Politics impeding SA growth – economist

Too much focus on politics is holding back South Africa’s economy.

Kevin Lings, chief economist at Stanlib, said in an interview with Justmoney that investors are reluctant to invest in a country with inconsistent policies.

 “The mining charter is the rule governing how we undertake mining and if we keep changing the rules, the investors will be hesitant to invest their money,” said Lings.

He said that investors like consistency and they would work around any rules as long as they do not keep changing.

“If we could clarify government policy on a range of issues and make it more certain, it would naturally lift confidence and therefore attract more investment,” said Lings.

Lings emphasised that until government moves the business confidence, South Africa is going to struggle to reach the World Bank’s estimated growth rate.

According to StatsSA, the Gross Domestic Product (GDP) showed a decrease of 2.2 % in the first quarter of 2018. The statistics showed that the largest negative contributors to the growth were agriculture, mining and manufacturing industries.

The economist said that instead of appeasing the investors, pres. Cyril Ramaphosa’s attention is on obtaining votes.

“We’ve got elections next year, so the president has to focus on that.  That means he can’t devote as much time to fixing the country.  On top of many things he will have to deal with factions in the ANC,” said Lings.

Lings said that the government needs to invest by building hospitals, schools and infrastructure. However, that is impossible judging by the amount of debt the country is in.

According to him, the government has borrowed approximately R1 trillion over the last 8 years. Furthermore, Ling said SA spent money on paying salaries instead of investing.

 Lings added that the government needs to create employment to encourage economic activity.

“Job creation is the most powerful economic factor that you can have in an economy,” said Lings.

During his speech at the Allan Gray Summit in Cape Town, he said that SA needs to look to America where 200,000 jobs a month have been created since its previous low in 2010.

“The US is advertising for 6.8m jobs. More than 18 million people have been employed since the financial crisis ended in America, yet there are more jobs available.”

However, he pointed out that the US will struggle in future as it only depends on technological innovations. He said the county’s workforce is mainly made up of ageing people.

He advised countries like South Africa and India with its younger populations to capitalise on its demographics to encourage economic growth.

He said this will be important for investors faced with growth constraints in an ageing industrialised world.