No more games, Ramaphosa, it’s time for real action – economists

As President Cyril Ramaphosa opens the Investment Conference in Sandton this week, he knows investors want him to move beyond sweet talk into concrete action to grow and stabilise the economy.

That’s the view of Dr Thanti Mthanti, senior lecturer of finance at Wits Business School. Ramaphosa would also have to act on the concerns of sovereign rating agency Moody’s, which gave the SA economy a negative outlook and kept its investment rating at BAA3 (BBB)– the lowest tier of investment grade.

The Moody’s report and the 11-year high unemployment rate of 29.2%, an increase of 0.1%, could not have come at a worse time for the president, who desperately needs investment.

He has always been given the benefit of doubt with regards to the rising unemployment rate, but could not escape the blame for the latest figure.

Mthanti said investors at the three-day conference would look for a credible plan to grow the economy.

“They would not plough their money in a declining economy because investors are generally attracted to growth,” Mthanti said.

Investors always look for similar things – that their investment would be secure; that they would make good returns; and a good plan of the government to grow or keep the economy stable.

Mthanti said for the economy to grow, the country needed to achieve at least 3% primary surplus to the GDP for at least three years that would be accompanied by a reduction in interest rate.

“The biggest issue in the economy is economic growth. If the economy was growing by 3% a year for five years there would be no crisis.”

He said the easiest way to stimulate growth was by reducing the interest rate and strengthening areas like manufacturing, mining and agriculture that were vital to SA’s economy.

The government must also address the budget credibility, which concerned Moody’s.

Economists said the next six to 12 months would be crucial for South Africa to turn things around if it is to avoid junk status by all three rating agencies.

Dawie Roodt, chief economist of the Efficient Group, was convinced Moody’s would join S&P and Fitch next year in downgrading South Africa to sub-investment grade unless Finance Minister Tito Mboweni was able to “pull the proverbial rabbit out of his hat”.

The country’s debt is expected to rise to 71.3% of the GDP in the next three years, including Eskom’s debt.

Mboweni, in his mini-budget last week, conceded the national debt exceeded R3 trillion and is expected to rise to R4.5 trillion over the next three years. “Clearly, we need to do things differently… this is a serious position to be in,” Mboweni said.

With the state-owned enterprises a financial drain to the fiscus and a burgeoning civil service wage bill, the country is in the doldrums. Almost all commentators said government has to make unpopular decisions, including drastically reducing the public wage bill.

There is a dilemma, though: the ANC’s partners, Cosatu and the SACP, are opposed to the minister’s reforms. In Klerksdorp at the weekend, the SACP for the first time publicly lambasted Mboweni’s economic plan for not catering for the working class.

Cosatu had criticised him for being “anti-worker”.

But big businesses pledged to work with the government to stabilise and grow the economy.

The Minerals Council of South Africa offered to help. “The mining industry has the potential to make a sustainable, positive contribution to growth and development, to the benefit of all its direct stakeholders and the country as a whole. But, to be able to do this it needs to be able to attract and keep investment, which in turn requires a stable, predictable and competitive investment environment,” it said in a statement.

“The council is committed to working with government and all sectors of society to stabilise and grow the economy, to the benefit of all its people.”

– ericn@citizen.co.za

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