Private sector can’t save South Africa from government’s mess: economist
The private sector can’t solve the various crises created and often orchestrated by the South African government, says economist and former World Bank president David Malpass.
Speaking to BloombergTV, Malpass said that South Africa is currently facing severe difficulties and is taking a beating on several fronts – and while the private sector has an important role in addressing these issues, it is no silver bullet to the fundamental changes that need to happen at a government level.
“South Africa is having severe difficulties – in terms of growth and inflation; the currency has been weakening; and public services are breaking down. This is electricity and clean water – which are so vital to people – and infrastructure. There’s a huge amount of work to be done,” he said.
When asked whether the private sector could step in to solve all these challenges, Malpass said that he doesn’t believe it can.
“The government is needed in basic infrastructure – like the transmission of electricity lines. (State-run utility) Eskom has been having difficulties for 10 or 20 years. It’s heavily unionised, and it’s hard to get maintenance done,” he said.
Because of these issues – which are widely known and experienced daily by all South Africans – private companies are, in fact, turning away from Eskom, he said, and finding solutions elsewhere, like in diesel generators.
Malpass said that the key trouble for South Africa is that when the post-democracy government took over there was some infrastructure to work with. But in the decades that followed, this was not adequately maintained and increased.
“It’s difficult for countries to find a government that can make decisions – like where to spend money.
“For too long, the government has been spending money on things that weren’t working. The flexibility of the labour force is also critical – (the government) needed to focus on skills for the labour force and then allow for the labour force to move around within the sector. That got lost over the decades,” he said.
While the government – especially president Cyril Ramaphosa – has been constantly promising and working on “reforms”, this has not yet been delivered. Much of the talk has been about getting the details right and allowing the private sector to come in and take part and create jobs.
“It’s a country with giant potential but needs fundamental change at the government level. I don’t think the private sector can make up for it,” Malpass said.
The country’s tax system is also problematic, he said, adding that the weaker rand is a symptom of all these issues. He added that South Africa’s “game” with Russia – where the country is seemingly playing Russia and the USA against each other in terms of its foreign policies – is also a “dangerous” approach.
Overall, South Africa has a host of core problems that can only be addressed top-down by the government, he said.
While countries like China have shown that things can turn around quickly – moving from poverty to prosperity in a few year – for South Africa to achieve the same it will have to fundamentally change how the government works with the private sector.
The government has recently softened its stance on having the private sector involved in South Africa’s fundamentals, with over 120 CEOs on board with government departments to try and resolve key issues in the country.
Despite the outreach, however, business leaders have made it clear that they can only assist, and they lack any legislative or other powers to make any changes – ultimately it is still up to the government to make the decisions that plot the country’s way forward.
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