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Prevent own goals

4th September 2015

By: Terence Creamer
Creamer Media Editor


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The unexpected 1.3% contraction of the South African economy in the second quarter of 2015 surely serves as a wake-up call to all the social partners, especially government, that efforts need to be intensified to deal with home-grown constraints to growth and investor confidence.

Government, business and labour certainly have no power to influence the macro drivers of the current bout of global economic turmoil: weak commodity prices and demand, the unclear state of the Chinese economy and uncertainty over the approach that the US Federal Reserve will take to the normalisation of interest rates.


However, that does not make them entirely powerless to act in a way that addresses some of the critical domestic logjams. Indeed, the rare show of unity in the steel industry is a case in point. It has been a long time since South Africa has witnessed government, business and labour leaders more or less aligned behind a common goal: to save an industry and protect jobs.

So what could be addressed to offset fragile business confidence and the prevailing sense of gloom?


Firstly, a change in mindset with regard to business would be helpful. No matter the context, businesses will seek to safeguard profit- ability and secure regulatory and legislative certainty. Government, in turn, will seek to channel business towards its development goals while raising tax revenue, and labour will always be seeking the best deal possible for workers.

But, in the current difficult environment, government needs to choose pragmatism over conditionality, especially if it wants business to partner with it on its nine-point plan for the stabilisation and recovery of the economy. Profit should not be perceived as a societal ill, but rather as the cornerstone for investment, the creation of jobs and improvement of tax revenues. There may well be a time for seeking to maximise reciprocity, but this is not it.

Secondly, we need to stop scoring own goals in the areas of legislation, regulation and policy implementation. Processes have to be accelerated to deal with the most obvious impediments to business, particularly in the areas of electricity and tourism.

Accepted, there is limited potential for quick fixes in the area of electricity. But have we really moved to fully exploit all the demand- and supply-side levers available to us? Just look at how long it is taking even to finalise the new solar-geyser incentives.

In the area of tourism, meanwhile, South Africa should be positioning itself to leverage the weakening rand, rather than raising the ‘hassle factor’ associated with the country as a holiday destination. In this area, progress could also arguably be made relatively quickly, as it requires little more than a stroke of a pen.

Similar urgency is needed to ensure that the infrastructure programmes move into full implementation and reduce the unnecessary red tape for investors and entrepreneurs.

To extend the football analogy further, it is probably fair to say that South Africa does not have the strike force to create many new scoring opportunities on the current global playing field. But the country could surely organise its defence in a way that prevents own goals.


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