Filomena Scalise

The patience of South Africa’s population is wearing thin and urgent action needs to be taken to address the big concerns, including economic growth and jobs, big deficits and social stability, according Old Mutual Investment Group South Africa senior economist Johann Els.

Speaking at the company’s Breaking the Economic Deadlock conference at Montecasino yesterday, Els said although the state was spending too much, with half of its expenditure going on wages and social grants, the lingering social challenges made for a discontented society as shown by the protracted labour strikes and the uncertainty of business about the political scenario.

“Politics matters a lot to business, politics is a huge constraint for business investing in their own business,” he said.

He said the backdrop to the increasing agitation was that 2012 was dominated by fear, with the euro zone falling apart, the fear of the world economy slumping to recession and policy that either did not work or led to more errors. But despite this, “none of the risks actually materialised”.

Part of the remedy lay in achieving sustainable growth over a long period to bring unemployment down.

He lauded the National Development Plan as fantastic but said the country “needs government to have the same sense of urgency that we need to do something now”.

On the excessive expenditure on wages and social grants, Els said there was a need for tax increases, which would cushion the state’s limited resources and at the same time help to achieve sustained job creation.

“Unfortunately there is no decent growth model, there is no single sector that can boost the economy,” he said.

Articulating the problems that needed to be addressed, Els pointed out the following:

l uncertainty about future policy direction; excessive government regulation and meddling in the economy; low employment absorption, which was a function of the labour laws, education, productivity and labour relations; corruption, which was a drag on infrastructure and tainted South Africa’s investor attraction;

l infrastructure backlogs, in which implementation crosswinds hampered plans;

l escalating costs in the economy, including wages, electricity, fuel, water and public service charges; and

l fiscal constraints, including the state’s wage bill and grant explosion, that threatened the infrastructure drive.

Making an assessment of South Africa’s ranking in the World Economic Forum’s Global Competitiveness Index of 144 countries, Els said the country lagged behind pathetically in labour/employer co-operation, where it was last. It was 143rd in maths and science education, the same in hiring and firing practices and 140th in quality of higher education and flexibility of wage setting.

“On the upside, say the fixes are made with vigour and speed, confidence recovers and growth and employment improves, but if the fixes are not made, investor confidence grinds lower, growth stagnates at 3 percent, social and financial pressures mount relentlessly and the end game is a crises,” he said.

Speaking at the same event, veteran journalist and author Max du Preez said the worst never happened in South Africa but sadly, neither did the best.