How can South Africa avoid junk status in the next six months?


The South African Economy is made up of 10 sectors which contribute towards the overall GDP. These sectors are finance-real estate-business, trade and wholesale, government, manufacturing, personal services, construction, transport-storage and telecommunication, electricity-gas-water, agriculture-forestry-fishing and mining-quarying.

According to the first quarter report by Statistics South Africa (Stats SA), finance grew by the highest percentage of 1.9%, construction scored the lowest growth of 0.5%. Trade, government, manufacturing, personal services sectors scored within the range of 0.6% and 1.1%. The sectors losers were transport, electricity, agriculture and mining. The mining industry declined by 18.1%, which can be attributed to labour unrest and decline in platinum prices in the global market. Agriculture reported the second highest decline of 6.5% which is attributed to the draught that is in our midst. Electricity and transport declined 2.8% and 2.7% respectively.

Due to low and negative growth rates that are reported in the first quarter, increment can be boosted by policy reforms across all sectors at both government and business level.

Labour unrest, for instance, coupled with high remuneration of executives and the high cost of production inputs like electricity, are the main culprits in contributing towards small growth, or even worse, negative growth. Government should be strategic in running SOEs such as utility service providers in an effective way. If such institutions run at high costs, these costs will be transferred to business owners through high bills of essential operating expenses such as electricity and water.

Despite all the challenges, South Africa is steering the ship of GDP growth towards the right direction. In order to boost GDP numbers, our trade sector needs access to larger markets, that is, trading across borders. South African Transport SOE has embarked on a massive infrastructure initiative to smooth trade across borders, as this can only happen under well-functioning railway systems, ports, roads, trains and ships.

As far as trade and foreign direct investments are concerned, South Africa has improved significantly for the past 26 years in harmonising its trade policy to allow for foreign business or investment participation. To further allow for foreign business to play in our space, political turmoil should be minimised through constructive and structural arguments of all political parties. Escalated political violence portray the country as ungovernable in the global space which intimidates foreign investors. We can all reap the benefits of having foreign competitors through replicating their models within our domestic businesses (knowledge spill-overs); competitive price for consumers and diversified product mix.

Aspiring entrepreneurs should be giving the Ubas, Facebooks, Whatsupps, and Business Moguls of this world a run for their money by making them taste their own medicine.

All South Africans have collective responsibility in developing entrepreneurs or boosting GDP figures, which can be done by demanding a healthy mix of local and foreign products. Increased demand has a transmission mechanism of increasing production and labour demand, which will dampen the staggering rates of unemployment. The South African government has already identified the need to nurture entrepreneurial talent, there are now funding and mentorship platforms in place that aspiring entrepreneurs can use to further develop their businesses.

It is clear that six months is short notice for issues that have been in existence for way more than six months, but steps in the right direction are better than leaving everything to chance. At the end of the day, economics is a science of self-fulfilling prophecy. Let us all demand the rand-denominated government bonds, and see how the rand will strengthen without the intervention of monetary policy.

Furthermore, economic growth begins at a micro-level and spreads down to a macro-level. All providers of labour should be efficient in their own private institutions, by getting on with their main business agendas that made them wake up in the first place. In so doing, managers will not spend too much time managing people, instead they will focus on the next innovative feature within their business domain—that will sustain the business or set it apart from competitors.

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Issue 83


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