Pretoria - Finance Minister Pravin Gordhan knows how to fix South Africa's economy, he just needs the political will to do so.
Those were the words of Stanlib economist Kevin Lings during a lecture on South Africa's economic prospects at the CSIR yesterday.
Lings said he had a meeting with Gordhan’s team to come up with seven ideas on how to get the economy back into shape.
“Finding solutions for the economy is easy. It's finding the solutions within the current political landscape that is difficult,” Lings said.
Gordhan, who is in his second stint as finance minister since the sacking of Nhlanhla Nene and David van Rooyen, has the unenviable job of preventing credit rating agencies from downgrading the country's rating to junk status.
“Junk status means when you want to get foreign money [investment] it will be more difficult and more expensive,” Lings said.
It would be difficult, basically impossible, for South Africa to accelerate its growth while the rest of the world's economy was subdued, he said.
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He predicted that South Africa's economic growth for the year would be 0.5 percent.
“When you look at South Africa, we are trying not to go into a recession and we might be successful.”
Lings compared Brazil's economy to South Africa's saying there were some similarities between the two countries that could spell disaster for South Africa in the future.
Brazil's junk status was caused by the country becoming anti-business and losing consumer confidence, he warned.
“The credit raters made them junk status and their finance minister said something needs to be done. Then, guess what, he got fired. Does that ring any bells?” Lings asked the audience.
The rand plummeted to lows unseen in years after the sacking of Nene which saw Van Rooyen take over for four days before Gordhan was called in to save the day.
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Lings said a good lesson South Africa should learn from Brazil is that the business community mattered. “If you want to create jobs you need to create investment. If you don't invest enough, you won't create jobs.”
The economist said the key to turn the economy around was in the private sector, since that was where the â€œbig bucksâ€ are, but they were too scared to invest in the country.
He said the best thing South Africa could do was to rely on the private sector to invest in the country, as they had the money to do so; and the government would pay them a fee.By investment Lings meant the sector should build factories, stadiums, infrastructure etc, which creates jobs and, in turn, increases employment which would have a positive impact on the South African economy.
“You have to grow the economy by corporate investments growth. Corporates are wealthier than they have ever been but they are in an investment recession.
“Pravin needs to get the political will to make things happen. Pravin is saying and doing the right things but he needs to implement it very quickly,” Lings said.
Private companies needed to be told to use their own money to invest in the country and find their own people and train them. Whatever infrastructure is built would be owned by the government and it would pay a fee - not a profitable one - to the private sector for this service.
In short, corporates have the money to invest in the country so that the country would not have to rely on foreign investment to get by, he said.