.
This picture should be a wake-up call to the new administration. There can be no more important task than turning this abysmal track record around. We need economic growth closer to 4%-5% per annum.
Now is the time for the new Government, all political and economic actors, and stakeholders, to turn our undivided attention to one question: “How do we drive South Africa’s economic growth rates much higher?”
We may contest each other about how best to distribute the benefits of growth, but we must now join hands to focus on driving economic growth higher. On this our beloved nation will sink, tread water or, if we let it, drown. It is up to us, South Africa’s leaders, to make smart, informed and progressive choices and chart the way forward.
Business and workers must ask, and we must lock arms with the government to find answers to, these questions:
- What do we need to do attract substantial foreign and domestic direct investment? How do we get the world’s largest companies to invest much more in plant, people and equipment in South Africa? What package of tax, trade, labour, logistics, infrastructure, incentives and broad regulatory regime will attract these companies to allocate capital and people, and invest here?
- How can we build on the business and labour partnerships with the government on energy, crime and logistics to drive a joint vision for, and concrete plan to achieve, higher economic growth?
- How do we make it more attractive for global companies that wish to invest here, to acquire assets in South Africa, or trade here, to do so? How can we remove regulatory hurdles, while protecting the public interest and decent work?
- How can we motivate local companies to grow their operations domestically and in Africa, and remove the obstacles for our companies to be national champions on the global stage?
- What potentially globally competitive South African companies and growth industries should be supported with fiscal support, tax and industrial incentives to give them a kick-start?
- What sources of domestic investment and capital are available to stimulate economic growth? How are such resources, including our state budget, best used to stimulate economic activity with the highest national multiplier effects?
- While recognising the tensions between labour and business, what space is there for agreements to provide a conducive environment for investment? What could anchor such an agreement between labour and business to drive transformation, while unblocking the impulse to invest? How do we unlock private capital to create jobs at scale?
- How do we provide operating, financial and technological support and generate an ecosystem, and an environment, conducive to growing the job-generating SMME sector?
- What social welfare support and mass employment programmes for the poor and unemployed are needed for the unemployed to survive, learn skills and find work, while we navigate a national glide path to when such support is no longer needed, when such consumptive state support can be liberated for productive purposes as jobs, and incomes for many, increase alongside improvements in inclusive economic growth and performance?
- What skills are needed at all levels in the government to execute an adopted growth strategy successfully? How do we get the best South Africans to occupy pivotal positions of leadership in the economy and institutions of state, at all levels, on which implementing such a growth strategy depends?
These and many other questions must be decisively answered if we are to have the hope of turning our current low growth, job destroying economy around. We must now deploy all resources at our disposal to single-mindedly focus on lifting economic growth for our citizens, our economy and our companies, thereby creating permanent jobs, whilst reducing poverty and inequality in partnership with an effective state.
Some ideas that have been explored include:
First, expanding economic production and investment. Continuous production can offer more South Africans employment opportunities in shifts, increase production and earnings for our economy, and work economic assets harder. Eliminating unnecessary red tape, fixing backbone logistics, and positioning South Africa as a hub for tourism, manufacturing and technology deserves more focus. A package of attractive economic incentives presented to the world’s top public and private companies could position us as a competitive regional gateway into the African market, facilitated by a functioning African Continental Free Trade Area (AfCFTA), for manufacturing. An employment strategy, mobilising business internships, state programmes and modernising labour market institutions, while respecting workers’ rights and promoting business activity, should aim to stimulate mass employment.
Second, an economic stimulus. A modest annual grant for the 2.5-million micro-businesses should be considered, stimulating jobs and incomes for those most in need. An ecosystem of affordable finance, training, logistics and access to markets should support SMMEs. For unemployed households, the social relief of distress grant should be maintained as is planned and, as fiscal space allows, increased, while removing restrictive eligibility criteria.
Third, a new workplace contract is needed between employers and employees to share in the profits, and risks, of enterprises. The broad-based BEE scorecard should be updated to promote workplace transformation, including employee share ownership schemes. The ultimate objective should be to increase co-operation between management and workers, to increase workplace skills and productivity, grow investment and jobs, while increasing the overall envelope of wages as growth expands, and reducing wage and income inequality.
Fourth, no economic plan will work without turbocharging state capacity, fixing transport and energy infrastructure and, where appropriate, partnering with the private sector to unlock investments in public infrastructure. Progress is being made, even though we are yet to see the benefits in economic growth statistics. We should mobilise even more expertise, indeed an army of professionals, into the government, creating a central hub of expertise deployed across the state.
Last, targeted investment in the Africa growth opportunity through the AfCFTA. We must partner with our fellow Africans to invest in the huge opportunities in three areas which are the tectonic plates transforming the continent:
- Building technology platforms and solutions, whether fintech, ed-tech, health-tech, logistics-tech, consumer-tech to solve market failures and leapfrog old-style infrastructure to service the rapidly growing African population;
- Exploiting, beneficiating and exporting critical minerals and strategic natural resources which are feeding the refitting of global economies for climate change; and
- Building the energy, transport and industrial infrastructure that will connect and transform African economies into modern, eco-friendly nations at the heart of a new green global economy.
Whatever direction we take, and in the light of the clear message from the electorate, we need from the seventh administration a decisive pro-growth economic plan to drive job creating economic activity with implementation co-ordinated across society, involving all economic actors alongside the state, in a common endeavour to stimulate real benefits, and hope, for all our people, in particular the poor.
South Africa deserves, after the painful experiences of state capture and corruption, and a decade of weak economic growth, to stop the bleeding and start to grow again! Now is the time for such focus.
We must lock arms and adopt a common mindset placing higher economic growth and job creation at the top of the agenda of the nation. We must all commit together, side by side with the new administration, to get South Africa growing for everyone ’s benefit!
✼ Coleman is co-chair of Youth Employment Service; Losi is president of Cosatu; and Mgojo is president of Business Unity South Africa