10 years to rebuild trust in SA's economy and institutions - Bank deputy governor
It will take a decade for SA to regain the lost trust of investors and rebuild its broken institutions, says Reserve Bank deputy governor Kuben Naidoo.
The good news, he said in Cape Town on Wednesday, was that work had already started.
Speaking at the launch of Wesgro's tourism, trade and investment promotion plan for 2019/20, Naidoo said SA had "decoupled" from the world economy in 2011 when GDP growth slowed to half the global rate.
The biggest factor still inhibiting Cape Town's growth, he said, was the persistence of apartheid spatial design, which left most residents living far away from job opportunities in the city centre.
In a candid speech, Naidoo expressed his concern that SA has no fiscal buffer left to absorb a shock similar to the 2008 global financial crisis.
"By 1996, South Africa had come from being one of the most closed economies to being among the most open,” he said, adding that between then and 2011 SA's economic growth outpaced the global average.
"Since 2011 we have decoupled from the global economy ... The reasons for our tepid growth are largely domestic."
He identified policy uncertainty, low trust, increased government debt and erosion of institutional capacity as the main reasons for the struggling economy.
"The Eskom crisis with corruption and state capture is the most glaring example of this," said Naidoo.
Some of the global factors affecting the local economy were lower commodity prices, a stronger dollar, and increased protectionism from trade partners such as the US.
But Naidoo said he was encouraged by the government’s willingness to talk about the problematic state-owned enterprises and to engage investors.
"This government is not standing on a soap box and shouting at the private sector any more," he said.
While SA spends the next decade rebuilding institutions and taking a "very slow and steady ride back up", the country will be vulnerable to global market shocks due to a GDP/debt ratio of more than 50%.
"It takes one year to break trust and 10 to rebuild it. It will take 10 years to rebuild Sars, treasury, the NPA. It will take another decade to get the debt down to 40%-30% of GDP," he said.
There were some encouraging signs for the Western Cape and Cape Town, however, and despite a devastating year for agriculture the province had the lowest unemployment and rural unemployment rates.
The MEC for economic opportunities, tourism and agriculture, Beverley Schäfer, said the focus would be on taking Cape Town from being the "African IT hub" to being a global hub in the sector.
Solly Fourie, head of the Western Cape economic development and tourism department, said the province's biggest challenge was finding ways of taking advantage of global and local opportunities to create jobs for its 600,000 citizens who were without work.