ANALYSIS | SA's economic recovery: Well implemented reforms will have an out-sized impact

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South African rand banknotes and coins sit in the till of a retail store in Johannesburg, South Africa. Photographer: Waldo Swiegers/Bloomberg
South African rand banknotes and coins sit in the till of a retail store in Johannesburg, South Africa. Photographer: Waldo Swiegers/Bloomberg

A small number of reforms, well implemented, plus strong leadership and an end to corruption will assist in getting the economy on the right track, writes Kenneth Creamer. 


A terrible ennui has gripped South Africa. 

Our history of apartheid and racism inhabits our past and haunts our present.

Pervasive corruption and violence leave us despairing as to the  possibility of a better future.

If we are to succeed, a new national narrative needs to be nurtured - one that presents a believable story of inclusive growth and national progress.

We must not allow ourselves to be side-tracked by entrenched privileged interests, populist or xenophobic rhetoric, or forces of state capture and corruption. Each of these counter-narratives seek to advance divisive, narrow agendas, and will divert us away from sound economic policymaking.

Before we can achieve an inclusive national narrative we need to answer a deceptively simple question: In our divided and economically unfair society, is there such a thing as South Africa's national economic interest?

"No", reply those who fight desperately to keep intact systems and structures of white privilege.  

"No", say those who seek to use economic policymaking as a terrain of proxy-battle, where power and influence are sought through scoring populist political points, no matter the damage that this does to the country's real economic prospects.

For those who answer in the affirmative, South Africa's national economic interest is understood along the following lines: 

  • Economic growth is a key policy goal, as examples throughout history and in various parts of the world have shown that growth is a necessary precondition for fundamentally and radically improving the standard of living for the mass of the population;
  • To make growth more inclusive and less unequal, racial and gender discrimination must be eradicated, market concentration and barriers to entry should be reduced, and policies should be implemented to ensure that there is a fairer distribution of income, assets and opportunities; and
  • Both the state and market need to function effectively to achieve inclusive growth, and as such the kind of corruption that has begun to take root in parts of South Africa's state and private sector must be dealt with decisively before it becomes entrenched as a permanent impediment to inclusive growth.

To place the country on a pathway that will favour its national economic interest, South Africa will require a period of profound and wise leadership. Our politicians, as well as those who occupy leadership positions in government, business, labour unions and civil society, will need to avoid the distracting siren-songs of privilege, populism, divisiveness and short-termism. Instead they will need to coalesce around the kind of growth, investment and job-enhancing policy reforms that are capable of correcting South Africa's economic course.

The devastation wrought by the global Covid pandemic - on an economy already in recession and with rising unemployment at the beginning of this eventful year - has made the need for a leadership committed to, and capable of, guiding South Africa's economic recovery even more urgent.

Paradoxically, confidence is currently at such a low-ebb that even a small number of economic reforms ably implemented, will likely have an out-sized impact in rekindling society's belief that a better life is indeed possible.

Electricity shortages 

For example, if as planned South Africa can, over the next 24 months, take decisive steps to overcome the country's crippling electricity shortage in a manner that heralds a transition to increased job creation and a greener energy base, this will be a positive harbinger for wider reforms.

The chain of causality would work as follows: Investment in new electricity infrastructure would enable downstream and upstream business activity. The net effect would likely be employment positive, especially if "just transition" polices provide support to coal workers and coal mining areas that would be negatively impacted. Due to increased economic activity revenue would flow to the fiscus, enabling improved service delivery as well as the much-needed stabilisation of the country's national debt.

READ | Opinion: A call for public-private partnerships from a government that refuses to change

Government's economic recovery plan actively promotes this vision, promising over 10 000MW of new electricity investment, mostly using wind and solar power. The plan also provides for an easing of regulations on companies and municipalities that wish to produce their own electricity. To ensure maximum economic benefit, these reforms should be accelerated, as should the process of restructuring Eskom and using "green finance" opportunities to ease Eskom's debt burden.

In the telecommunications sector, after many years of delay, a strict timetable has now been set for the release of spectrum in the first part of 2021. These reforms should see the increased availability of faster internet access in more parts of the country, as well as result in a windfall for the fiscus.

Need for energy and telecommunications reforms 

The effective implementation of energy and telecommunications reforms will assist South African firms, households, schools and consumers to have access to secure electricity supplies and speedier internet connections. Such interventions will not only foster increased levels of economic activity and job creation, but at a more fundamental level these reforms will improve South Africa's ability to compete in a global economy that is increasingly skills-intensive, green and digital.

Economic growth in South Africa will also be made more inclusive if it is combined with reforms to extend social and economic infrastructure into historically under-serviced areas. New models for infrastructure delivery should be developed to include standard, cost-efficient designs for clinics, police stations and schools. Infrastructure financing and regulatory models should be reformed to ensure greater certainty over future revenue streams for the funding of water and road networks, and, where appropriate, should include the use of public-private partnerships.

Similarly, crucial to the achievement of inclusivity, is that programmes of accelerated land reform must be designed to give black South Africans, in particular, ownership of rural and urban land which can be capitalised-on and utilised for productive economic activity.

Impact of corruption 

The rising sense of hopelessness in South Africa's future has been fuelled largely by the growing spectre of corruption. For generations, the struggle for freedom in South Africa was for one person one vote in order to achieve democratic control over the state.  The vision was for the post-apartheid state to be developmental - a state capable of strategically guiding inclusive growth and uplifting living standards. 

READ | Mpumelelo Mkhabela: Stubborn party politics are destroying SOEs

But, this vision has been hijacked and side-tracked by selfish and corrupt interests. Until corruption is decisively dealt with in both the state and private sector, it is hard to imagine how a new sense of national purpose and new confidence about economic recovery can properly take root.

There are so many things that need to be done to make South Africa right. To name a few, we need jobs, education, health, housing, municipal services, effective policing, tax morality, racial integration, an end to gender-based violence and the progressive realisation of human rights. Achieving all of these things will be made easier if, through a set of focused reforms, we can get our economy growing.  If our economy continues to contract, they will not be achievable.

Dr Kenneth Creamer is an Economist at Wits University

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