If the ANC’s favourite banker were finance minister for a day

2014-01-25 12:12

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Colin Coleman, country head of Goldman Sachs International, is the ANC’s favourite banker.

The party regularly quotes the bank’s report on 20 years of freedom because it tracks in detail the positive fruits of freedom the administration achieved in 20 years.

The report, which forms part of the ANC’s manifesto, includes key economic and social trends of the past two decades. The economy is significantly larger, trade has opened up and boomed (in some periods), the middle class has burgeoned and geopolitics for business is better.

Electricity connections have surged significantly as has water access and a significant social safety net has been sewn into place by the democratic state.

“South Africa has, broadly speaking, entered into a much more difficult period through quantitative easing (the US process of tapering or reducing the Federal Reserve’s bond-buying programme).

“The [Goldman Sachs] report has brought balance into the equation. It has packaged the achievements. But foreign investors don’t have great attention spans,” said Coleman, as South Africa hit the trail in Davos to shore up foreign direct investment.

The banker is also in Davos so I asked him what he would do if the ANC made him finance minister for a day.

“Invest in research and development,” was Coleman’s first answer. He said that for the first time, the manifesto moots that 1.5% of GDP be ring-fenced for R&D, but that we spend much less.

“The ANC must be more decisive. We invest significantly, but the efficiency is lacking.”

South Africa spends significantly on health and education but does not get impact and efficiency, he added.

The other trade-off that needs to be struck is between wage demands and productivity. “Wages have increased by 3% while productivity has fallen by 4%,” said Coleman, pointing to a tough debate the government has yet to have with unions to secure labour market stability.

What else would he do if he was in Cabinet?

“The mining sector needs special focus,” he said, as a wave of strikes grips the platinum belt. While mining as a percentage of GDP is in decline, its contribution to exports is still significant and it has a multiplier effect into the manufacturing sector.

Despite the uncertainties that quantitative easing brings, Coleman said 2014 “will play to SA’s strengths” because of better growth prospects in Europe, China and the US – all major trading partners of the country.

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