South Africa looks set for an economic upswing, as a far more competent leader than President Jacob Zuma is now controlling our economy.
We are looking at the very real prospect of an 11-year Cyril Ramaphosa presidency, which “must be good news” for business and society.
This is the gist of a Dolphin Bay Brief interview with independent analyst JP Landman. Bertus attended a presentation by JP in early December and found it so interesting that he asked JP to give our customers his views on the major tipping points South Africa has been facing in recent years, and the extent to which these have shifted in the past two months.
The first tipping point is the possibility of population growth outstripping economic growth over a sustained period, JP said. “For society to progress, people need to get richer. Per capita income must increase. We must generate more resources and distribute them more fairly.
“Economic growth must outstrip population growth. If it is any lower, we go backwards.”
Between 1946 and 2016, economic growth exceeded population growth by about 1.2% per year, which provided the money for building more roads, schools, and hospitals, among other social benefits.
Population growth in South Africa, including immigration, is now at 1.6% and economists are predicting economic growth of 1.2% in 2018. This year would be the fifth consecutive year where population growth outstrips economic growth. However, an upswing has already started: last year, economic growth was 0.9% and in 2016, 0.3%.
“Are improvements guaranteed? Of course not. However, South Africa had its ‘Trump moment’ when Zuma was elected. The evidence is that we are now moving in the opposite direction.”
Even if Zuma was to serve out his full term as president and Ramaphosa only assumed office next year, the prospects for South Africa’s economy are much brighter than they were last year, JP said.
Changes at Eskom and the charges against those behind the Vrede Dairy Farm scandal are just some of the many positive developments that are starting to encourage economic growth and more improvements are likely to follow.
“One of the golden rules for ensuring economic and political success is having a 3C government – one that is committed to growth, capable of delivering it, and is credible on economic growth – and we are on the cusp of getting it,” JP said.
The second tipping point would be the strengthening of an open society, one in which voters can replace the government and there is rule of law; a free and pluralistic media; laws against corruption and, among other things, independent agencies of restraint, such as the Reserve Bank and financial markets.
An open society ensures there is “fierce contestation at all levels, so that everybody gets something, rather than giving just a few people all they want.”
“Cyril would not be ANC president if it were not for the forces of an open society,” JP said. “The majority of people were outraged by what has been happening in government. Ironically, Zuma’s presidency has caused society to open up even further – the ANC saw it would lose electoral support if it didn’t change.
“So, for me, this tipping point, too, is falling in the right direction. We are making really good progress.”
Are improvements guaranteed? “Of course not,” he said. “There can be a backlash, as happened with the election of Donald Trump as US President, and the UK’s Brexit vote. However, South Africa has had its ‘Trump moment’ when Zuma was elected. The evidence is that we are now moving in the opposite direction,” JP observed.
A 2017 study by Ipsos Mori for the World Economic Forum, called “Perils of Perception”, found that South Africans were more pessimistic about their own country than every one of the other 37 populations surveyed. Brazil was second on the list.
The study investigated the gap between perception and reality in 38 countries surveyed. Among its findings were that over 80% of the South Africans surveyed thought the murder rate was higher than that in the year 2000, while in fact it was 29% lower, and that respondents thought that 44% of girls aged 15-19 give birth every year, while the real figure was 4.4%. This “lens of pessimism” is very real, as the study shows, and it influences the way we think about opportunities.
The intractable challenges South Africa faces, including ensuring broad land ownership and youth unemployment, could be addressed if we have economic growth and an open society, JP said.
“Our open society is getting much stronger, and this genie is not going back in the bottle,” he said. “It’s an uncomfortable journey, but one that is very good for modernity, which is the endgame.
“The biggest threat is our own lens of pessimism.”
Businesses should now “do business, and invest, in South Africa,” he advised. “The private sector is much bigger than the public sector. If we want economic growth, we need investment. I’ve always believed local investment is the more important factor, and foreigners will follow if they see that locals have confidence in their economy.”
Source: Dolphin Bay Chemicals