01 JUN 2021
Post-Covid economic recovery in SA: Opportunity & Challenges
As part of a series of ‘WBS Leadership Dialogues’, Wits Business School recently hosted a panel discussion on post-Covid economic recovery in South Africa.
The series aims to find solutions to some of the most urgent issues facing South Africa and the rest of the continent by bringing together experts representing the private sector, government, civil society and academia.
Hosted by Director and Head of School Professor Maurice Radebe, the panel comprised Dr Lumkile Mondi, lecturer in economics at the School of Economics & Finance at Wits University, Mr Martin Kingston, executive chairman of Rothschild & Co and board member of Business Unity South Africa (BUSA), and Professor Nhlanhla Nene, former finance minister and newly-appointed chairman of Thebe Investment Corporation.
Mondi’s opening remarks included a broad view of where South Africa is today, as compared with a South Africa in 1985 when the country faced its then ‘Rubicon’. “With our high levels of debt in relation to the GDP, the national treasury finds itself in the same position as it was under [PW Botha] when there was massive capital outflow as a result of sanctions and shrinking government finances spent on keeping the troops in the townships and Angola.
“It is frustrating to see that under a black-led government that poverty has increased from 44% in 2015 to over 50% today because of economic mismanagement and the lockdown, and inequality has widened.”
“In the wake of ‘Radical Economic Transformation’ and allegations of state capture, South Africa has no choice but to marshal the private sector to drive investment. We also need to do more to acquire skills to capacitate the state,” Mondi added.
Kingston agreed that there is a need to harness the skills and resources of government, labour, civil society and the business community (including big business, small business, and the formal and informal sectors), as the only way to get onto a sustainable and inclusive growth path.
“There is no ‘silver bullet’ for such a crisis situation. This country was deep in recession before Covid struck, but if there is one intervention that will have a major impact on our economy in the short-term, it is quite simply to implement a comprehensive roll-out of the vaccine to all South Africans as quickly as possible.”
Kingston added: “There is no doubt that we need investment to drive growth, which in turn results in sustainable jobs, and investment is driven by the private sector. The levels of corruption and criminality in the both the private sector and public sector are unacceptable – this has not being addressed properly and is a hindrance to investor confidence.”
Kingston went on to list some low hanging fruit, that would ‘move the needle’ meaningfully: these include visa reform; restructuring the energy sector; creating higher levels of productivity and holding people to account, and opening up and auctioning the digital spectrum.
He also highlighted the country’s fiscal constraints in the face of having to service massive debt, and reiterated the need for structural reform.
“We need to talk about cadre deployment, openly and honestly, as a society. It just cannot be the case that every board of a state-owned enterprise (SOE) is subject to the decision making processes of a political party. The individuals who are selected [to serve on the board] must be done so on the basis of competence and integrity, rather than based on politically-biased criteria.”
Professor Nene referred to a friend’s analogy of the Coronavirus being like a long-lost relative who arrives at your doorstep without any forewarning. Instead of passing through he grows very comfortable, empties the fridge and generally causes chaos in the house.
“This unwelcome guest, in the form of the pandemic, has left behind it a trail of destruction. However, long before Covid ‘visited’ us, we were talking about the fissures in our society, in fact long before the end of apartheid, and in the past we have had consensus on what has to be done to fix these faults. But we have to ask ourselves, why are we not picking the low hanging fruit in order to fix our economic structure?
“It is common knowledge that there are five stumbling blocks, all of which start with a ‘P’: politics, politics, politics, politics and politics.”
“There has been document after document, plan after plan outlining what has to be done to spur economic growth,” Nene continued. “Structural reform is not a new idea. What’s stopping us is that economic reform creates winners and losers, and also takes time to bear fruit. Those who stand to lose will mobilise and block reforms, and those who stand to gain do not have the political clout to mobilise and push for reforms.
“Sustainable, long-term economic reforms require political will and political management. The reason for our slow pace of economic growth is, I would repeat, political.”
The three panellists agreed that the matter of the country’s SOEs needs urgent attention. Mondi put it this way: “Our SOEs are constrained economically, and so privatisation is no longer an ideological matter, it is a practical issue – we urgently need to unlock value for the public and redeploy resources [from SOEs] in strategic areas, such as education and the health sector.”
“SAA is being supported by the public purse at a time when last year we did not have the wherewithal to lay our hands on $17 million to be able to put down the 15% deposit for the Covax facility for 6 million South Africans to be vaccinated,” commented Kingston.
“We need to take difficult decisions and prioritise our key objectives, otherwise we are fiddling while Rome burns.”
Nene agreed about prioritising key areas, highlighting the agriculture and energy sectors. “We need to spend less time on politics and more time getting our hands dirty and getting things done. And most importantly, we need to prioritise those most vulnerable in society. It takes a crisis to mobilise people and find a solution. We must not led the pandemic crisis go to waste – this is an opportunity for us to work together and dig ourselves out. We have to stand up and agree not let politics get in the way of our achieving the true liberation of poor people on the ground.”
Building a capable state by the harnessing the skills and resources from all social partners, and holding everyone accountable - the state, the private sector, organised labour and civil society – was a strong point that emerged from the discussion.
“Business schools and academia need to also reflect on how we can help build a capable state,” said Professor Radebe. “We need to be clear about a skills audit of the state and see how we can all contribute in a meaningful way. We need to pick the low hanging fruit before it rots.”
At the Wits Business School we recognise that our task, through our academic and executive education programmes, is to equip leaders, managers and entrepreneurs with skills to proactively address challenges presented by the changing environment within which we operate.
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