Cyril Ramaphosa and Mkhwebane legal battles not helping growth, says IDC
The current political climate is retarding the push to improve SA’s sluggish economy, says the IDC, adding that the country needs ‘leadership focus’
The current political climate, including the legal squabbles between President Cyril Ramaphosa and public protector Busisiwe Mkhwebane, is not “helpful” in the push to revive SA’s sluggish economy, Industrial Development Corporation (IDC) CEO Tshokolo Nchocho says.
The IDC is a key national development finance institution set up to promote economic growth and industrial development. It also focuses on driving regional development, the economic empowerment of communities, and growing black industrialists.
In an interview after presenting the corporation’s financial results on Tuesday, Nchocho said the current political climate has contributed to the lack of confidence in the economy. “There is a sense that there is no leadership focus. We need leadership cohesion, but the way national politics is playing itself out will not build confidence,” said Nchocho.
Ramaphosa and public enterprises minister Pravin Gordhan, the key proponents of a clean-up of the government and state-owned entities (SOEs), are under growing pressure from factionalism within the ruling ANC.
The public protector has recently released controversial reports on the two, throwing into doubt their roles in the clean-up process.
Growth in the SA economy — mainly driven by the services, manufacturing and mining sectors — has been slow since 2011, when it recorded 3.3%. Since then, growth has generally been trending downward, falling below 2% from 2014.
Nchocho said there are several “low-hanging fruits” on which government should focus to improve economic performance. These include agriculture, tourism, the “sophisticated” financial services sector, and harnessing the potential of the broader industrial base.
“These are critical conditions necessary for us to realise our potential. Right now, confidence in the economy is a problem …the country has to get better at implementing things. It is a problem that very often money that is budgeted does not get fully spent,” said Nchocho. He said, however, there are strong institutions, including the IDC, which have the needed capabilities and can play a bigger role in boosting SA’s economic recovery.
Nchocho said that while the IDC has maintained its counter-cyclical role, the impact of the depressed economic environment is evident in the corporation’s financing activity. “Notwithstanding the depressed climate, the IDC’s financing and investment contribution to the SA economy has been sustained at meaningful levels over the years.”
In the year under review to end-March 2019, the corporation disbursed a total of R11.8bn, down from R15.4bn in 2018. The bulk of the funding (76%) was utilised in start-up ventures, project development and expansion of businesses.
Normalised revenue increased 2% to R17.2bn, total assets grew 6% to R144.6bn, and reserves were up 3% to R95.5bn. Normalised profits dropped 14% to R720m, a reflection of the challenging operating environment that “our business partners are faced with”, said Nchocho, adding that the corporation continues to be prudent in managing its costs, with the cost-to-income ratio remaining flat at 24%.