looking view of the possibility of better things to come. Unless we can achieve meaningful growth in the real economy, there will simply be no returns to speak of; the vast majority of people need to benefit materially from economic expansion, since trickle-down economics tends to fail – and this needs to happen sooner, rather than later.
So what is a workable recipe for economic growth? Four economists give their views:
“Government’s anti- corruption stance and its aversion to predatory extraction and looting is a step in the right direction.”
Dr Iraj Abedian
According to Abedian, Chairman and CEO of Pan-African Investment & Research Services, we need to distinguish between two
types of growth: short-term, cyclical growth and sustainable, long-term growth. Political certainty and confidence in the economy will boost short- term growth, but obstacles exist. Policy hesitancy in areas such as mining, ICT and land redistribution hinder the potential for sustainable growth. “With the global economy expected to grow at a long- term average of around 2.5-3% a year, conditions are extraordinarily favourable, despite the fact that commodity prices are no longer through the roof,” says Abedian. “The United States and the European Union are growing and China’s maintaining its growth. This climate will have a favourable impact on short-term growth in South Africa.”
He believes we can achieve growth with stability, predictability and certainty.
“Government’s anti-corruption stance and its aversion to predatory extraction and looting is a step in the right direction,” he says. “If Cyril Ramaphosa can ‘walk the talk’, it will go a long way towards creating the perception of a new regime that’s good to do business with. This could change the almost zero-growth dispensation of the past two years to one of mild growth (even 1.5-2%, if the President acts quickly enough).” Abedian says South Africa should aim to regain its global investment grade creditworthiness and attract
capital at lower costs. “At best, this will lead to 2.5-3% growth – but even that is not sufficient to deal with the structural issues we face, such as inequality, unemployment and poverty,” he cautions.
To deal with structural issues, long-term sustainable growth is needed. “Key national and sub-national infrastructure has been left to decline and you can’t grow without ongoing maintenance, as well as long-term planning,” says Abedian. “You simply can’t sustain growth without a long-term strategy focusing on critical requirements such as water, energy and infrastructure. We haven’t made a plan for water provision for the next 30 or 40 years and praying for rain isn’t an answer. Our energy policy is unclear when we need it to be credible, reliable and globally competitive. However, these are also opportunities for investment.”
Abedian believes greater investment in our education system and human resource development is needed. “The unholy alliance between politicians and teachers’ unions has ensured that, by omission or commission, we have an unproductive and inappropriate education system, conducive to the promotion of unemployability,” he says. “Education is the largest item on the government budget, but for years we’ve
20 An Absa Investment publication
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