Johannesburg - South Africa urgently needs to address the weakness in the economy.
Clem Sunter, director of the Mind of a Fox, said: “South Africa is in the premier league; but we are in a gentle decline into the second division.
“It is lethal because we don’t see it coming. We need an economic Codesa.”
Speaking at an Afriforesight conference in Sandton yesterday, Sunter said corruption was the biggest “flag” putting off foreign investment in South Africa.
“A lot of companies are having second thoughts about coming to South Africa because they have zero tolerance for corruption,” said Sunter, a former chief executive and chairman of Anglo American.
He said the quality of infrastructure, including unreliable power supply from Eskom, poor quality of schooling, and the need for inclusive leadership and entrepreneurship were also red flags.
South Africa was more divided as a nation than it was back in 1994, he said.
“And the idea that we will get 100 000 jobs in the mining industry is ridiculous; it’s never going to happen. We need to create an entrepreneurial spirit.”
Mining companies have announced their intention to shed thousands of jobs because of declining commodity prices and the subdued demand in oversupplied markets.
Ben Smit, director at the Bureau for Economic Research, said the organisation was gloomy about prospects of economic growth and believed the Reserve Bank would probably hike interest rates by 50 basis points by January.
Smit forecast that economic growth rate in both the next two years would be at best 1.7 percent.
“Unemployment is likely to increase under the circumstances,” said Smit.
Finance Minister Nhlanhla Nene projected economic growth in 2015 at just 2 percent, down from the 2.5 percent indicated in October.
Smit cited the RMB/BER Business Confidence Index, which lost ground in the second quarter, the FNB Consumer Confidence Index, which plunged to a 14-and-a-half-year low in the same period, and the drought that has raised fears of increases in food prices and inflation as challenges for the economy.
”It is not clear what the government can do in the short term to stimulate the economy.
“Previously it was private consumption and government expenditure that helped,” said Smit.
“However, consumers are likely to be under pressure and government is not in a position to raise expenditure now.”
BUSINESS REPORT