Cape Town - South Africa got excited when President Cyril Ramaphosa was elected and there was an expectation that the country could be turned around very quickly - but one has to be realistic.
This was the message from STANLIB chief economist Kevin Lings,speaking at an Allan Gray Investment Summit in Cape Town on Tuesday.
"The most critical thing holding South Africa back is that we are just not happy. Business confidence for the last eight years has been below average. Why does Ramaphoria not focus on this?” asked Lings.
"I think we are too worried about politics. Cyril [Ramaphosa] wants to first win the election next year. Then he can turn his attention to addressing these other issues."
Lings sees two sets of major challenges facing the country.
"At the moment we are kind of dealing with the first set [of problems] – where the media attention and political debate is on saying one has to keep business happy; sort out SOEs [state-owned enterprises]; have clear transformation policies; not being sure about the Mining Charter, NHI [National Health Insurance] and more; and having to stop corruption," said Lings.
"These are some of the immediate challenges in South Africa. To be fair, we are making progress on these factors, but nothing phenomenal."
Lings said that the other set of challenges SA needs to address are education and employment.
"If South Africa addresses these two things, a lot of other stuff will get a lot better. I would like to see policy in South Africa focus on these two variables. The more you improve these, [the more] it will address social issues in South Africa," said Lings.
"Job creation is the most powerful economic factor you can have in an economy."
He said there were two problems with education in the country. First, too many people leave school early - 1.2 million children start school each year, yet just over 600 000 write their final year matric exams.
Second, only about 17% of registered university students actually obtain their degrees, he said.
As for the long-term challenge of unemployment, Lings pointed out that SA would have to create at least 600 000 jobs and grow at least by 5% each year.
A youth unemployment rate of 52% is particularly concerning, he added.
"Many people in South Africa, therefore, turn to government, but the government is highly indebted. Under Trevor Manuel we had fiscal discipline, but in 2009 the government said it will borrow more to build infrastructure. This was, however, spent on salaries and corruption," said Lings.
"The scary thing is that the escalation in government debt excludes debt by Eskom, Transnet, SAA, the SABC and other SOEs. The South African government is, therefore, quite simply not in a position to drive economic growth. They don’t have any more money."
That is why Lings claims that one cannot expect the SA government to boost economic growth by spending money. "There is no more money," he said.
"So, to meet these challenges, growth has to come from private sector investment. Yet, the current level of investment shows the private sector is not expanding and not engaging with the South African economy," said Lings.
Investment levels in key sectors like manufacturing, for instance, have declined in recent years, he said.
Investment in the SA's manufacturing sector would not grow until there was a different approach to taking the country forward, he said. This must include a focus on technology, skills development and education, among others.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER