DARYL SWANEPOEL: Government must get back to basics to build a better economy

Hope for reviving the SA economy roams the halls of the National Treasury. In his recent budget speech finance minister Enoch Godongwana announced that the government is expecting a budget surplus, with revenue exceeding non-interest payments by 2023/2024. If realised it will be the first time in 16 years. The last time being in 2007/2008 with Trevor Manuel at the helm. It was a different time.

In 2007 the unemployment rate was hovering around the 22% mark. The debt-to-GDP ratio stabilised at 27%, with the government able to buy back some of its debt. On the eve of the 2008 financial crisis South Africans could still purchase a dollar for just more than R7 and load-shedding was barely a whisper.

In comparison, 2022’s figures look dismal. Unemployment has hit a record high of 34.4% (narrow definition). The country’s debt-to-GDP ratio has blown through the roof and is expected to stabilise at 76% over the next three years. The rand has lost its strength against the major currencies and electricity blackouts have wreaked havoc across the economy.

This is the base from which the economy must be revitalised. It’s a momentous task, but not impossible to achieve. Through engagements with different sectors we attempt to gauge what the impediments to economic growth are and how they can be overcome.

The government can start by decluttering the paperwork. Hefty regulations and complicated legislation strangle businesses. For example, to construct a R4m warehouse in Johannesburg takes 20 procedures and 155 days to obtain the required licences and permits. In the mining sector unresolved licensing applications are preventing R30bn from flowing into the industry.

These sectors specifically are large-scale employers and contribute significantly to the fiscus, yet they are hamstrung by red tape. Rolling back excessive regulations will free up time, human resources and funds to be applied more productively elsewhere. This in turn will promote growth.

Policy certainty is another key component the government needs to streamline. Investors have indicated that SA’s investment climate is uncompetitive as they have no guarantee that laws won’t change in the short term. This is particularly concerning in the energy and mining sectors. Furthermore, there is a call for a re-evaluation of the country’s transformation policies. While most participants agree that these may have been implemented with good intent, they say the policies have become prohibitive and a breeding ground for corruption.

Once the paperwork is in order the government must clean up its house. Appointing skilled individuals in all spheres in government, especially at local level, should be done urgently. Many municipalities across the country have crumbled due to insufficient and unskilled leadership, with weak to nonexistent service delivery as a result.

A business owner told us his local fire brigade was unable to attend to a fire at his store as they were on strike. When the brigade from the closest town 40km away finally arrived and plugged in their hosepipes, there was no water. The store was burnt to the ground. Dairy producer Clover relocated its biggest cheese factory after flailing service delivery at the hands of the Ditsobotla local municipality. These anecdotes are a dime a dozen and prove that inadequate leadership kills business, and with it job opportunities.

Tackling crime and corruption is another urgent matter to attend to. Not only does it erode confidence but businesses are forking out increasingly large amounts of money for private security and insurance, and with good reason. According to one report, the disruptions caused by the so-called “construction mafia” have cost the sector more than R40bn. These wasted funds could have bankrolled more productive measures.

Another wasted cost burning a hole in the wallets of businesses is electricity blackouts. It has been more than decade, and the problem remains a persistent obstacle to economic growth. According to a report by the Council for Scientific & Industrial Research, the blackouts are estimated to have cost the economy  R60bn-R120bn in 2019 alone. It further states the economic damage between 2010 and 2020 caused by Eskom’s inability to keep the lights on could be as high as R338bn. Even if the government is able to address all other impediments in the economy it will be meaningless unless it can supply adequate electricity.

The government is also urged to rework the education system. Young matriculants are simply not equipped for the labour market. Despite an uptick in the number of graduates the country still faces an extensive skills deficit.

The latest Critical Skills Survey conducted by Xpatweb reveals that 77% of organisations are struggling to obtain critical skills, forcing them to employ individuals from outside the country. In a rapidly evolving environment businesses simply can’t remain competitive if their staff are not properly skilled. Again, if business is hampered so is economic growth.

This is where collaboration between the government and the private sector becomes imperative. As President Cyril Ramaphosa said in his recent state of the nation address: “We all know that government does not create jobs, businesses create jobs.”

Working together to equip the youth could go a long way in addressing the shortage of employable South Africans. It is a good example that both parties require each other to move forward in their respective ways. Rebuilding trust between the private sector and the government will be a cornerstone in rebuilding the economy. Public-private partnerships can be constructed to resolve some of the country’s most pressing issues.

These types of collaborative efforts can be used to lure investors looking for opportunities brought about by new technologies. SA has already secured an $8.5bn fund to invest in renewable energy, green hydrogen and electric vehicles. As the global call for a just transition to a greener economy grows, so does the pool of funds made available to reach this target.

Another sector with budding opportunities is e-commerce. According to projections the market in SA will expand from $4.5bn at present to $7.9bn by 2027. These are the type of growth-enhancing opportunities both business and the government can capitalise on to stimulate growth.

It’s not just a pipe dream. The economy can be revitalised. Easing regulations, streamlining policies and fixing the government, together with greater collaboration between the private sector and state and seizing new opportunities, could bring this about. If implemented correctly, it may put the country on the necessary trajectory for Godongwana to claim his surplus prize in 2024.

• Swanepoel is CEO of the Inclusive Society Institute, which has just completed a series of sectoral engagements as input into its blueprint to rejuvenate the SA economy.