The ongoing series of downgrades in South Africa's sovereign credit rating should be a clear call for national collaboration to achieve inclusive economic growth. Such collaboration should involve government, business, labour and civil society. It should seek to address our country's most pressing social inequalities as well as the policy confusion that plagues many of our state institutions.
These two challenges - social inequality and policy uncertainty - are similar. If left unaddressed, both will undermine confidence in our country and our ability to sustain a growth trajectory.
Consumer confidence is low, as shown by flat consumer and household spending. Retail sales rose by 1.9% in 2016, while private consumption rose by only 0.8%, both around half their previous levels. Spending on durables was down 7.3% in real terms and spending on vehicles dropped by a massive 12% year on year. The Absa house price index showed residential investment declined by 2%.
Business confidence is similarly weak, with private sector investment down 6% in real terms in 2016. The Absa/BER business confidence index has been below the neutral 50 mark for more than two years. Last year, 80% of manufacturers surveyed identified the political climate as the most significant constraint on confidence.
On the labour front, the economy created only 39,000 jobs, less than a 15th of what is required to absorb the increase of 640,000 in the labour force during the year.
Growth - and inclusive growth that enables marginalised groups such as black people, women and young people to share in its financial benefits - is essential to social stability. This is an interdependent relationship - growth is often premised on stability. The challenge is to reverse the spiral of negative growth and social instability. There is no longer time to defer action on our most glaring policy inefficiencies, service delivery weaknesses and social inequalities.
Such inequalities in our country are nowhere more pressing than in education. A poorly educated nation places limitations on development. We need to show the conviction required to do something about it. Our education system - primary, higher and tertiary education as well as vocational training - needs fundamental improvement.
In this regard, banking sector CEOs and the Banking Association South Africa have been active in a pilot programme to support the National Student Financial Aid Scheme as it works towards more affordable fees for tertiary education. The Ikusasa Student Financial Aid Programme will allow ordinary citizens to invest in a fund to support needy students via commercial banks.
Our state institutions are another structural weakness.
The finance minister was replaced just as the National Treasury and the CEO Initiative embarked on an unprecedented series of collaborations and roadshows to rebuild investor confidence.
The predictable consequence was downgrades of our sovereign rating to below investment grade by both S&P and Fitch, with a similar downgrade by Moody's looming.
The weakening of our institutions owing to political interference is cited by ratings agencies as central to their ratings reviews.
However, business, labour and civil society must not be disheartened. We must continue to engage government and insist on independent institutions with good governance.
State-owned enterprises (SOEs) have also been shown to be vulnerable to political interference and financial mismanagement. It was disappointing to hear that the nine largest SOEs had incurred debt of R700-billion over the past financial year.
Such debt is a significant fiscal risk to the country. While many SOEs borrow for worthwhile capital projects, we must insist on better corporate governance in these organisations. The multimillion-rand salaries drawn by executives hardly seem justified when they are unable to bring their companies onto an even keel, and constantly turn to the government to bail them out.
The state broadcaster is similarly embattled, only now emerging from apparent capture by political interests and unable to show how its state support is productively employed. Suppliers are going unpaid, and a hefty guarantee from treasury will likely be necessary to keep it liquid. But the SABC is at least in the process of a turnaround following a parliamentary inquiry into its management.
Despite findings of political interference, the inquiry perhaps contains the germ of a political revival. Parliamentarians showed non-partisan dedication to conducting a thorough hearing and compiling a report on the extent of organisational inefficiency and financial incompetence at the SABC.
As we saw during the hearings, there are many talented, hard-working South Africans dedicated to the success of our institutions. When these institutions work effectively, they restore confidence in our country.
This can happen across our social landscape. Effective institutions are also the bedrock of policy certainty, another fundamental driver of confidence. Clear policy actions improve business confidence and drive private sector investment. This creates jobs, making growth inclusive and not the sole benefit of shareholders.
Institutions playing a positive role in building faith in our country include the media and the judiciary. The judiciary has taken steps to address corruption and inefficiency in cases related to social grants and even the president himself.
Our banking industry was rated the second most sound in a World Economic Forum survey. The independence of the Reserve Bank and its monetary policy framework are also vital contributors to confidence.
We still have numerous effective institutions and committed, patriotic citizens.
We need rational, evidence-based policymaking and diligent, honest delivery of public goods and services.
This will improve confidence, unlock domestic and international investment and enable the fast, inclusive economic growth and job creation needed to turn our country's fortunes around.
• Coovadia is managing director of the Banking Association South Africa
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