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NEWS
Henley offers scholarships to investigative journalists
Henley offers scholarships to investigative journalists

5 trends that can keep the South African MBA relevant
5 trends that can keep the South African MBA relevant

We need to realign government, business and civil society
We need to realign government, business and civil society

Life as a full-time MBA student
Life as a full-time MBA student

Brexit delay provides breathing space for SA
Brexit delay provides breathing space for SA

MSA joins the ADvTECH family
MSA joins the ADvTECH family

SA plunges to 117 out of 149 in gender wage equality
SA plunges to 117 out of 149 in gender wage equality

UCT’s Executive MBA recognised for its distinctive approach
UCT’s Executive MBA recognised for its distinctive approach

GIBS Executive MBA programme debuts in top 50
GIBS Executive MBA programme debuts in top 50

Can Africa fill the glass?
Can Africa fill the glass?

YALI AFRICA launch at Unisa
YALI AFRICA launch at Unisa

The fake resurrection of South Africa
The fake resurrection of South Africa

Don't panic: The digital revolution isn’t that unusual
Don't panic: The digital revolution isn’t that unusual

Why Agile works
Why Agile works

How firms can avoid the mediocrity trap
How firms can avoid the mediocrity trap

How a 100000-strong company is relearning how to innovate
How a 100000-strong company is relearning how to innovate

The changing shape of the MBA
The changing shape of the MBA

Adding climate change to curriculum is a top priority
Adding climate change to curriculum is a top priority

The MBA should turn you into a business disruptor
The MBA should turn you into a business disruptor

Innovation in SA organisations driven by C-level support
Innovation in SA organisations driven by C-level support

UNISA SBL a torch-bearer of training for military veterans
UNISA SBL a torch-bearer of training for military veterans

Scaling up the MBA for relevance in the 4IR
Scaling up the MBA for relevance in the 4IR

Moody's: SA not out of the woods yet
Moody's: SA not out of the woods yet

GIBS manufacturing-focused MBA kicks off in Durban
GIBS manufacturing-focused MBA kicks off in Durban

Henley’s Makhoalibe selected for sought-after programme
Henley’s Makhoalibe selected for sought-after programme

Personal potential, a source of power
Personal potential, a source of power

Reach your business leadership potential with a MBA from WBS
Reach your business leadership potential with a MBA from WBS

MPC: SA needs a period of stable interest rates
MPC: SA needs a period of stable interest rates

SA’s energy problems just the tip of the iceberg
SA’s energy problems just the tip of the iceberg

What's really driving disruption?
What's really driving disruption?

Why has there been such a failure of leadership?
Why has there been such a failure of leadership?

Steinhoff: Exactly where does responsibility stop and start?
Steinhoff: Exactly where does responsibility stop and start?

The cure for the loneliness of command
The cure for the loneliness of command

How to survive in the age of digital transformation
How to survive in the age of digital transformation

New MBA timetable starts in 2016
New MBA timetable starts in 2016

EVENTS
Henley MBA & PGDIP Preview Day
Henley MBA & PGDIP Preview Day
29 May 2019,
Pretoria

UCT GSB MBA Information Sessions
UCT GSB MBA Information Sessions
15 October 2019,
Johannesburg



08 MAY 2019
The fake resurrection of South Africa
by UCT GSB Associate Professor Sean Gossel
While hopes are being pinned on the 8 May election to provide the ailing South African economy with new direction and growth, all indications are that this faith may be unfounded.

When Cyril Ramaphosa took over the presidency of the country just over a year ago, few wanted to think that South Africa’s ‘new dawn’ would turn out to be yet another fake resurrection; but unfortunately, this increasingly appears to be the case.

South Africa’s declining fiscal and economic space can be traced back to the global economic crisis of 2008, and the Zuma presidency which gained traction at around that time. Under Zuma, the country experienced the erosion of democracy and declining economic fortunes, and a rise of authoritarian leanings and patronage-driven elitism. It will take a herculean effort and many years to recover from his disastrous nine-year presidency during which billions, if not trillions of rand, were siphoned from parastatals through corrupt activity in what has become known as the state capture project.

Finance Minister Tito Mboweni’s budget speech, delivered in Parliament in February, confirmed yet again that the country is in deep trouble, and sadly it looks like the situation will only get worse as the last embers of “Ramaphoria” fizzle out.

The budget painted a bleak picture: Rising expenditure (largely driven by the public sector wage bill); declining tax revenues (pointing to low economic growth and systemic problems at SARS, the receiver of revenue); increasing debt (SA’s debt to GDP ratio will peak at just over 60% in 2023/2024); low growth projections (the growth forecast for 2019 was revised downwards from 1.7% to 1.5%); and failing state-owned enterprises. Most significantly, Eskom the troubled power utility, has a debt burden of more than R400bn, which it is unable to service from its revenue and is thus regarded by ratings agencies as a major risk to South Africa’s finances. In Mboweni’s budget, provision was made for financial support of R69bn to the cash-strapped utility over three years. Support will total about R150bn over the next 10 years as part of a rescue plan, but it won’t be enough.

The power utility is struggling largely as a result of corruption, poor management, and design flaws at its costly new mega power plants Medupi and Kusile. Eskom has also struggled with maintenance issues at most of its aging power plants. This has once again raised the spectre of ongoing load-shedding, which will certainly hurt the country’s ability to revive its moribund economy. As Simi Siwisa, an executive director at research and advisory ?rm, Stratvest, put it during a recent post-budget commentary at the UCT Graduate School of Business: “Who will invest in South Africa without security of energy supply? Eskom cannot guarantee that [energy supply]. The budget was meant to be the medicine to resuscitate the economy, but that did not happen. It did not lay the foundation for growth.”

Instead, Minister Mboweni has placed the economy in a holding pattern, waiting for the election before making any major decisions.

Moody’s, which maintains the country’s sovereign rating at one notch above junk status, may yet decide to downgrade later this year. A downgrade would mean all three major ratings agencies have SA’s foreign currency and rand-denominated debt at sub-investment grade, consequently triggering the country’s exclusion from the Citi World Government Bond Index and projected capital outflows of hundreds of billions of Rands.

State-owned enterprises were supposed to be the backbone of the developmental state, but in South Africa they have spectacularly failed to deliver on their developmental mandate. What the budget really shows is that South Africa is living with the after-effects of a failed developmental state. Thus, for the country to progress, it will be imperative to reconsider the role of state-owned entities in the country’s developmental agenda. Indications are that there will be little option but to move away from a developmental state ideology; and instead restructure, privatise, and list parastatals so as to ensure that the country is fiscally sustainable.

The country has high hopes that the election will lead to renewed direction and an economic boom but indications are that we are likely to see yet another fake resurrection. This election is gearing up to be the most hotly contested in the country’s democratic history, and polling results thus far suggest that, after the election, the country will be entering an unprecedented age of coalitions. And with such vastly different political ideologies and ambitions in play, there is a high likelihood that these coalitions will be even more unstable than those the country has experienced since the local government elections in 2016. In addition, there is also the danger that corruption will become decentralised as it will be a useful tool to attract, control or maintain unstable coalitions. Consequently, the strength of the country’s democratic project, which has already been significantly eroded during the Zuma years, could be further damaged post 8 May.

The hope therefore that the country is pinning on these elections – just as the hope that was pinned on a pro-growth budget before them – is likely to be unfounded. Instead, they will probably deliver yet another fake resurrection.

Gossel is an associate professor in economics at the UCT Graduate School of Business and lectures Public Sector Finance on the MCom (Development Finance) programme, Capital Flows and Emerging Markets on the MBA programme, and Macroeconomics on the EMBA. His research focusses on the effects of financial globalization on democracy in Africa.
Source:

University of Cape Town Graduate School of Business
UCT GSB is internationally renowned as one of a few business schools in Africa with the prestigious triple-crown accreditation with endorsements from EQUIS, AACSB and AMBA. As a top school with more than five decades of experience in Africa and other emerging markets, UCT GSB has a responsibility to engage with its socio-political and economic context. Its teaching, learning and research are directed towards addressing the complex and pressing economic and social challenges of our world today. Visit our InfoCentre or website.

University of Cape Town Graduate School of Business, Executive Education
Executive Education at the UCT Graduate School of Business is dedicated to growing the leadership backbone in organisations and individuals and inspiring a new generation of leaders to engage with the challenges of the African continent in a hyper-connected and globalised world. Visit our website.

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