Page 65 - IRMSA Risk Report 2020

EXPERT OPINION

DANIEL SILKE
DIREC TOR, POLITIC AL FUTURES CONSULTANCY

SA’s 2019 third quarter GDP figures say it all. A contraction of 0.6% means that the country is, once again, flirting with a recession, should the fourth
quarter be similarly negative. The GDP numbers mirror the dismal unemployment figures and the broader issues of rising debt to GDP; falling business
confidence sentiment; and an ongoing battle to keep the lights on (literally at Eskom and figuratively among a host of ailing State owned entities).

Positive shifts include broad-based recovery of institutional integrity – particularly at the NPA, the Hawks, South African Revenue Service, and in the
reconstitution of a host of State owned entities’ boards. A better governance ethic is apparent while the PR machine aimed at the investor community
is gaining traction.
Yet despite these not insignificant shifts, nothing from the past year seems to be directly impacting the performance of the domestic economy. While
re-booting a state from an incapable status to one that is more capable can take many years (thanks to the rot of malfeasance), time is of the essence
for a country desperately in need of economic growth.

As we move into early 2020, it is now clear that substantive structural reforms are required. Privatisation and job-shedding must be addressed. Critically,
this means that the ANC – and President Cyril Ramaphosa – have to acknowledge that their next few years will be fraught with managing and navigating
austerity-style policies, which will also put a strain on the broader alliance and South Africans alike.

With the 2020 Budget due soon, there is a sense that some sort of policy-framework climax is being reached. With the rating agencies on the cusp of a
full downgrade – and the potential capital outflows and resultant knock-on effect on the currency and equity markets – there is now no time to waste.
Indeed, it would seem as though the country has a rapidly closing window of opportunity in which to make bold moves.
Bold moves includes a more decisive government and a courageous President to deal swiftly with State Capture and deepening corruption. It also
means that business should invest in opportunities rather than adopting this “wait and see” approach. Foreign investors would be reluctant to invest if
large local corporates do not make positive moves in this direction. Our country has been through much worse and we are moving beyond the previous
regime (albeit too slowly and challenging given factions in the ruling party). This means that as citizens we also need to be part of the turnaround
strategy. Labour needs to be more innovative in their approach to balance saving jobs with the immediate threat of continuing “business as usual” at
all costs.

In addition to a few bold moves highlighted above and the risk treatments for all the other risks in this report, the five fundamental building blocks for
sustainable long-run growth that must be considered by all four sectors, are organised according to the following themes:
• modernising network industries;
• lowering barriers to entry and addressing distorted patterns of ownership through increased competition and small business growth;
• prioritising labour-intensive growth in sectors such as agriculture and services, including tourism;
• implementing focused and flexible industrial and trade policy; and
• promoting export competitiveness and harnessing regional growth opportunities.

Lastly, the Report entitled “Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa” released
by the Treasury this year provides a number of useful proposals on strategic imperatives that can and should be urgently implemented if we are to avoid
another ratings downgrade.

6 4