South Africa is out of time
South Africa can no longer wait around and hope for external solutions to fix the country’s ailing economy; the government urgently needs to accelerate reforms and get state companies back on track.
According to Business Leadership South Africa (BLSA) CEO, Busi Mavuso, moves from the state in recent weeks are net positives for boosting the economy.
This includes missions to the United States to continue negotiating for lower tariffs, building other trade relationships across continents, and meeting with international bodies to get the message out there that South Africa is open for business.
However, she said that there is no guarantee that any of this will actually work, and so the government needs to plan for every scenario.
More importantly, it needs to make a plan for South Africa to resolve its own issues from the inside because the time waiting for an outside saviour is long over.
“The months ahead will test our collective resolve and adaptability as a nation,” she said.
“Whether we achieve a breakthrough in US trade negotiations or must navigate continued barriers, the imperative remains the same: we must accelerate our economic transformation through diversified partnerships, improved infrastructure and increased investment confidence.”
Mavuso said that the modest growth South Africa achieved in the second quarter of the year, where GDP growth moved up to 0.8%, while encouraging, underscores that the country cannot afford to wait for external solutions.
“Business and government must work together with renewed urgency to unlock the investment and productivity gains that will drive sustainable growth and job creation,” she said.
“In an increasingly fragmented global economy, South Africa’s success will depend not on any single trading relationship, but on our ability to build resilience through multiple pathways to prosperity.”
The CEO pointed out that even though South Africa’s growth trajectory improved, the investment component of the GDP figures was a big disappointment.
Investment was at its lowest level since 2003, equivalent to 13.5% of GDP. Public corporations, particularly Transnet and Eskom, were especially weak.
She added that, in the context of the government targeting infrastructure investment target of R1 trillion over the next three years, “it is clear that public spending plans are not getting out of the starting blocks”.
“That needs to change, and our efforts to resolve the electricity and logistics crises are critical to making that happen. The gap between ambition and execution has never been starker,” she said.
Can’t bet on the United States changing
President Cyril Ramaphosa will be in New York this week to attend the UN General Assembly. This follows Trade and Industry Minister Parks Tau’s visit to the states last week to talk trade.
While this in no way means the end of the 30% tariffs on imports from South Africa, Mavuso said that it does give the sense of momentum towards some kind solution.
The US and South African teams reportedly agreed to a road map of future discussions toward a conclusion of the trade negotiations.
The US tariffs are having a serious impact on parts of the economy, particularly in the automotive and agricultural sectors, although the full economic impact is still to be determined.
Worryingly, South Africa has already seen significant job losses as factories have suspended production lines as US orders have collapsed.
Mavuso noted that, while South Africa is an important trade partner to the US, the country’s below-average growth means it is becoming less relevant over time.
“The US will look at the likes of Angola and Nigeria through a different lens given the rapid GDP growth achieved there relative to our sub-1%,” she said.
Complicating matters are the US’s demands on domestic policy issues like foreign ownership rules, meaning there is no easy route to a solution.
The CEO said US policy remains unpredictable and chaotic, and that South Africa can’t bank on any resolution.
Instead, she said South Africa needs to lean into its alternatives.
This includes the African Continental Free Trade Agreement, which can accelerate the flow of goods to the rest of Africa.
Mutual recognition arrangements, such as those signed in July with India and the UK, ease customs and border procedures, removing trade frictions.
The BRICS arrangements also offer enhanced trade and investment opportunities as well as better advocacy for a fairer global trade system.
“The DTIC is also preparing a mission with South African companies to Indonesia, Vietnam and Malaysia next month as part of its broader efforts to promote new trading corridors,” she said.
“These efforts are well-supported by business and reflect a global structural shift as countries elsewhere simultaneously attempt to reduce their exposures to the US economy.”
As a country, we must grasp every opportunity to build new markets, she said.
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