There may be some euphoria in the country after President Cyril Ramaphosa’s announcement of his new cabinet, but analysts warn that he will need to look for new ways to stimulate growth.
“To whom much is given and much is required …,” said Lesiba Mothata chief economist at Alexander Forbes, referring to the mammoth task that awaits the newly appointed president.
Speaking at a Mail & Guardian roundtable on the South African economy 2018, Mothata said that there is much that Ramaphosa can do to stimulate the economy to achieve the growth that South Africa needs.
He cited that Ramaphosa’s new economic deal requires a demonstration that he will implement structural reforms which will increase potential economic growth.
During the state of nation address, President Cyril Ramaphosa said he aimed to achieve GDP growth of about three percent.
Although business and confidence levels may be high, Ramaphosa has to tackle a 26.7% youth unemployment rate as well as high poverty and inequality levels. Ramaphosa needs to create a new economy, Mothaba added.
South Africa has one of the best budget processes, rated first according to the latest open budget index survey. Mothata said that national treasury needed to maintain this.
Government would also have to clamp down on corruption. Ramaphosa said during his state of the nation address that said that if anti-competitive behaviour is addressed about 0,6% would be added towards GDP growth.
Ramaphosa needs too to diversify the economy by shifting the focus on big cities and take advantage of economic benefits from peripheral cities, said Lesiba Mothata. For example cities such as Rustenburg which is platinum belt and should be transformed through finished products by adding value through beneficiation.
“This will redirect growth and decrease a oligopoly in the market as currently there is a high concentration of value chains and this is barrier of entry for small-medium sized enterprises”, said Mothata
Magda Weirzycka, chief executive at Sygnia group, said the one challenge that South Africa is facing is job creation. “I am supportive of Cyril’s call for summits, because you need to get a hold of the brightest minds to help us come up with creative solutions to uplift investor confidence”.
Weirzycka said there are few areas the newly appointed president can immediately focus on to create much needed jobs, for instance the mining charter needs to be resolved as the sector can create much needed jobs once resolved.
“We also need to all amend our black economic charters as the way they have created oligarchs and what we need is wealth distribution that is broad-based”.
“Cyril Ramaphosa represents optimism and new dawn”, said Weirzycka, while Mothata warned “that as much as South Africans may remain optimistic, they ought not to be euphoric”.