South Africans are fond of debating whether public or private sector failings are the bigger problem. It does not take too long to realise that they are really talking about race.
This is evident as the country faces an unusual scandal – one involving a private company called Steinhoff. The multinational furniture company is in trouble after German investigators began looking into it, for allegedly doctoring financial information to mislead the markets.
This was not the first time fingers were pointed at a private company. Auditors KPMG have been accused of unethical practice on behalf of the Gupta family who are linked to President Jacob Zuma and are accused of using money to influence government appointments and policies. Media conglomerate Naspers is also facing corruption accusations. Its subsidiary MultiChoice is accused of paying large sums to the formerly Gupta-owned television channel ANN7 in the hope of influencing government decisions.
But Steinhoff stands out because it does most to shake the confidence of one side of the argument and to get the other claiming it is vindicated. For much of the past few years, corruption has been seen almost exclusively as a public sector problem. Attention has focused on Zuma and his relationship with the Guptas. The private sector (Gupta-owned firms excepted) has, by default, been painted as a corruption-free zone.
The KPMG and Naspers cases may involve prominent private firms, but are seen by the national debate as yet another sign of the Guptas’ baleful influence. The villains remain the same and so does the problem: public sector corruption.
Steinhoff is a different matter entirely. The state plays no role at all and the company is a pillar of the private economy. Its leadership is overwhelmingly white and its attitude to the post-apartheid government seems to range from indifference to scepticism.
No wonder that its failings have been gleefully seized upon by people who insist that private sector corruption is as big a problem as its public equivalent. Or that many of the people who usually insist that public corruption is the problem have reacted to Steinhoff with shock.
On the surface, this sounds like the standard debate in most democracies over the past few decades in which one side favours letting business do as it pleases and the other wants it to be reined in by the state. But, in a country in which whites remain dominant in private business while blacks largely control the government, it is really about the country’s racial divides.
Colour of merit
Apartheid was underpinned by strong beliefs in white superiority – these don’t simply melt away because political rules change. People are used to seeing one racial group in skilled jobs, giving orders to the other: inevitably, this becomes seen as natural and so being white is associated with merit, being black with lacking it.
Since 1994, when policies promoting black advancement in business and the professions were adopted, this is often expressed in the view that black people in senior positions are there because they were given a free pass by the system, not because they deserve it.
This way of thinking also shapes attitudes to government and business. For those used to the racial pecking order of the past, government is run by people who hold posts because they are black, not because they are competent. Business continues to be run mainly by people who were judged to be competent in the past and who are therefore assumed now to be honest and to know what they are doing. Calls to assign more government functions to businesses or business people are often a way of saying that white people or black people approved by them should be running the country.
This attitude is particularly evident in how people in the suburbs react to private monopolies or dominant corporations.
Government departments are almost always associated with waiting in long lines for surly officials who have no idea what they are doing. In most cases, this is a caricature; in some, the Department of Home Affairs passport office for example, it is flat wrong. But similar long waits, indifference to customers and incompetence at the dominant digital television corporation or one of the mobile phone companies is accepted cheerfully as normal business practice.
Delighted black voices
Black people are perfectly well aware of these attitudes. This is why those who insist that the private sector is as bad if not worse than its public equivalent are almost always black. And why many black voices are delighted at what has happened at Steinhoff because it shows that a pillar of white business can behave at least as badly as black government.
It also explains why many white people have reacted to Steinhoff with such shock – and why Steinhoff happened in the first place.
The editor of the country’s leading business daily, Tim Cohen, has pointed out that Steinhoff’s failings should not have been a surprise since several market analysts warned a while ago that something was amiss and were ignored. He offered some explanations but, given the realities described here, the most likely answer is that no-one believed the specialist nay-sayers because they assumed that a major white-owned company must know what it is doing and that the critics must have an axe to grind.
Cohen also ran into trouble on social media for suggesting that reduced capacity at state regulators allowed Steinhoff to happen. Predictably, black people felt (wrongly in his view) that they were being blamed for white business failings.
There is another explanation for the regulators’ inaction. It is that they were not eager to look into a large white-owned company because they feared that this would be seen as yet another case in which incompetent black people wanted to bully competent whites. It is standard in the South African debate that any attempt by government, however mild, to intervene in business is branded a threat to the market economy so it would hardly be surprising if regulators feared this.
Correcting wrong perceptions
The Steinhoff scandal would do South Africa a huge service if it made the point that corruption and mismanagement have nothing to do with race. It would also help if it alerted everyone in the marketplace to watch as carefully over private companies as they do over government departments.
But, given how entrenched racial attitudes are, it is more likely that it will be dismissed as a once-off freak by those who assume that white led business is always competent and as further evidence of white prejudice by black people reacting to the label often stuck to them. If that happens, some private businesses will continue to get away with behaviour which would never be tolerated in government.
South Africa and Morocco will resume diplomatic ties more than a decade after Morocco withdrew its ambassador from Pretoria, South African President Jacob Zuma said in a newspaper interview published on Sunday.
Morocco recalled its ambassador from South Africa in 2004 after former South African President Thabo Mbeki recognized a breakaway region in the Western Sahara, which Morocco claims as part of its territory.
"Morocco is an African nation and we need to have relations with them," Zuma told City Press in the interview. "We never had problems with them anyway; they were the first to withdraw diplomatic relations."
Zuma met Morocco's King Mohammed last week on the sidelines of an African Union-European Union summit.
"They felt that even if we differ on the Western Sahara issues, the two countries should have a relationship," Zuma said about Moroccan officials' position at the meeting.
South Africa's official government position - as re-affirmed by Zuma in one of his state of the nation addresses - is to support "self-determination and decolonization for the Western Sahara".
The decision to re-establish ties with Morocco is likely to go down badly with some members of South Africa's ruling African National Congress (ANC), of which Zuma is leader. The ANC - as one of Africa's oldest liberation movements - has long backed those seeking independence in the Western Sahara and has accused Morocco of occupying the region.
The ruling party said in a statement it had "unequivocal support for Western Sahara" but that this did not mean it harbored enmity towards Morocco.
"There is also no ANC policy that says South Africa should isolate Morocco," the statement said.
A spokesman for South Africa's foreign ministry could not be reached for comment on Sunday. Morocco has controlled most of the Western Sahara, which is rich in phosphates and has seen some initial oil exploration efforts, since 1975. A ceasefire in 1991 called for a referendum on self-determination for Western Sahara, but the vote has never taken place.
South African Deputy President Cyril Ramaphosa saw his lead over Nkosazana Dlamini-Zuma narrow in the race for the presidency of the ruling African National Congress as the party’s branch nomination process drew toward a close.
Ramaphosa has secured decisive endorsements from the Eastern Cape, Western Cape and Northern Cape, while Dlamini-Zuma was backed by an overwhelming majority in the North West and Free State, and won by a slim margin in Mpumalanga. The deputy president so far has 904 branches to 708 for Dlamini-Zuma, the former head of the African Union Commission.
The contest has divided the 105-year-old ANC like never before, with court challenges, allegations of rigging and outbreaks of violence marring the process of deciding who will attend and vote at the conference. The election has also paralyzed several government departments as officials delay decisions until they learn who the new leaders will be. The winner of the election at the conference to be held on Dec. 16-20 will be the party’s candidate in 2019, when Jacob Zuma is due to end his second term as President.
The remaining three provinces are due to announce their nominations over the next four days. Ramaphosa is likely to be endorsed by Limpopo and Gauteng, while Dlamini-Zuma has strong support in her home province of KwaZulu-Natal, which has the most ANC members.
Ninety percent of voting delegates will come from the branches, and the rest from the ANC’s leadership structures and leagues representing the youth, women and military veterans. While the branch nomination tallies are the best available indicator of who’s likely to win, they aren’t conclusive because some bigger branches are entitled to more than one delegate and there’s no guarantee members will vote as instructed.
Mpumalanga, which will send the second-most delegates to the elective conference and announced its tallies on Friday, is keeping its options open about who it will back, with almost half of its branches declining to name their candidate yet. It’s unclear how delegates from those branches will vote should no consensus be reached on who should succeed Zuma, meaning they could be a swing vote at the conference.
Dlamini-Zuma won the backing of the North West province as expected on Friday, with 291 branches endorsing her to 45 for Ramaphosa. The region is one of the provinces in a rural bloc known as the Premier League that has helped Zuma, her ex-husband, thwart challenges sparked by multiple scandals that prompted calls from within the party for him to resign.
Most investors favor Ramaphosa, 65, a lawyer, former labor union leader and one of the wealthiest black South Africans, who has pledged to revive the ailing economy, reduce a 28 percent unemployment rate and combat corruption if elected. Zuma’s preferred successor is Dlamini-Zuma, 68, who has echoed his call for “radical economic transformation” to place more of the country’s wealth in the hands of the black majority.
Imports from South Africa grew by $107 million (Sh11 billion) in the first eight months of the year that saw Africa’s most industrialised economy overtake the United States in sales to Kenya.
South Africa sold goods worth $414 million (Sh42.7 billion) to Nairobi in the eight-month period, a 34 per cent growth from $307 million (Sh31.7 billion) in a similar period a year earlier. The faster growth in sales saw Pretoria displace the US to emerge sixth biggest seller of commodities to Kenya.
South Africa is the most industrialised and diverse economy in the continent and is the top seller to Kenya among African countries. It sells to Nairobi goods such as wines and other alcoholic drinks, cars as well as spare parts, oil lubricants and machinery.
Imports from the US grew to Sh40.2 billion in the eight-month window, from $331 million (Sh34.2 billion), slipping one position behind South Africa on Nairobi’s import table, data from Kenya National Bureau of Statistics (KNBS) shows.
But Kenya’s exports to South Africa remain paltry, at less than $48 million (Sh5 billion) in the period with the country not featuring among the top 11 buyers of goods from Nairobi, the KNBS data shows. South African companies with operations in Kenya include MultiChoice, SABMiller, and Massmart (Game brand) while thousands of Kenyans are frequent travellers to South Africa for business and leisure.
Kenya has long expressed discomfort with the many hurdles its citizens travelling to South Africa continue to face with little response from Pretoria.
Ideally, Kenya and South Africa are supposed to be dealing with each other under the principle of reciprocity — meaning that benefits extended by one country are mirrored by the other. The KNBS data shows China remains the biggest seller of goods to Nairobi, having shipped in Sh273 billion worth of goods in the year to August, ahead of second-placed India (Sh117 billion).
Agriculture delivers more jobs per rand invested than any other productive sector. If the entire agriculture value chain is considered in South Africa, its contribution to GDP reaches approximately 12%.
There are a number of reasons for this. Unsustainable food production practices have led to soil erosion, biodiversity loss, pollution and climate change. There is also increased competition with other industries, like biofuels, for the use of arable land. Declined access to quality water and the failure to address land redistribution are also contributing factors.
Another major reason that the sector is unable to realise its full potential is the fact that education and training is in need of a very serious overhaul.
This is the core finding of a recently published consensus study I chaired for the Academy of Science of South Africa. The study identified three key areas in need of attention: substantial institutional reform, stimulating innovation in the sector and ending the fragmented way in which education and training in the sector is managed.
There are only a few agricultural secondary schools in the country. At secondary school level, agricultural science as subject is a popular choice. The tertiary sector consists of 12 agricultural colleges that offer specialised training. Ten of the country’s 26 public universities also offer agricultural science degree programmes up to doctoral level.
But the current system of managing education and training is fragmented and in dire need of substantial reform.
For example, responsibility for agricultural education and training is split between research councils and various government departments. On top of this, agricultural colleges are administered at the provincial level and aren’t formally part of the national higher education system.
Postgraduate education, training and research at universities is supported by the Department of Science and Technology through the National Research Foundation. But there’s no formal mechanism to coordinate the work of these various entities.
Recommendations for reform
Reform should be directed towards greater integration, cooperation and accountability.
The panel believes that it’s necessary to establish a National Council for Agricultural Education and Training. Its first responsibility would be to ensure the inclusion and participation of all of the linked departments and other critical stakeholders in the sector. Its work would be to coordinate their various policies and programmes. But, given the current moratorium on establishing statutory bodies, the recommendation is to appoint a Ministerial Committee to oversee this process.
In 2015 the cabinet took a decision to move agricultural colleges from provinces to the national Department of Higher Education and Training. A task team was appointed to investigate the implications of the transfer of authority. But there’s been little progress.
The panel has made a strong recommendation that the task team’s work should be expedited. And that sufficient resources should be allocated to make sure that there is progress.
Attention also needs to be given to institutional capacity and resources.
Exploring land-grant possibilities
The panel has also recommended that South Africa pilot test a land-grant system that links research, education, training and extension. Extension is the application of scientific research and new knowledge through farmer education.
Land-grant systems have been successfully implemented in countries ranging from the US to Brazil and India.
Over the past six decades the US has built 60 land-grant universities. Academics hold appointments with dual responsibilities for teaching, on one hand, and research or extension, on the other. In their capacity as extension officers, academics advise and assist farmers on the ground, with the goal of ensuring sustainable production and rural development. They then bring this experience back to the university. They facilitate the flow of information both ways - bringing new innovative research and technology to farmers, and feeding knowledge about field problems back into the university to inform the research and teaching agenda.
The US has managed to develop one of the most sophisticated agricultural innovation systems in the world using land-grant institutions.
India has also adopted a land-grant system called the State Agricultural University System. It now has a network of 41 institutions that have played a major role in lifting millions out of poverty. The system has also led to crop yield increases of 1.6% a year for 30 years.
Some research entities, provinces and universities have already expressed an interest in taking part in the South African pilot.
The three national government departments involved in agricultural education – higher education and training, science and technology, and agriculture, forestry and fisheries all support the findings of the consensus study. And they’ve made a commitment to ensuring support for the ideas to become policy.
The study has also been recognised by the Regional Universities Forum for Capacity Building in Agriculture as having the potential to address challenges faced by agricultural education and training across Africa.
Wittingly or unwittingly, South Africa’s Finance Minister Malusi Gigaba’s medium term budget policy statement places him – and champions of the market economy inside and outside the African National Congress – in a strong position and opens the way for real economic change. Whether the opportunity is taken is, of course, another matter.
Gigaba revealed that the government’s revenue shortfall is two thirds higher than expected, spending is growing, as is the deficit which will not, as promised, stabilise next financial year. And growth projections are down from a poor 1.3% to a negligible 0.7%.
The minister announced no new measures which are likely to turn the situation around and another set of ratings agency downgrades seem inevitable. This is partly because the agencies take their cue from domestic economists and business people, all of whom see a downgrade as inevitable. The only rational response is surely that the economy is in a downward spiral and that the minister cannot or will not do anything about it.
Perhaps. But there is another way of looking at the speech which sees many of these negatives as potential economic game changers.
One reason for seeing an opportunity for change is that the speech provides more than enough grounds to begin two of the tasks which must be confronted if the economy is to turn around in a sustainable way. It provides a powerful lever for everyone who wants to resist patronage projects. And the scale of the problem does send a signal to all economic actors that a sense of crisis – the acknowledgement that the economy must change course if it’s to grow and include more people – is needed and that negotiations to change the economy are essential.
Gigaba’s speech made it clear that the argument that money is simply not available is now an understatement. One casualty might be the nuclear power project on which President Jacob Zuma and his faction seem to have set their hearts. There have been suggestions that Zuma’s primary objective in his most recent cabinet reshuffle was to insert a loyal person into the energy portfolio so that he could make the nuclear deal happen.
Gigaba is now signalling that there is no money for the project and so the reshuffle’s purpose may have been undone.
And the argument for structural change, not mere tweaking, is much stronger now than before the speech. The harsh realities he explicitly set out mean that any finance minister who wanted to shut the door on patronage, begin cleaning up state owned enterprises and kick-starting talks with other key players, such as the private sector, is in a very powerful position. This could open the way for bargaining between all the economic interests on how to grow the economy and open it up to those who are excluded.
It does not mean that Gigaba will take the opportunity. The fact that he kicked the can of change down the road during his speech, proposing no new plans for change – and that he has already granted South African Airways a bailout – seem to show that his apparent desire to please everyone leaves him ill-equipped to take any of the steps suggested here.
But, if we assume – as many people who observe him do – that Gigaba’s chief goal is to advance his political career, the numbers he quoted today suggest that he is unlikely to do that unless he can show that he did something to change the realities he described. It’s possible that the minister knows that these realities won’t change unless he takes some decisive steps.
Stage set for trade-offs?
The speech offers no solutions but it can hardly be accused of ignoring or concealing the problem. On the contrary, Gigaba made a great deal of his refusal to “sugar coat” the problem. Insisting that South Africans must know how bad it is, he added that citizens needed to understand the “challenges” because only then
(will) we … know what to do … as well as what trade-offs must be made in the public interest.
That sounds very much like an attempt to set the stage for some unpopular decisions and for engaging with key economic actors on what trade offs should be made. Clearly, a minister who hopes to please as many people as possible is not going to initiate major changes without very solid backing – the speech may well have been an attempt to get that backing.
So Gigaba could be trying to set the stage for a process in which the awful state of the economy enables him to gain support from key economic actors to introduce the “trades off” he promised.
Of course, the minister may have no plans to use his leverage in this way. But, if so, the speech may have provided an important lever to those who would want him to do so. It clearly was an invitation to private economic interests to engage.
If businesses take Gigaba up on the offer, they may well find themselves in a more powerful position than they imagined, given the state of public finances and of the economy. They certainly have economic reality on their side and, since the minister is not zealously attached to either of the African National Congress factions, he may well be inclined to support them if the alternative seems likely to promise his political ruin.
The speech showed that the economy is in crisis – it needs to change direction if it’s to serve the country’s needs. Whatever the minister decides to do, its effect will depend on how those in society who have an interest in that change choose to react. The stakes are clearly too high for them to fold their hands and wait for the minister to act.
Uuumm .. that’s a toughie. But we really should know so we can drop it into conversation in a casually cool way – I always find listing the 54 African countries by GDP in 2017 makes me pretty popular – and I want to give you too the chance to gain a reputation for exciting repartee.
What do we know ? Based on the dodgy exchange rates being used in Egypt until November 2016 and in Nigeria/Ethiopia/Angola etc all year – Nigeria was the largest economy in Africa in 2016, followed by Egypt and then SA. All of Africa had a similar GDP to India, but was not as big as California. That goes a long way to explaining relative news coverage.
Source: IMF with a little help from Renaissance Capital
What about 2017 ? “We have a problem here Captain” as Scottie would have said because we just worked out that the IMF is using an average exchange rate for Nigeria of 304/$ for its GDP estimates.
Now I like the IMF resident a lot – but I think this is hard to justify. The I and E fx window rate has averaged 368/$ from 25 April to 11 October. What about Jan-Apr? Do we use the parallel market rate that hit as weak as 520/$ in early 2017, or the Naira rate quoted on Bloomberg which was 313/$ ?
In the graph below, we show both Nigeria using the IMF figure, and Nigeria using a 367/$ average. If you believe the IMF, Nigeria was number 1. If you think 367/$ is more realistic, it was number 2 and SA swept past both Egypt* and Nigeria to take number 1 slot again. Humble South Africans can once again stand tall, arm in arm with President Zuma, a man who has helped ensure per capita GDP in 2017 is not above the lofty heights it achieved in 2007. To be fair to Zuma, Brexit has helped push UK per capita GDP back to below 2006 levels. This must be a deliberate part of the UK charm offensive to rebuild links to the old Empire so that will help make Britain great again. *at least Nigeria has an IMF implied exchange rate, Egypt doesn’t let the IMF publish one, so you are relying on us for that figure
Meanwhile Ethiopia cleverly timed its devaluation until just after the IMF publication so it can lay claim to 8th place .. when the deval probably means it is 9th behind Kenya.
Source: IMF with a lot more interference from RenCap in this one
What about GDP per capita ? Nigeria, Kenya, Ghana, Ivory Coast are all in roughly the same place – just ahead of Bangladesh – with wealth levels double that of Rwanda or Uganda. Of these, Kenya, Ghana and southern Nigeria are best placed to industrialize in the same way that southern Bangladesh has.
I tested this last chart on twitter and the instant response is … “not Equatorial Guinea”. Fair enough, the average per capita GDP may bear no relation at all to GDP per person once the boss has nabbed all the oil wealth. But the point is, India is mid-way between countries like Egypt, Nigeria, Ghana and Kenya, and positive themes should be found in a few of them.
Re the Kenyan elections – what we heard at our East Africa conference is that President Kenyatta would probably win a re-run, especially if Odinga boycotted the second round.
Source: IMF, Renaissance Capital, World Bank (for Somalia population)
CONCLUSION: GDP per capita has probably bottomed now in Egypt, Nigeria and a fair few others. The next move should be up again as we enter 2018. Nigeria may have lost out to SA in terms of being the largest economy in Africa in 2017 (let’s see what happens to the ZAR by year-end) but this SA resurgence won’t last for too long. We continue to see Morocco, Egypt, Tunisia, Ghana and Kenya as among those best placed to industrialize in the coming years.
South African tourism minister warned against the escalating violence between Uber and meter-taxi drivers, saying this affects the tourism industry.
"In addition to the needless destruction of property and threat on human life, the general mood of uncertainty implicit in the violence threatens the stability of the tourism industry on which thousands of jobs are reliant," Tokozile Xasa said in response to the recent attack on Uber operators.
Violence flared up again between Uber and meter-taxi drivers following the burning of two vehicles belonging to Uber drivers in Johannesburg.
Over the past several months, several people have been killed in violence related to the rivalry between meter-taxi and Uber drivers. Uber Sub-Saharan Africa has launched a petition calling on Transport Minister Joe Maswanganyi and Police Minister Fikile Mbalula to take action to curb the violence.
The violence between the meter taxicab and Uber operators is injurious to the two since even local passengers would eventually stop patronizing either if the violence continued, Xasa said.
"In this context, it is self-evident that the operators are cutting off their noses to spite the faces," she said. For any domestic or international tourist, the sense of security is as important as the ordinary citizen, said the minister.
"However, both the meter taxicab and Uber operators need to bear in mind the fact that whereas as citizens, our relationship with South Africa is not one of choice, tourists can elect to visit one place and not another and one country instead of another," Xasa said.
She urged the two transport operators urgently to engage in dialogue, the better to find lasting solutions to their disagreements. "No one's life must continue to be placed in danger because two operators are in disagreement with one another. This must stop!" she said.
South African President Jacob Zuma sacked a vocal critic from his cabinet on Tuesday, a move expected to further deepen tensions as an elective conference to the ruling ANC draws near.
In his second reshuffle this year, Zuma dropped Higher Education minister Blade Nzimande, a member of the South African Communist Party, which is a key political ally of the ruling ANC. Zuma also moved State Security Minister David Mahlobo to the energy portfolio, the president’s office announced, reviving debate over controversial and costly plans for nuclear energy.
Nzimande has in recent months been incessantly vocal in calling for Zuma to go.
“The ANC is being stolen in broad daylight,” Nzimande told an anti-graft strike last month which urged Zuma to quit over a series of corruption scandals. The SACP and the country’s largest trade union, COSATU, are long-term political allies with Zuma’s African National Congress (ANC) party.
Both the SACP and COSATU have endorsed Cyril Ramaphosa as the ANC’s new president. Zuma is backing his ex-wife Nkosazana Dlamini-Zuma to succeed him. The ANC is due to elect Zuma’s successor as party leader in December, ahead of general elections in 2019.
South Africa’s lacklustre growth has been driven by an underperforming education system, a swollen public sector, and a lack of strategic flexibility within South Africa’s private sector.
Addressing these issues will lead to stronger economic growth, increasing wealth equality, and a more stable social and political environment for South Africa.
These goals cannot all be reached in the short-term, and require both the private and public sectors to contribute to them if they are to be achieved at all. If they are reached, they will be to the benefit of all South Africans, and in the meantime, the journey towards them will change a pessimistic national outlook and reignite the hope of a brighter South African future.
The first issue facing South African growth is the education system, which is struggling to deliver the quality of graduates that is required to build a multi-faceted economy. South Africa ranked 75th out of 76 countries in the 2015 OECD education league tables, 27% of students who have attended school for six years cannot read (compared to 4% in Tanzania), and only 37% of children starting school go on to pass the matriculation exam. As well as failing to deliver a literate workforce, the South African education system perpetuates a system of racial inequality, with black students ten times less likely than white students to do well enough to study a subject like engineering.
While there has been a modest improvement in the standard and equality of the education system since the end of apartheid, these statistics illustrate the challenges that remain. Economies are largely driven by the intellectual capital of their workforces, and this is increasingly true in a world that is becoming more automated and specialized. If South Africa cannot improve its education system, it will struggle to drive and maintain long-term growth.
The second issue, a bloated government, impacts all sectors and is endemic to developing nations. It is an affliction that is often the result of a government that tries to reduce unemployment and improve public opinion by hiring large numbers of people. When this happens, leadership stagnates, bureaucracy increases, and skills cannot be brought to bear where they are most needed. Public employment in South Africa has grown rapidly over the years, averaging more than 6 times the growth of employment in the economy as a whole from 2008 to 2014, and must be slimmed down to facilitate a flow of talented people into the private sector and drive economic growth.
In conjunction with re-evaluating the size of its public sector, South Africa must reduce the bureaucratic impediments to doing business. It is too difficult to set up new businesses, hire employees (especially international transfers), and grow once a business is established.This stifles entrepreneurialism and innovation, makes South Africa a less attractive target for international investment, and limits the private sector’s ability to grow. Simplifying the complex process of operating a business in South Africa is a necessary step to enabling the private sector to expand as it needs to.
The third issue facing South Africa lies within the private sector itself, which has not adapted to the new opportunities. Businesses must capture the new markets; pricing for consumers with less disposable income, offering differentiated services to the growing urban middle-class, and expanding into other African markets, which offer a significant opportunity.
With the South African economy recently coming out of a recession, consumers are struggling to maintain their standard of living at a time when they have less disposable income to maintain it with. By adjusting pricing and product and service attributes, companies can capitalize on these opportunities but many South African businesses have been slow to do so.
But first and foremost, South African companies need to get their mojo back. All too often I meet defeatism when the opportunities look bright. Cash flow is often strong and capabilities within companies are stronger than ever. Releasing this energy is what is needed.
South Africa has much in its favour. Its geographical positioning, inherent strengths, and international reputation mean that it can reassert its status as a leading emerging economy. There is no reason that it cannot match the growth of countries like Poland, Colombia, and Egypt, and should be targeting minimum GDP growth of 3% per year to 2025. Tackling problems systematically and aligning public and private growth efforts will drive the country towards this goal.
The keys will be improving education, reducing the size of the public sector, and increasing private sector flexibility to seize growth within the rapidly changing African landscape.