Many of the country’s strengths have been tested to the limit. State capture damaged the economy extensively, followed by the Covid-19 pandemic driving unemployment to emergency levels.
With many challenges still threatening the economy — globally and domestically — it’s easy to fall into despair. But we survived state capture and the pandemic, and we are trying to shape our country to be stronger. That’s some achievement and gives me confidence that we can overcome present and future challenges, and prepare the path for a brighter future.
SA has many strengths. The way the country emerged from the pandemic, after enduring among the most severe restrictions in the world, won respect globally. That point was emphasised repeatedly at the forum Business Leadership SA (BLSA) hosted this month with the IMF team responsible for the financial sector assessment programme it undertook on SA.
A session focused on how SA responded as quickly as it did to ease monetary conditions, and the SA Reserve Bank was praised widely. It cut the repo rate by 275 basis points by May 2020, with the first harsh lockdown having kicked in at end-March. More rate cuts followed. It also introduced what it called “extraordinary” changes to monetary policy operations and prudential regulations, to ensure an adequate flow of funds in the banking and financial systems. These measures eased liquidity strains and averted the outflow of foreign funds to safe havens becoming a panicked exit.
What came out clearly (and I should point out that the Bank wasn’t at the IMF forum) was that it was able to act quickly because, through its track record, the Bank had developed a relationship of trust with the financial sector. Because of this, it was able to call meetings at short notice and get the measures in place quickly — with co-operation from banks and other financial institutions.
Furthermore, its communication with the markets has always been excellent, giving reasons for its decisions. That kind of transparency is rare within government, but as BLSA repeatedly emphasises, policy certainty is extremely important for the private sector.
That the Bank was able to act with such speed in cutting rates also reflects the robustness of the financial sector, particularly as far as liquidity management is concerned.
The IMF assessment is a vote of confidence in SA. Though it doesn’t shy away from highlighting our problematic issues, it paints a positive picture of regulation broadly in SA.
The strength of our financial sector is something to be nurtured, and we must keep adding to its resilience where we can, ensuring we remain in the “best practice” category in the eyes of the world. Rest assured there will be future shocks — the global economy faces risks including climate change, global recession, inflation and geopolitical uncertainty.
I gain confidence in our future from other strengths. We have a strong constitutional democracy and judiciary, and through the Zondo commission the country is trying to address the sins of the state capture era and establish powerful anticorruption institutions for the future.
The economic reforms we’re undertaking are also hugely positive despite the many blockages — but even most of those are being addressed. And as bleak as the energy picture is now, with load-shedding a daily occurrence, it will improve. Some of those blockages have ensured that load-shedding will have to extend beyond 2024, but once we’ve added 6GW of new generation load-shedding will end.
From that point, with that restriction on economic activity lifted, we’ll be well positioned for growth. The energy market will continue to expand and we now have an investment plan to tackle the just energy transition. Though it still requires a lot of work, it’s a solid starting point, and that’s another strength.
Other reforms will have kicked in by then. Hopefully, our rail and ports systems will have at least improved their capacity so that our miners, manufacturers and farmers can export as much as they can produce. Additionally, should government manage to streamline the process for public-private partnerships, our infrastructure programme could be up and running, injecting billions into the economy.
Of course, in SA optimism can never be unbridled. There’s a lot of hard work still to be done to get things right. But BLSA firmly believes the country has the core strengths to build a better future for our children and will be rigorous and determined in pursuing that goal.
• Mavuso (@BusiMavuso2) is BLSA CEO.
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