SA needs to redefine its starting point - Coovadia

Johannesburg – South Africa needs to redefine its starting point by changing four things, said Cas Coovadia, managing director of the Banking Association of South Africa (BASA).

Coovadia was speaking at the Banking Summit 2017 at the JSE on Friday, which focused on the role of the financial sector in promoting economic transformation.

Currently South Africa is faced with a situation of volatility, uncertainty, complexity and ambiguity (VUCA), Coovadia explained in his address.

“We need a situation of less volatility, greater policy certainty, understanding of complexity and the reduction of ambiguity,” said Coovadia. 

In South Africa’s case, volatility refers to that experienced in the economy and which was mainly brought about by political uncertainty. This has resulted in sudden changes such as downgrades and negative outlooks and the loss of billions, he said.

South Africa can reduce its uncertainty by ensuring policy certainty and institutional continuity. “We can reduce uncertainty in the markets even further by greater transparency and clearer indication of the intents of policy makers,” said Coovadia.

He went onto explain that greater understanding of complexity within a globalised world is needed. This complexity stems from interconnected variables through technology, global trade and movement of capital and people.

The ambiguity is related to situations where causal relationships are unclear and precedents are unknown. A challenge specific to South Africa would be creating jobs and reducing unemployment.

He said that the financial sector was facing high volatility, uncertainty and ambiguity. “The sudden cancellation of an investor roadshow, the removal of a competent finance minister, the threat of moving to more populist policies have shaken confidence not only in our economy but also our institutions… The centre does not seem to be holding.”

Coovadia said that “sound and visionary” leadership is needed, across government, labour and business.

Democracies are noisy

Economic Development Minister Ebrahim Patel who delivered an address at the summit spoke on political uncertainty and how it is eroding confidence.

“Democracies are noisy places,” said Patel. Given that investors are needed to grow the economy, they need certainty, which is fundamental to confidence, said Patel. In turn, Patel said he gets strong calls for change and transformation from other stakeholders. “In a democracy how do you square this?” he asked.

In democracies policies change, they are not cast in stone. But changing policy needs to be guided by key principles. “Chopping and changing” policy and issuing and withdrawing policy is not helpful, he said. People should be able to predict the direction of change. This can be done through informed public discourse.

In the context of challenges South Africa is facing, it would be wrong to promise no change. But there needs to be a better way to manage the process of change, he said. Predictability ensures that stakeholders, particularly businesses, can operate within a changing environment.

“The difference between dictatorship and democracy is that even where government leaders and representatives and leaders in ruling parties have insights, we must contest points of view in a democratic process,” said Patel.

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