No more plans - just do it - Times LIVE
Wed Apr 26 17:39:59 SAST 2017

No more plans - just do it

David Shapiro | 2016-02-24 00:37:13.0
David Shapiro. File photo
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During a discussion about today's Budget a journalist asked if there was still hope for the economy. I know what the situation is now, she observed, but tell me how it can be.

Of course this country has promise, I answered, but it would entail more than raising taxes on the rich, obliging government officials to fly Kulula and cutting ties with the Guptas.

Indeed, these would be small steps forward but investors' and the rating agencies' concerns extend beyond our income account. Their biggest worry is whether this country can grow fast enough to cover its mounting debt obligations and intensifying social demands.

In January the IMF forecast the world economy would grow at 3.4% this year, with recovery in the advanced nations modest.

The picture for developing economies was diverse and challenging. They believed South Africa would grow at 0.7%, a fraction of the increases in the developing world of 4.3% and the advanced economies of 2.1%.

For South Africa to satisfy the scrutiny of the rating agencies, and attract foreign savings would require a jolt to our current political and business thinking.

Dismissing calls for structural reforms, austerity and improved government service delivery, no matter how offensive they may appear to certain populist factions, would condemn us to a future of hardship and despair.

South Africa has a resilient private sector that has prospered through the Boer War, World War1, the Great Depression, World War 2, recessions, stock market crashes, social uprisings and a host of other disturbances.

It does best when left alone, free from heaps of disruptive and draining rules and decrees. Put obstacles in the path of this nurturing stream and it will divert its course elsewhere.

In the past two decades, the government's harsh labour laws, anti-business leaning, low-growth environment and demands on prescribing procurement, employment and shareholdings have driven businesses to seek returns abroad.

Today the JSE is barely a reflection of the domestic economy. The largest companiesthat make up a major slice of the JSE's valuation do little, if any, business in the country.

In the past year two sizeable groups, Steinhoff and Mediclinic, transferred their primary listings abroad, while retailers Woolworths, Truworths and Foschini have expanded their operations internationally.

Roughly 70% of the JSE's total revenue is earned on foreign soil. This has allowed local investors to diversify their wealth and protect their purchasing power against the rand's downward plunge.

The downside of the trend, though, is that corporate flight creates jobs and economic value in other regions and not back home, where it is needed.

The unexpected steep decline in commodity prices has plagued our miners with debts and excess supply, forcing difficulties, too, on those manufacturers closely tied to the industry. With China switching from an investment-led to consumption-led economy the downturn in resource prices could persist indefinitely.

Repositioning the South African economy for the troubles ahead will require bold decisions. Opportunities abound in tourism, financial services, retail, farming and so forth, but to attract investment we have to lay out a welcome mat.

We don't require sweeping plans. We do, though, have to reduce crime, drive properly, fix the street lights, pick up the litter, improve our schools, make sure our hospitals are well equipped and, most importantly, listen to investors when they tell us what they need to be successful.


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