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THE International MBA - InfoBytes
THE International MBA - InfoBytes
12 December 2019,

02 OCTOBER 2019
Economic recovery or low-growth trap for SA?
Just as it could no longer be 'business as usual' for the private sector if SA wanted inclusive growth and transformation, neither could it be 'policy as usual' for the government, if goal was for the SA economy to break out of its current 'low growth trap' of less than 1% this year, said Professor Raymond Parsons, of the NWU Business School, in his lecture on 'Economic Recovery or a Low-Growth Trap for SA?'. He said that, although after nearly a decade of economic deterioration and weak governance, in the wake of recent political changes SA had announced or implemented several important remedial measures, the jury was still out on whether enough of the right things have been done to strongly turn the economy around.

He said that positive steps had, for example, indeed been recently taken to probe and curb corrupt practices. "But it does not mean that those who are actively seized with tackling state capture and corruption are necessarily in favour of essential pro-growth reform policies and projects", he added. He felt that there needed to be more evidence of market-friendly changes to strengthen the economy, as well as to keep SA's public finances under better control and avoid a 'debt trap'.

Professor Parsons said that the ambitious but necessary official goals such as generating $1 billion worth of new investment and dramatically facilitating the ease of doing business in SA within the next few years required maximum cooperation between the public and private sectors if they were to be achieved. Investor and business confidence needed to be boosted. This would continue to require that policy uncertainty is reduced and renewed trust be built with the business community.

For this to happen needs government to firmly 'stay on message' regarding pro-growth reforms and to take the tough decisions involved in several of them, said Professor Parsons. There was still too much perceived policy ambivalence in SA.The handling of key matters such as the financing and future of major SOEs like Eskom, the recent controversy around the role of the Reserve Bank, the lack of clarity around land reform, clear costing of the proposed NHI, political factionalism within the governing ANC and other similiar factors had unfortunately kept policy uncertainty at elevated levels, he said.

Professor Parsons emphasised that business therefore still needed to take every opportunity, whether through its various organised business lobbies, or such as at the planned first anniversary in November 2019 of last year's investment summit, to hold government to account by critically reviewing to what extent pledges and promises of new pro-growth reform policies were indeed being realised. He believed that the official reaffirmation of commitment to the National Development Plan could still be a rallying point for 'unfinished business' on the national agenda, as well as to generally promote more policy consensus about growth and transformation.

Both business and government thus needed to find themselves on the same page as to future policy direction in the post-Zuma era, he said. The challenge of creating a bigger, stronger and better economy in SA remained a collaborative venture. "Business must decide whether it is part of the problem, or wants to be part of the solution", concluded Professor Parsons.

NWU Business School
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