South African Reserve Bank governor Lesetja Kganyago argued forcefully last week that the current adverse global economic climate should not be used as an excuse for ignoring the ongoing domestic constraints to economic expansion.
He acknowledged that Africa’s most advanced economy faced a “challenging future”, owing to a confluence of lower commodity prices and weaker growth outlooks for South Africa’s key trading-partner markets of Africa and Europe. But his key message was that attention needed to be given to home-grown limitations to economic performance, especially the prevailing shortage of electricity, which was undermining output in the farming, mining and manufacturing sectors, as well as investment in productive sectors of the economy.
“It’s too easy to sit back and bemoan the fact that we are hostage to global developments – there are things that can be done,” he told delegates to the inaugural Industrial Development Conference hosted as part of the seventy-fifth anniversary of the Industrial Development Corporation.
Many of the remedies had been outlined in the National Development Plan (NDP), the New Growth Path and the Industrial Policy Action Plan, but Kganyago lamented the fact that South Africa appeared to be “underdelivering” on its ambitious infrastructure plan.
“If South Africa wants to develop its industrial sector, it needs to improve its infrastructure.”
Addressing the country’s high rate of unemployment also required a “growing and competitive economy”. Such competitiveness was not simply about the exchange rate, but rather a multidimensional concept that also included the quality of the goods and services produced, reliable delivery and infrastructure, appropriate technologies and skills and a supportive business climate, where red tape was minimised.
Finance Minister Nhlanhla Nene partially reinforced this theme of addressing domestic constraints in the Medium-Term Budget Policy Statement, where many of the key messages were all but drowned out by the dramatic protest scenes outside the Parliamentary chamber.
Nene stressed the need for greater policy coherence, the absence of which has been partially blamed for the weak investment performance by the private sector.
He also argued that the introduction of socioeconomic impact assessments should assist in “improving coordination of government’s policy choices and identifying unintended consequences earlier in the process of developing regulations and legislation”.
The need to accelerate the implementation of the NDP was also emphasised, especially the infrastructure components of that plan.
However, with an expenditure ceiling in place and the rise in the wage bill having created a massive funding gap for the coming three years, it’s hard to imagine the proposed shift from consumption to capital expenditure being sustained, let alone intensified. Should that shift be throttled, though, South Africa will remain hostage to exogenous developments.