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Millions of South African job seekers, buried under the heavy weight of one of the world’s highest unemployment rates, must be wondering how a shrinking economy like ours is going to produce jobs that enable them to put food on their tables to feed their families.
After growing by 3.1% in the fourth quarter of 2017, the economy suffered the biggest contraction in nine years when it unexpectedly shrivelled by 2.2% in the first quarter of 2018, dragged down by substantial declines in mining, manufacturing, agriculture, and construction.
The decline in South Africa’s economic performance does not bode well for people who are searching for elusive jobs, and entrepreneurs who are looking to expand their businesses.
Even worse, our economy is caught up in what economists term a “low-growth trap”.
Former deputy finance minister Mcebisi Jonas pointed out the long-term stunted nature of our economy in June last year, when he reminded an audience that the South African economy has grown at an average of 1% since 1990.
SA’s anorexic growth rate is put to shame by its fellow Brics members, China and India.
China has grown at an annualised rate of 8.5% since 2000, while India has expanded by 7%.
SA badly needs growth engines to fire up and boost its economy. President Cyril Ramaphosa is looking to foreign direct investment (FDI) as a solution for accelerating growth and generating employment.
The FDI might be the proverbial tide that lifts all boats, hence Ramaphosa has dispatched four investment envoys – Jonas, former finance minister Trevor Manuel, executive chairperson of the Afropulse Group Phumzile Langeni, and former Standard Bank chief executive Jacko Maree – to scour all four corners of the earth to attract $100bn in investment to our country over the next five years.
While wooing international investors to our shores is important, it is also critical to engage local corporates to take a bet on their home economy. South African corporates are reportedly hoarding an estimated R1tr in cash.
If there is anyone who can break the investment strike by local corporates it is Ramaphosa.
As a skilled negotiator with an extensive background in business and trade unionism and now government, he is well placed to get all these social partners to sing from the same hymn sheet to resolve the structural problems that hold our economy back.
His investment promotion crusade, if successful, could help push SA’s fixed capital investment as a percentage of GDP well above the current 18%, which is woefully low for a country with ambitions to make a big dent in a 26.7% unemployment rate.
Fast-growing Asian Tigers like China and South Korea have fixed capital investment ratios of 47% and 30% respectively.
Both the state and the private sector have to lead the charge in boosting our fixed-capital-investment if we are to steer our economy towards higher growth rates above 5%.
The ongoing investigations into massive corruption at state-owned enterprises (SOEs) and the marching out of executives who are allegedly linked to so-called state capture at these institutions is a good start.
But is it enough to sell SA to investors on clean governance?
The answer is a resounding no. Even when we were the cheapest producer of reliable electricity in the world, we struggled to attract investors to come and set up shop in our country.
One of the biggest hurdles that often turns off investors from investing in a country is policy and regulatory uncertainty.
That has been the hallmark of our political leadership since the early days of the Jacob Zuma administration, leading to an investment strike by capitalists. Zuma’s replacement as head of state, Ramaphosa, has to address that uncertainty.
After all, investors are chasing profits, not politics. And politics should never get in the way of investment flows, which we need to create jobs and propel millions of poor and working South Africans into the middle class.
Policy clarity should go hand in hand with reducing the costs of doing business, thereby facilitating an economic climate whereby profit-making and healthy tax collection thrive side by side.
And the tax revenue generated should be spent wisely on continuous improvement of our infrastructure and skills base to drive down the cost of electricity, logistics, and broadband.
Our labour has to accept that wages must be linked to productivity and, above all, it must prepare itself for the Fourth Industrial Revolution.
Companies are looking to deploy robots and computer software that replace blue-collar workers in factories and farms, not sparing white-collar workers alike in posh, air-conditioned offices.
Robots don’t call in sick and don’t complain about low salaries. This is a reality that we live in and as a country we need to wake up and realise what’s at stake.
Otherwise, automation will continue pushing men and women of working age into joblessness and poverty while our political leaders debate whether our kids need to learn history or not, instead of investing in education that prepares our workers for the rapidly changing economic landscape.
Andile Ntingi is the chief executive and co-founder of GetBiz, an e-procurement and tender notification service.
This article originally appeared in the 21 June edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
