The NKC Economics colloquium heard on Thursday that while it will take a long time to undo the damage that was done to the South African economy over the past decade, there are some things government can do to put the economy on the mend.
The Cape Town colloquium was addressed by experts including senior political analyst Gary van Staden and senior economist Elize Kruger. The latest quarterly GDP figures announced by Statistics South African were just another wad of bad news weighing down on an already underperforming economy.
Issues such as perceptions of corruption, policy uncertainty and continued unemployment bode ill for South Africa and heighten the risk that South African faces sovereign credit downgrade.
However NKC Economics experts were optimistic that South Africa was capable of sending the right signals to give itself enough breathing room to up the economy’s performance.
Here are some short-term fixes which NKC researchers say must happen soon to reassure the world that government has cleaned up its act.
1. What: Ease Eskom jitters
When: Next Week
Kruger said next week’s State of The Nation Address was the perfect time for Ramaphosa to speak unequivocally on government’s commitment to fixing South Africa’s single biggest emergency: Eskom.
Kruger said since Ramaphosa announced at his February State of The Nation Address that Eskom would be broken up into three entities – generation, transmission and distribution – there have been few positive developments to speak of at the power utility.
She said Ramaphosa would need to announce major action to stave off fears brought on by the return of load shedding and the recent resignation of CEO Phakamani Hadebe.
2. What: No Cabinet reshuffle
When: At least for 18 months to two years
Van Staden told the colloquium that Ramaphosa was keen to ensure policy certainty and that would mean keeping his Cabinet in place and unchanged for at least a year and a half.
Cabinet reshuffles, especially changes in the economic cluster, have been associated with instability and have scared off economic observers.
Van Staden said it was likely that Ramaphosa would seek a commitment from each minister in his Cabinet that they would stay put for as long as two years to prevent jitters over policy certainty.
“My understanding is that everybody who is in Cabinet now has, perhaps not signed in blood, but has given an undertaking that the Cabinet must not change for the next 18 months to two years. Because Cyril can’t have a situation where someone is in his Cabinet now and all of a sudden Tito (Mboweni) wants to go fishing,” he quipped.
3. What: Shape up
When: In the next six to 12 months
Kruger said investor confidence could return to South Africa if the economy posted positive data and implemented congruent policy over the next year.
“It is possible for South Africa to avoid a downgrade. But a downgrade will only be averted if we see tangible action and commitment to structural reform measures in the next six to twelve months,” said Kruger.
Kruger said this timeframe was also critical to sovereign credit rating agencies watching South Africa to see if governance and structural challenges are, indeed, being addressed.
4. What: Prosecutions
When: By the end of the year
Van Staden said no one would take tough talk on corruption seriously until those found guilty of being involved in the state capture project are successfully prosecuted and convicted.
He said the State Capture Commission of Inquiry chaired by retired judge Raymond Zondo was in the process of investigating the maleficence of the past decade and that the findings would be critical to securing accountability.
He said the end of the year was an acceptable time to see action in this regard, assuming the commission of inquiry concludes and releases a report on schedule.
“When it comes to expecting arrests from the Zondo Commission, you can reasonably expect prosecutions before the fourth quarter. If you don’t see anything by that point, you would probably have to wonder what is going to happen, if anything,” said Van Staden.
5. What: Ensure policy certainty
Van Staden said it was important for Ramaphosa to stand his ground on matters related to economic policy, as the public spat over the South African Reserve Bank between ANC officials showed that there were those within his own party who were working to undermine his efforts to improve the economy.
“Luthuli House is always going to push a more populist policy line than government will want to implement. It’s about how this balance of power works. The idea that ANC makes policy and government must just implemen is partly true,” said Van Staden.
Van Staden said even though Ramaphosa edged ANC secretary general Ace Magashule out on the SARB battle, there were other policy battles to be fought in the governing party.
He said many conference resolutions were often loosely worded, which allowed for government to navigate their way around honouring those resolutions and safeguarding economic stability.