The world economic forum global competitiveness report highlights South African labour protectionism being higher and a threat to investors and all those facets are also projected to exacerbate unemployment pressures, poverty, and inequality. Photo: Reuters
The world economic forum global competitiveness report highlights South African labour protectionism being higher and a threat to investors and all those facets are also projected to exacerbate unemployment pressures, poverty, and inequality. Photo: Reuters

The South African vulnerable economic situation can impact on the 2020 economic outlook

By Miyelani Mkhabela Time of article published Jan 15, 2020

Share this article:

JOHANNESBURG – The International Monetary fund, Global Rating agencies and different economic strategists or economic determinist pondered, reflected and provided a directive synthesis for the projected vulnerable economic outlook for the South African economy that’s projected to remain sluggish in 2020 below population growth for the sixth consecutive year. 

The January 8 statement is still wishing on policies and priorities that might not address the economic crisis faced currently and therefore the medium-term growth outlook would remain subdued accompanied by somewhat muted inflationary pressures. South Africa is experiencing low growth and low job creation. 

The world economic forum global competitiveness report highlights South African labour protectionism being higher and a threat to investors and all those facets are also projected to exacerbate unemployment pressures, poverty, and inequality.

Those who were part of causing a crisis will not have capabilities to turnaround the same economic crisis. The poor management and leadership skills that dragged the economy into this sluggish economic position will not assist with complex problem solving as they failed while the economy was still growing at 3 and 5 percent. 

We must adapt in quickly failing, learning new attitudes and solving problems as quickly as possible to inspire society with our management and leadership capabilities. 

Amid weak economic performance, credit expansion remains low, notwithstanding an uptick in unsecured loans. External debt and gross financing needs remain elevated, while external financing continues to be heavily reliant on non-FDI inflows. 
The economy faces three immediate challenges that are too persistent.

Persistently weak economic growth

South African subdued growth is largely attributable to stagnant private investment and exports and declining mining and manufacturing productivity, mainly due to the slow pace of reform to address weaknesses in the business climate, including regulatory constraints, labour market rigidities, and inefficient infrastructure. 

Unreliable electricity supply or unplanned load shedding Eskom crisis has exacerbated the growth constraints and sends a wrong message to investors about our economic management and leadership. Small and medium-sized enterprises (SMEs) are especially disadvantaged in this environment where SMEs are struggling for their lives every 18 to 36 month of their establishment. 

Deteriorating fiscal and government debt

Weak revenue and increased current expenditure have worsened the budget composition, and raised deficits and borrowing requirements, undermining the sustainability of public finances. 

Major difficulties in the operations of state-owned enterprises (SOEs).

Inefficiencies in SOEs operating in network industries such as electricity and transport, translate into costly inputs for businesses and repeatedly require financial support from the spending. Government financing of SOE current spending is not growth-enhancing and has increased debt service costs that are now the fastest-growing expenditure item, crowding out other forms of public spending.

The highlighted economic challenges such as Persistently weak economic growth, Deteriorating fiscal and government debt and lastly Major difficulties in the operations of state-owned enterprises (SOEs) are not tackled by the January 8th Statement with boldness and affirmation but came in as observations that might not take the economy out of the crisis. 

In building a capable and resilient state and municipalities, the ruling party must focus on implementing policies and the resolutions of their last 2017 conference and past game-changing priorities including priority 3.3 in their 2020 January 8 statement that priorities Investment, Jobs and Inclusive growth. 

Reflecting on the book of Acts 2 verses 42 till 47, the conclusion that we get is when people are working together for one purpose, sharing what they have and listening to the recommended advises by gifted strategists and implementing them, the economy can experience a turnaround,  economic growth, and job creation will be fundamental in creating reducing unemployment, inequality and poverty in all provinces. 

We need to develop new positive attitudes to change the current view of our unintegrated thinking to realise the Freedom Charter pillars of ‘The People Shall Share in the Country’s  Wealth!’ and  ‘There Shall Be  Work and Security’ which all needs unity or working together from whites and blacks. Strengthening two armies of the economies that are not working together in one nation will not turn the economy around and move from economic crisis we are currently experiencing. 

This acceptance cited that “The  most  direct  and  effective  way  to  reduce  inequality  is  to  create  employment and economic opportunities, particularly  for young people and women.” Will need a clear vision and an implementation process that will clear a roadmap so we all know which sectors are capable of creating jobs and which sectors has constrains in creating jobs so our investments be concentrated to Greenfield projects that are capable in expanding the economy and create more jobs for the 29% South African unemployment rate, of which in that we have 60% youth unemployment rate that’s unsustainable for the future generations. 

The ruling party believes that substantial increase in investment, a  massive infrastructure build programme,  steps to improve the ease and reduce the cost of doing business, and the expansion of pathways for young people into the world of work are essential in turning around the South African economic crisis. 

Allocations of committed investments into impact developments projects, strategically funding operating companies to collaborate with to operate state-owned Enterprises and confronting the problems that the economy is facing are the first aspects that need to be addressed by communiques moving forward as part of addressing the crisis in different sectors of our government and economy at large.

Identification of priority sectors will guide the strategic planning and implementation of the clear vision and objectives that complies with the SMART principles plans  in priority sectors such as   manufacturing the future, The future of  tourism, agriculture  and agro-processing, Space Economy, Telecommunications, The New Circular Economy and the oceans economy as major areas for employment  and growth 

South Africa is connected to globalisation and industry 4.0 or the future of manufacturing, geopolitics and economic trade wars, we, therefore, needs to continuously scrutinise the global market environment to highlight navigation systems to peak growth spot potentials that can assist on the wealth of our nation. 

The 4th industrial revolution will also have major impacts on job creation mainly in the services sector and manufacturing sector because of artificial intelligence,  robotics,  manufacturing technologies,  modernization and mechanizations in the mining sector as well. 

When we have trust in the current administration, we mustn’t be afraid to confront the challenges we have and seek additional funding to assist in expanding the economy, that will need a good character of leadership to use properly the funding to be allocated to projects in sectors that can add value in creating both growth and jobs. 

We need to improve in governance, accountability and financial management to ensure that all our departments and municipalities report every R10 allocated to them, and those will be signs of capable management and leadership to win the global investment community again. The global institutional investors have more than $120 trillion of capital or Asset under management that requires project preparation and cooperating political leadership for South Africa to also enjoy this opportunity of relationships. 

South Africa has more new problems than we experienced in the second term of a democratic economy and the complexity of the problems have outweighed most of the strategies planned and moving forward we need to ensure that our regulatory system their structures are complying with complex adaptive system; viable systems models and resilient organisation to clear the constraints and clearly identify possibilities to give the South African people an authentic communication that can attract them to also volunteer their skills in building one strong nation that will be equitable in the future. 

Miyelani Mkhabela is an Economic Strategist and Director at Antswisa Transaction Advisory, contactable at: [email protected] and Twitter: @miyelani_hei

BUSINESS REPORT

Share this article:

Related Articles