Cape Town – Economic growth in South Africa will always be a “marginal business” and it has never been realistic to expect a 5% growth rate, said economist and political analyst JP Landman.
Speaking at Old Mutual’s Advice for Life conference in Cape Town, Landman said economic growth in South Africa over the past 70 years was on average 3.4%.
“It’s nonsense to think we can grow at 5%. In fact we’ve never been growing at that rate over the years,” Landman said.
The National Development Plan (NDP) sets a GDP growth target of more than 5% to bring South Africa’s unemployment rate down from 27% to 14% by 2020, but South Africa has fallen short of this target for a number of years.
South Africa entered a technical recession in June after the economy contracted for two consecutive quarters showing negative growth of 0.3% in the last quarter of 2016 and 0.7% in the first quarter of 2017.
“I’ve seen this movie before. In 1985 South Africa faced similar economic challenges,” Landman said in reference to the South African economy.
But despite the country’s economic and political woes, South Africa has an “open society” that enables it to make an about turn.
SA has the makings of an open society
He highlighted the following “forces” in an open society:
- The ability to replace the government;
- A free and pluralistic media;
- The presence of the rule of law – an independent judiciary;
- Laws that curb corruption;
- Agencies of restraint (for example the SA Reserve Bank, financial markets, courts);
- A market economy that for example guarantees property rights;
- A commitment to the peaceful resolution of conflict; and
- Reason and critical thinking.
“In an open society there is the ability to make an about turn and move in a different direction,” Landman said, “and I believe the chances are very strong of this happening in South Africa.”
The open society forces in South Africa today are infinitely stronger than in 1985 when the economy was also in a bad state, he added.
Landman acknowledged that South Africa needs to “do something about the politics”, just like in 1985.
“It’s about just avoiding bad ideas. Don’t do foolish things, like the Mining Charter, for example.”
The Mining Charter announced on June 15 by Mineral Resources Minister Mosebenzi Zwane showed “bad sense”.
“The fact that the Minister is now retreating is confirmation of this point. It’s just a pity that it has taken him so long,” Landman said.
Moving from traditionalism to modernism
There are remarkable similarities between President Jacob Zuma and former state president, the late PW Botha, he said.
Both Botha and Zuma came from a deep rural background and like Botha, Zuma is also hard-working and a superb political operator.
Landman equated Zuma’s disastrous recall of former finance minister Pravin Gordhan from an international roadshow in March this year to Botha’s infamous Rubicon speech in 1985.
Botha at the time was expected to announce the abolishment of the apartheid system and major reforms, but instead his speech was about consolidating the National Party’s power.
This speech was on the back of Chase Manhattan Bank’s decision to stop making new loans to private borrowers in South Africa, Landman said, a step that in today’s terms would be similar to a credit ratings downgrade.
Zuma’s move to recall Gordhan from an international roadshow where he was due to reassure international investors of South Africa’s credibility had serious repercussions.
The rand fell by almost 3% after the news and sent out a profoundly negative message about South Africa’s attractiveness as an investment destination.
Botha’s failed Rubicon speech however was a catalyst for change in South Africa, Landman said.
“The same thing could happen again.”
The bottom line for growth in South Africa would be a journey from traditionalism to modernism, Landman added.
To get onto this journey, the country needs to “embrace the world”, by selling the world what it wants and taking what it can give you.
“Tourism in South Africa for example makes us more money than mining. If the world doesn’t want our platinum, give it rhino and giraffes,” Landman said.
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