SA FACES many of the same global challenges as other developing markets — including lower commodity prices and the risk of rising interest rates — but has reason to be upbeat, says global intelligence consultancy, the Oxford Business Group.
In its SA report for 2016, the group says the future for inclusive growth in the continent’s most sophisticated economy is still seen as "encouraging" compared with other Brics nations Brazil, Russia, and China — but excluding India — and big emerging market Turkey.
According to the report, SA needs to diversify its exports beyond the European Union (EU) and China, especially into the rest of Africa. However, it acknowledges that programmes such as the strategic infrastructure rollout and renewable energy initiatives are laying the groundwork for an uptick in growth.
Robert Tashima, Oxford’s managing editor in charge of publications on Africa, says the group’s economic reports cover 11 countries across the Maghreb and sub-Saharan Africa.
"We really try to have a boots on the ground approach," he says.
"Our take on SA is that long-term, the country’s fundamentals are very encouraging. There is a lot in SA’s favour, but right now is an extremely tricky time that may last for 10 to 15 years," he says.
Mr Tashima cites SA’s appalling Gini coefficient, pointing out that it is among the most unequal countries in the world. The shortage of electricity, along with the prevailing drought conditions, and SA’s over-reliance on the export of commodities also figure as negatives.
Added to uncertainty among investors over the goals of black economic empowerment are dysfunctional labour relations, government bureaucracy, and destabilising policies over visas and company ownership in respect of the security industry.
However, the report does not cover corruption, although general and financial crime is.
"Great strides — from apartheid to the Rainbow Nation", the report begins. President Jacob Zuma is cited on the "way forward", while Minister of Economic Development of the Russian Federation Alexey Ulyukaev is interviewed on "fresh trade and investment opportunities" between the two Brics nations, and the "multiple benefits" of being a member of the Brazil, Russia, India, China, SA bloc.
"The impact of social grants has been a critical factor in reducing absolute and relative poverty levels, but given fiscal constraints, they have had limitations in terms of reducing inequality," Mr Zuma says. "Similarly, the improvement of minimum wages and labour laws have had limited impact in the face of high unemployment, especially in very poor households.
"Ultimately, the only way to bring about a more equitable economy in SA must be through government programmes of radical economic transformation."
The group also speaks to Trade and Industry Minister Rob Davies on how SA can balance the need to liberalise trade, while ensuring that domestic and regional industries are not affected negatively.
Former minister of finance Nhlanhla Nene is interviewed, and so is Nedbank CEO Mike Brown, along with Norman Mbazima, CEO of Kumba Iron Ore, whose industry is experiencing "its toughest period in some time".
"Prior to 2014, when prices started plummeting, it was performing quite well. Now, everyone in the industry is scrambling to reduce their cost per tonne and stay afloat," Mr Mbazima says.
"There is a drive for greater efficiency across the board in operations, employee and equipment productivity, and supplier rates."
Bobby Godsell, chairman of Business Leadership SA, speaks on what role he thinks the private sector is playing in rolling out the National Development Plan (NDP); how collaboration between labour and the public and private sectors can be improved; and what policies might best channel foreign capital into domestic development.
"The private sector is fully behind the targets of the NDP and understands that certain fundamental social and political goals must be achieved to ensure inclusive growth. However, the key to its success will be implementation, and both the government and private sector acknowledge that each has a significant role to play."
Mr Godsell adds: "Infrastructure-funding is a space where the private sector can be directly involved. There are approximately 18 Strategic Integrated Projects in the pipeline that will require some form of public-private partnership to ensure financing and execution. The government is currently experiencing a period of fiscal consolidation that will require the private sector to fill the funding gap for large infrastructure projects."
The more than 200-page report covers most angles of South African life. But sometimes events overtake its sober analysis, as in Mr Zuma’s sacking of Mr Nene, leaving new questions unanswered.
"While much has been achieved, more remains to be done 20 years after the end of apartheid," the report says. Much of this relates to what it calls the "major discrepancy in the economic capacity and development of SA’s nine provinces", and "fixing the past".
In a "mixed review" segment it says growth predictions for the short term remain modest, due to the effect of falling commodity prices. It also says even as intra-African trade increases and new capacity to help alleviate power shortages comes onstream, SA’s fiscal deficit continues to prove stubborn. The country has to diversify trade beyond China and the EU, exporting much more into the rest of Africa, while also focusing on skills and productivity to improve global competitiveness.
"But the pessimism of local business in the country is not necessarily shared by those outside of SA," Mr Tashima says. "Generally speaking, SA has a clear and robust policy framework."
He points to the Automotive Production and Development Programme and the Renewable Energy Independent Power Producer Procurement Programme. But SA also needs to provide a more "stable, coherent, clear sense of where it is going".
Mr Tashima says while the goals of black economic empowerment are "necessary and laudable", execution has been found wanting.
"The effectiveness and results of the programme have not been what is hoped for," he says.