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How 5 economists would kickstart SA's economy

Sep 18 2018 06:30
Lameez Omarjee

Cabinet's economic stimulus package is set to be released shortly, with the hope of giving SA's economy a much-needed boost following recent news of a recession. 

President Cyril Ramaphosa has said the stimulus package will include measures tackling the mining, telecommunications, tourism and transport industries. 

Finance Minister Nhlanhla Nene, meanwhile, has hinted that quick fixes are not on the cards. He said last week that economic recovery would not occur "overnight".

"What is important is the response to the recession, and that is what we are working on," he said. 

This was ahead of a debate by MPs on ideas to boost the sluggish economy - requested by Democratic Alliance leader Mmusi Maimane - on Wednesday. Nene said Maimane's ideas were nothing new. 

As SA awaits the details, Fin24 spoke to five economists to hear their views on what government should prioritise.

Thabi Leoka, independent economist

SA needs an employment plan. If more people are employed, it will drive up demand and spending, Leoka said. But in a recessionary environment, companies often cut jobs in an effort to reorganise.

In this case, a pact between the private and public sector is necessary – the big companies in the private sector which are doing well can employ more people, she argued.

As for investment, the funds received must be targeted to sectors which need support, Leoka added.

Professor Jannie Rossouw, head of Wits school of economic and business sciences

Government should limit the size of Cabinet, Rossouw believes.

The country should also get rid of non-performing state-owned enterprises (SOEs) like SAA. Government should  stop bonus payments at SOEs and agencies like the South African Revenue Service (SARS) because these bonus payments drive corrupt behaviour of executives, he said.

He added that he was particularly passionate about government vehicles being bought from local manufacturers, as well as having a moratorium placed on new appointments in the civil service. Adjustments in civil service remuneration should be limited, he added.

Maarten Ackerman, chief economist at Citadel 

Ackerman raised concerns over where the funding for the stimulus package would come from, given that SA’s budget is already constrained. SA may need a combination of tweaking the budget and relying on international aid, Ackerman said. If the funding is sorted out, it should go towards value-adding industries, creating jobs and improving education.

SA must focus on being a competitive manufacturing hub in the world, and this requires having competitive labour, so people must be appropriately skilled for jobs in demand, Ackerman argued.

Annabel Bishop, chief economist at Investec 

Government must improve the environment businesses operate in, Bishop said.

This includes fewer hefty fines for perceived collusion, and introducing warnings and smaller fines first to change behaviour without damaging industries.

Red tape should be reduced, particularly for small business, she said. Simplifying business requirements would go a long way to supporting entrepreneurship and small business growth, and therefore also supporting employment and growth, she explained.

Bishop also suggested better payment systems from provincial, municipal and other levels of government to expedite payments to suppliers in the private sector, thus preventing these companies from experiencing financial strain or going out of business due to non-payment. 

Rooting out corruption, wastage and inefficiency at all levels of government, as well as within SOEs, is also necessary, Bishop believes - as business confidence depends on trust in politicians, government officials and government itself.

A sharp deterioration in government finances, as was the case over the past decade, "severely" damages business confidence, she said. 

Johann Els, chief economist Old Mutual Investment Group

Given that there is no money to provide relief to consumers through tax cuts, Els said government should prioritise improving confidence among consumers, business and investors. Once there is confidence, built through policy certainty on issues such as mining and land, then the economy can grow. However, there might not be certainty until the national elections in 2019. 

Els said that the best thing we can hope for is that government keeps to its spending targets and keep the budget deficit in line with what was announced at the National Budget in February. This will keep ratings agencies happy until the elections next year, he explained.

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