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Crossing the Rubicon

30 July 2018Jonathan Faurie
Kevin Lings, Stanlib's Chief Economist

Kevin Lings, Stanlib's Chief Economist

Business confidence is inextricably linked to economic growth. If there is no confidence in the country (from the business community or from foreign investors), there is little chance that the economy will grow. South Africa currently faces a complex conundrum. Government has indicated that it needs to grow the economy and has set revised targets that are far below those stipulated in the National Development Plan; yet, business confidence within South Africa is extremely low and government is failing to create the jobs needed to drive the economy forward.

Speaking at the Allan Gray Investment Summit in July, Stanlib Chief Economist Kevin Lings said that he is confident that South Africa will be better off in two years’ time, provided that two very specific challenges are resolved.  

Education is a mess

Unsurprisingly, the first challenge that needs to be addressed is the education challenge. 

“Too many people in South Africa drop out of school. Every year, we see record numbers of learners registering for Grade 1. This figure is about 1,2 million children a year throughout the country. These children are obviously passing through the system because the number of registered Grade 10 learners is 1,1 million a year (on average). However, in Grade 12, this figure drops to 687 000 registered learners,” said Lings. 

That leaves 413 000 children in the country without a matric. And we all know how hard it is to get any form of employment without one. 

But what about the learners who leave school and go to university? Lings pointed out that the current pass rate at university is 17%. 

“South Africa is facing a definite education problem,” said Lings. 

Unemployment is rife

Lings said that the second problem that needs to be addressed is unemployment. Especially youth unemployment. 

“There is a perpetual increase in the unemployment rate, and this needs to be resolved. Government needs to create 600 000 jobs a year if it wants to address this challenge. If government wants to achieve a growth rate that will make a difference in this country, it needs to grow the economy by 4% or 5%, not the 1,5% it is currently achieving,” said Lings. 

There is another problem that is associated with unemployment. According to Lings, 65,7% of those who are unemployed are so discouraged about the situation that they are not even looking for work. 

“When people become so discouraged that they are not looking for work, they turn to government to support them. The problem is that government simply does not have the funds to do so,” said Lings. 

The road to nowhere

To illustrate the fact that government is short of funds, Lings pointed out that fiscal debt is up, and credit ratings are falling. 

This has a significant impact on business confidence. According to Lings, private sector investment is 11%; this figure should be close to 20%. 

Investment in the manufacturing sector has also been declining since 2008. 

“South Africa is known as a nation of shoppers, but we like to buy imported goods. If anybody wants to know why the Chinese and Indian economies have grown so rapidly, it is because they support local manufacturers, said Lings. 

Its now a time issue

The challenges that Lings pointed out are not new to South Africa. 

We understand that education is a problem in the country and that unemployment needs to be resolved. The question now is: can these challenges be resolved overnight? 

The simple answer is, no. We have been trying to address these two challenges for several years now with very little success. Lings is optimistic about the future; let’s hope he is right.

The 2019 presidential election may be the moment that the African National Congress (ANC) crosses the Rubicon. If they can resolve the education and unemployment challenges, then its supporters will feel vindicated in their vote. However, if the ANC cannot resolve these challenges, their support will wane. 

Editor’s Thoughts:
You can fool all of the people some of the time, and some of the people all the time, but you cannot fool all the people all the time. Let’s hope there is political will to resolve these challenges.  Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Paul, 30 Jul 2018
This article contains information that the ANC and the government have been aware of for many years.
There is nothing new here.
And still they do nothing of consequence except to try and implement the voting fail safe of land grabs.
Shame on them!
Report Abuse
Added by Eric, 30 Jul 2018
And still government is playing the populist game of spending time and money of renaming towns and streets, wanting to legally steal from their tax base by taking land and or property without paying for it...if SA Inc was a company, they would be a sad reminder of mismanagement.
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