Challenge: All eyes may be on the coming ANC national conference, but the roots of SA’s lacklustre growth go deeper than today’s political headlines. Picture: DAYLIN PAUL/ SOWETAN
Challenge: All eyes may be on the coming ANC national conference, but the roots of SA’s lacklustre growth go deeper than today’s political headlines. Picture: DAYLIN PAUL/ SOWETAN

From Capitol Hill to Cape Town, financial markets and economic participants grapple with the phenomenon of political uncertainty.

In SA, many analysts dwell on the deepening divisions within the ANC and its alliance partners, the allegations of state capture and its impact on economic growth, in particular private sector investment. But politics only accounts for part of the considerable growth gap between SA and its peers.

More likely, the roots of SA’s lacklustre growth go deeper than today’s political headlines; they can be traced to entrenched inequality and skills gaps, combined with the fading of the secular growth underpins that previously helped lift living standards. Over the last 15 years, these tailwinds were the commodity super-cycle, global reintegration and an emergence of a middle class helped by public sector employment.

Recognising these core economic challenges is an important step. Indeed, the ANC’s elective conference may not be the economic turning point for SA for all but the short term.

Yet there are some reasons to be optimistic.

First, the global economic picture remains constructive. Growth is strong and broad-based and the investor outlook for emerging markets is positive. Emerging market GDP growth is forecast to reach 4.8% and capital inflows for the fixed-income asset class are anticipated to be strong at $80bn in 2018.

Second, when compared with its emerging market peers, SA does not look out of line in terms of the scale of its fiscal challenges to set itself on a sustainable path. It is perhaps more in the middle of the pack.

Assessing the outlook for SA, analysts frequently make the comparison with Brazil, which is now in recovery mode after a prolonged and deep recession.

Like SA, Brazil suffered after a large fall in commodity prices that reverberated through the economy and underwent a period of profound political upheaval. However, unlike SA, Brazil’s problems coincided with a lull in global growth and shift in global sentiment towards emerging markets at that time.

This exacerbated the depth of the crisis but it also accentuated more acutely the need for change, perhaps proving to be a painful but necessary catalyst on a journey of wider change.

It is both a source of comfort and consternation that SA is unlikely to have to suffer the same fate. With an external catalyst not likely, it must look inward for its own resolve.

While recent ratings actions by S&P Global Ratings and the pending review by Moody’s appear to spur the authorities into action regarding the 2018 fiscal shortfall, such challenges are largely symptomatic of weak growth momentum.

What is more likely is that the solution to low growth will not be achieved through politics and government intervention alone. The situation requires that SA crystallises its resolve to do things differently at all levels, and by all stakeholders.

Companies also have a significant role to play in supporting the tutoring system at tertiary education institutions for students from educationally underprivileged backgrounds

To achieve a different future, businesses and individuals will need to recognise and embrace a growing role in tackling the country’s social problems.

The solutions are complex and may be difficult to stomach. It is a looming challenge that almost 40% of young South Africans are neither employed nor participating in education and training.

In response, the government is said to be considering free higher education, but this is not easily fiscally sustainable if access is to expand over time.

Options include income-contingent loans, which are then repaid when people enter the workforce. This approach is complicated by an elevated unemployment rate.

Greater private-public partnership could be among the answers. Corporations may have to play a bigger role in offering internship programmes and work placements, providing young people with some relevant experience to get paid work and ultimately to start paying off their loans.

Companies also have a significant role to play in supporting the tutoring system at tertiary education institutions for students from educationally underprivileged backgrounds.

New partnerships are required between firms and universities to help bridge gaps in the education system and ensure students have the literacy and numeracy skills to complete their studies and enter the workplace. Complementing this with initiatives to tackle the substantial challenges in the basic education system
would yield even better results. A collaborative approach can even extend to households and their engagement with household employees.

However, a collaborative approach is not achieved easily, particularly as our recent journey has not been as painful as Brazil’s and financial markets are not likely to be a catalyst.

Yet our problems are too big and complex and implementation will probably be too slow to be tackled by one group alone.

I hence extend the question that was recently posed to me: what are we doing to be part of the solution?

• Keller is executive director of emerging markets research at JP Morgan

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