Economists have revised their growth forecasts upwards since Cyril Ramaphosa prevailed in the ANC’s presidential race, and the prospect of him becoming president of SA can only add "upside risk", as they say, to those forecasts.
But, as Citi economist Gina Schoeman put it last week, while it’s easy to get a 2% in front of the growth rate, getting 3% will be a lot harder. That’s because while the Ramaphosa rally in confidence could drive a cyclical upturn in the economy, there is still no structural underpin for higher growth rates.
Not that the growth rates economists currently have in mind are all that high.
Schoeman has lifted her forecast for 2017 to 1.5%, up from 1.1% in December and 2018’s growth is seen edging up to 1.9% and rising to 2.2% in 2020. Some economists have pencilled in lower growth rates; some are more optimistic.
That’s better than SA has seen over the past three years, during which growth has averaged no more than 0.8%, which is way below the population growth rate of about 1.6%.
Replacing ministers and withdrawing the worst of the measures driving away investment would send the required signals to investors that the new leadership is serious about rooting out corruption and pursuing growth and jobs
That means that in per capita terms, SA’s wellbeing has been going rapidly backwards and the economy will have to grow quite strongly over a sustained period to reverse the damage. Growth rates of 1.5% to 2.5% are hardly strong, but they are at least a start.
The global environment is favourable for an upturn. The Reserve Bank’s indicator has long suggested that SA should be going into an upward phase in the business cycle but was being held back. It was the confidence factor that was holding it back, Schoeman and many other economists believe.
So with confidence now bouncing off the multiyear lows to which it had sunk, growth should start to lift. Investment spending should start to pick up on strong business confidence; consumer spending should gain some momentum as consumer confidence improves.
However, that mild cyclical upturn is not going to turn into a more structural upturn that propels SA towards being a 3% or better economy unless the country’s new leaders start making some big changes. Some are more urgent than others and Ramaphosa will have to act fast if he wants to avert further damage to the economy and sustain the confidence boost that his victory prompted.
Mineral Resources Minister Mosebenzi Zwane needs to be replaced urgently and his disastrous Mining Charter withdrawn to get industry and the government back to the negotiating table and lift the policy logjam that has killed investment in the South African mining industry.
Public Enterprises Minister Lynne Browne needs to be booted to enable proper governance and competent management teams to be installed at all the state-owned enterprises.
Justice and security ministers who have allowed SA’s law-enforcement institutions to avoid prosecuting corruption and state capture must go. Someone needs to unblock the visa logjam that continues to hold back foreign direct investment and dampen tourism. And, of course, Social Development Minister Bathabile Dlamini needs to be removed as fast as possible to prevent a social-grant catastrophe.
Replacing ministers and withdrawing the worst of the measures driving away investment would send the required signals to investors that the new leadership is serious about rooting out corruption and pursuing growth and jobs.
But Ramaphosa and his colleagues will need to make much tougher decisions about structural reforms, if they want to put the economy on a path to higher growth and deliver on their job creation promises.
Meanwhile, the first order of business will be to ensure that the finance minister delivers a budget which is austere enough to convince Moody’s not to downgrade SA to junk status but not so austere that it nips growth in the bud.