What South Africa can do right now to get back on track: former Goldman boss

Former chief executive officer of Goldman Sachs in sub-Saharan Africa, Colin Coleman, says that there are a number of steps that South Africa can take as it plots a recovery path post-Covid-19.

Coleman said in an interview with Bloomberg TV, that these are ’emergency times’ as the country faces a massive economic contraction as well as an unemployment rate which could hit 50%.

To address these issues, Coleman, who is now senior fellow and lecturer at Yale University, said that government should look at the following measures:

  • Universal income – Coleman said that the government should introduce a basic income grant at a cost of about $8.5 billion (R142 billion) per annum which would cover unemployed workers and provide a stimulus as they use that money for essential items.
  • Eskom – Coleman said that Eskom should be recapitalised in the form of removing government-guaranteed debt from te power utility onto the government balances sheet and taking advantage of the improved credit spread. This would also allow Eskom to focus on its core functions of producing energy, he said.
  • Special export zones and industrial incentives This will help with competition in the country and drive investment. “As we come out of Covid, I think there is a lot of opportunities will arise to position regions as alternative supply-chains away from China in particular. I think South Africa can do that given its sophisticated financial and manufacturing infrastructure,” Coleman said.

He said that the other areas which the government needs to focus on include:

  • The introduction of tax reforms;
  • A crackdown on the illegal economy;
  • Relief for businesses;
  • The development of infrastructure projects.

Why is this time different?

With another of these proposals discussed by government and financiers in the past, Coleman acknowledged that sceptics may question how president Cyril Ramaphosa’s administration will be different in introducing reforms.

He said that the ‘capacity of the state’ is an ongoing problem and that South Africa faces the ‘bizarre ‘ situation of having one of the strongest cadre management expertise across all emerging markets, alongside a state that is virtually incapacitated after former president Jacob Zuma’s ‘state capture years’.

“I think there needs to be an honest conversation between the government and the business community about how to deploy management skills into the state, and how to smartly have the state collaborate with the private sector,” he said.

Coleman said that South Africa is a country of ‘talking’, dating back to the formation of the new Constitution, but not so much a culture of ‘doing’.

He said that president Ramaphosa and the ANC have the overwhelming majority and can implement changes. However, he noted that it was the ‘parliament of views’ within the ANC itself that is going to determine the government’s ability to introduce reforms.

“Leadership is everything, so it is really up to president Ramaphosa to lean in and say this is the direction the country is taking, this is who I want to lead my administration, and if you are not on the ship I will get you off.

“I think he needs to be more decisive and take the country forward, but obviously he has his own political judgements on the balance of forces in his government and in his party to take into account.”

Despite this, Coleman said that Ramaphosa is likely to be stronger post-pandemic, and will have more power to introduce the reforms he is promising.

Read: South Africans are running out of money – here’s how many will struggle to survive a one month financial emergency

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What South Africa can do right now to get back on track: former Goldman boss