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We need to change our outlook warns Gordhan

08 November 2017Jonathan Faurie

In terms of South African politics, 2017 has been an interesting year. We have seen two major cabinet reshuffles and we are seeing a lot of pressure being put on President Jacob Zuma who many feel is letting the country down in a number of areas.

The socio-political climate in the country is having a significant impact on the financial services industry. After the first cabinet reshuffle in April, South Africa was relegated to sub-investment grade, otherwise known as junk status.

What is the political outlook for the country going forward? Will the African National Congress (ANC) emerge out of the December elective conference as a galvanised force or a fractured party? These were some of the issues discussed by Member of Parliament, Pravin Gordhan, at the recently held Independent Financial Advisers (IFA) Symposium.

Sanity prevails

Without speculating on who he feels should govern the party coming out of the elective conference, Gordhan said that it is important that sanity prevails.

“What happens at the December elective conference has a major impact on how the country will be run going forward. The impact of geopolitics on the economy cannot be denied. Look at the effects that the decision to leave the European Union had on the UK, and the effects that the election of Donald Trump had on the US,” said Gordhan.

He added that the fallout is also having effects on areas outside of the economy. The independence vote of the UK showed that there is major discord between the country and the rest of the EU.

Can we afford poorly made political decisions to influence the way that the rest of the world looks at South Africa at a time when we need major investment into the country?

Frank discussion

South Africa is sitting on a precipice in many respects where the country has the ability to be one of the fastest growing economies in the world if the correct political decisions are made.

“The elective conference needs to be convened with the sole ambition and goal of driving South Africa to reclaim its position as the leading economy on the continent. The leaders going into that conference need to have frank discussions about issues that affect the public and the economy. The leaders also need to have discussions about how we are going to go about resolving legacy issues. The fact of the matter is that there are 30 million people in South Africa who are living on the poverty line. We need to create jobs for these people and we need to create them now,” said Gordhan.

One of Gordhan’s closing statements sounded an ominous warning to attendees, “South African politicians need to make different political decisions. At the moment, these decisions are about putting personal gain ahead of the country’s economy. We are not creating conditions for economic growth, we are creating conditions where a person can loot money from State Owned Enterprises.”

The financial services industry

Whoever emerges from the elective conference as the victor will have a specific view on the policies that they will want to implement in the country.

“With this change comes a shift in the way we do business,” said Gordhan, “The mechanical approach that the financial services industry is currently adopting is unsuited to achieve radical economic transformation. There is a disconnect with what the majority of the population experiences when it comes to financial savings vehicles and the experiences of the top earners in the country. This needs to be addressed.”

He added that this can only be achieved through the right combination of policies and levels of inclusivity; this means that there is a role for government to play, but there is also a role for the financial services industry to play. The industry needs to rethink the way it goes about doing business.

Shifting focus

For many years, rightly or wrongly, financial advisers were seen as product pushers who would sell products with little regard as to whether the product was appropriate to a person’s needs.

The Financial Services Board (FSB) and National Treasury are hoping to change this by encouraging advisers to have a greater focus on the economic wellbeing of their client. This may also go into helping clients review their decision making process to achieve different goals.

Editor’s Thoughts:
South Africans are patriotic by nature and love their country. The financial services industry already plays a major role in this by providing clients with world class products and services. Does the financial services industry need to rethink the way it does business? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by peter, 08 Nov 2017
All MPs' should required to be fit and proper just like financial advisors. The impact of their bad conduct is more devastating on the economy and the people than the latter.
In the case of advisors, there should be a gradual shift to fee based advice. If you went to your doctor for a diagnosis and he didn't charge you but was paid by a pharmaceutical company for drugs sold, there would be an incentive to diagnose so as to sell the drugs. His integrity may be intact and he may not mis-diagnose, but the inherent conflict in such a system incentivises bad behaviour. This is the system in place in the financial services distribution system.
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Added by Berndt, 08 Nov 2017
Mr Gordhan has hit the nail firmly on the head. Another part of the problem is the current status of electing members of parliament. No-one is held accountable in any constituency and thus cannot be voted out if they are not looking after their constituents
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