Socially conscious capitalism needed for SA - analyst

Johannesburg – Socially conscious capitalism may be what South Africa needs to uplift its economy, says an economist.

Speaking at the inaugural Courageous Conversations dialogue hosted by the Nelson Mandela Foundation on Wednesday night, Investec chief economist Annabel Bishop shared insights on the impact of the recent credit downgrade.

Bishop was part of a panel of experts which included former RMB chief executive and current chairperson of the National Student Financial Aid Scheme (NSFAS) Sizwe Nxasana, political economist Moeletsi Mbeki and University of Pretoria’s Chancellor Wiseman Nkuhlu. The discussion centred on the way forward following the downgrade to junk status.

Bishop expounded on the concept of socially conscious capitalism. “Generally, the countries with good economic growth are the ones which follow capitalist policies,” she said.

Using China as an example, Bishop explained how the country moved from “economic oppression” to “economic freedom” as it integrated with global markets. “[China] allowed citizens to become wealthy by building their own businesses.”

This capitalism needs to be accompanied by a conscientiousness of society. The majority of the poor in South Africa needs to get to an equal footing where they can start to participate in the formal economy. This could be in the form of taxation where wealth is distributed to the poor. “We need structures and institutions driving wealth to the poorest in the economy,” said Bishop.

She pointed out that the current money from taxation is not spent wisely, and it should be better allocated towards social upliftment.

Bishop highlighted that the lives of the poor can only really be changed with strong economic growth. Achieving sustainable economic growth could help reduce the current unemployment rate from around 26% to 22%, she said.

In turn, reducing unemployment will help eradicate poverty and reduce “excessive inequality”. “The majority of South Africans don’t want social welfare, they want employment and to be productive in their own right.”

South Africa’s economy is worrying and is starting to mirror what is seen in sub-Sahara Africa, Bishop said. For example, South Africa’s debt to GDP ratio has risen sharply, this was one of the biggest concerns for ratings agencies which predicated the downgrade, she explained.

The country may have at least one local currency rating at investment grade, but there is a risk for slippage. This will see people’s lives become harder, as borrowing costs rise said Bishop.

Currently Treasury is borrowing in order to cover expenditure. This growing debt is not a building block for economic growth.

Bishop explained that the cooperation between government, business and labour was encouraging. She added: “We need faster economic growth to come through by government allowing business to do its job as business.”

Slipping down the ratings will result in South Africa being a bankrupt state, unable to finance social welfare which is needed.

Sizwe Nxasana, Wiseman Nkuhlu, Annabel Bishop and Moeletsi Mbeki.