Mcebisi Jonas, the former deputy minister of finance, gave the keynote address at the recent Sunday Times Top 100 Companies Directors Event, attended by some of SA’s leading personalities in government, business and civil society.

Jonas presented a Swot analysis of SA, looking at its strengths and weaknesses. He pointed out that the economy was in a period of low growth and in recession after the economy contracted for two successive quarters. Mining and agriculture grew as a result of global economic growth and the end of the drought of the past year. However, the trade sector had contracted by 5.9% and people were spending less on goods and services such as food, clothing, restaurants and hotels.

Jonas says the low growth is not cyclical, but structural, with the economy having grown by just 1% since 1990, whereas the whole of emerging Asia has grown by 7% over the same period. “Why is SA not growing at the same rate as other developing economies, especially since we have the infrastructure?” he questions. The answer: we are too dependent on unreliable sources of foreign investment, making us susceptible to shocks in global markets as primary exporters.

From a structural point of view, says Jonas, we have a problem. SA does not invest enough in fixed capital, which forms just 18% of GDP, in comparison for example to China’s 37% of GDP. “We need to ask why foreign investors are choosing other developing markets and not SA,” he says.

Jonas believes this is largely due to uncertainty in our policies, which is damaging the mining industry and creating social and political instability. Simple asset redistribution will only increase unemployment and inequality, in much the same way as our BEE policy has made only a handful of black business people wealthy. “We need to have a different conversation about how to create real economic participation for all,” he says, adding this will mean more incubation programmes for black entrepreneurs, and the creation of jobs for the low-income, low-skilled section of the population.

“There is a lack of focus from government on policy, and government’s abilities are constrained by the deep levels of capture and corruption in the system,” Jonas says, stating by example the link between the cost of utilities and corruption in state-owned enterprises. Singapore, he says, has a zero-tolerance approach to corruption and therefore a far more effective state-owned enterprise system. “The money we use to sustain our inefficiencies could be better used elsewhere,” he says.

The building of a corruption-free state must be a priority in SA, Jonas says. This will start with better management of the fiscus. “It makes no sense to focus less on growing the economy and more on public spending,” he says.

SA’s recent downgrade to junk status has posed a major challenge and we need to work hard to reverse this trend, which has been caused by political uncertainty, mixed signals on policy and the lack of the will to implement economic reform, not to mention the economic illiteracy from our leadership creating an inability to face challenges, Jonas says.

Growing populism happens when there is low trust in society; friends and enemies become defined and people start to demand that the state behave in a partisan manner, even if this means breaking its own rules. Populism, says Jonas, denies risks and takes the focus off the issues that need to be addressed, appealing to desperate politicians.

He says South Africans need the courage to resist the populist rhetoric that divides us and that puts business into the role of the enemy with its calls to destroy “white monopoly capital”.

Jonas believes SA could find itself on a path to economic destruction, such as has been seen in Venezuela and Zimbabwe. This is creating distrust in policy, confusion in general and migration of investment and skills.

On the upside, Jonas believes the SA constitution is its strength and what differentiates it from countries like Zimbabwe and safeguards it from absolute collapse.  Moreover, the country has extensive infrastructure and a sophisticated business sector. He points out that all sectors in the country should work together to create an ecosystem for inclusive growth.

Jonas believes a diversified economy is the answer, together with expanded trade into the rest of Africa.

The big take out: Mcebisi Jonas believes that rebuilding a corruption-free state in South Africa must be the top priority in order to create growth in the economy and create a more secure political future for all, free of populist rhetoric.

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