It’s probably right for the National Treasury to be sounding the warning bells about state spending. As a Treasury document on “cost-containment measures” three weeks ago put it, there was an “exceptionally large year-to-date decline in government tax revenue collections, estimated at R22bn for the first five months of the year”. This implies a R50bn shortfall for the full year.
The country, in other words, is in a fiscal bind. The outlook is gloomy and sentiment is tanking. The question of how to reverse the trajectory — first through a series of short-term interventions and then through longer-term action — is one that occupies the minds of the best of our corporate leaders.
To counter this tide of pessimism, the FM tapped into the thinking of those who run our largest corporations. We approached CEOs, executives and power brokers in society, asking what they would do in a three-month time frame to shift the sentiment, and then over a year. What you read in these pages this week is testament to how seriously they take the issue.
Yet the scale of this challenge is evident in the fact that few of them believe GDP growth will be anything other than pedestrian in the foreseeable future. MTN CEO Ralph Mupita says forecasts of about 1% “look realistic to me”, which chimes with the views of others such as Investec’s Fani Titi.
“GDP growth all depends on whether the government is prepared to introduce the necessary reforms,” says Neal Froneman, director of Business Leadership South Africa and CEO of Sibanye-Stillwater. But, he adds, with the right interventions — such as getting the private sector to invest in infrastructure — growth “could see a remarkable turnaround within a year”.
MTN chair and former deputy finance minister Mcebisi Jonas says that while it’ll be difficult to push growth above 1% soon, if a route can be found to conquer load-shedding and end the Transnet-induced logistics snarl-up, growth could climb above 3% within three years. And if the small business sector starts firing, 4% beckons.
Sadly, even that’s nowhere near where we need to be to eat into the 32.6% unemployment rate, which blows up to 42.1% if you include those who’ve given up looking for work.
Says Mark Barnes, chair of Purple Group: “What we need is a plan that takes us up to 8% if we want to have any chance of addressing poverty, inequality and unemployment, let alone keeping up with the unfunded social support promises.”
To get there, there can be no compromise: South Africa’s balance sheet must stay intact — which means silly ideas such as the basic income grant, or National Health Insurance as conceived by the government — have to be binned or overhauled. That these pie-in-the-sky plans haven’t already been tossed out suggests we’re led by a government that prioritises cynical populism or has no fiscal sense — or both.
What we cannot afford is for the Treasury’s “cost-containment measures” to be sacrificed on the altar of political expediency ahead of next year’s election.
What’s clear from the contributions of our top executives in these pages is that the country has the ideas, and it has the skills in the private sector, to push GDP growth towards a point where it’ll make a real difference. What we need now, however, is for politicians to finally embrace reality.
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