The success of an economy can be measured against a simple mantra: Everyone who wants a job, has a job.<\/p>\n
This is the view of Kevin Lings, chief economist at Stanlib, who spoke at the 2021 Allan Gray Investment Summit. Lings singled out job creation and fixed investment as critical levers for South Africa\u2019s long-term success.<\/p>\n
However, he warned of a potential major stumbling block in the country’s economic recovery attempts: a lack of government fixed investment.<\/p>\n
\u201cYou cannot talk about economic success until you add a significant number of jobs to the economy,\u201d said Lings, against the backdrop of an all-time high unemployment rate. The extent of the jobs crisis was illustrated by the 1.5 million job losses suffered during the Covid-19 pandemic, combined with the more than half of working-age under-35s being jobless.<\/p>\n
\u201cFor South Africa to make meaningful headway in the battle against unemployment, it must create at least 600,000 new jobs each year.\u201d<\/p>\n
Investment creates jobs<\/strong><\/p>\n According to Lings, the recipe for job creation is simple: \u201cInvestment creates jobs.\u201d But ingredients include 5% or higher annual GDP growth; investor-friendly economic policies and collaboration between the private and public sector insofar as investment is concerned.<\/p>\n \u201cYou need the government to do some critical infrastructure investment, but the private sector must shoulder the bulk of the investment and job creation responsibilities,\u201d Lings said.<\/p>\n Yet, government fixed investment has fallen to below 5% of GDP, magnifying the risk of Eskom\u2019s ongoing maintenance issues affecting other critical infrastructure such as transport and water and sanitation.<\/p>\n Meanwhile, the combined private and public fixed investment has slipped to below 15% of GDP, the lowest level on record, the economist said.<\/p>\n \u201cIt is impossible for us to be economically successful with this level of investment,\u201d Lings warned, adding that the target rate of economic growth and job creation requires that South Africa\u2019s fixed investment spending is around 30% of GDP. In other words, investment spending needs to increase by at least R750\u00a0billion per annum.<\/p>\n Business confidence promotes investment<\/strong><\/p>\n One way to tackle the declining investment trend would be to address business confidence. \u201cThere is a very strong relationship between private sector investment and business confidence; this is the most critical relationship for our economic success,\u201d said Lings.<\/p>\n He strongly advocated for developing economic policy based on its impact on business confidence. \u201cIf a proposed policy hurts business confidence, then can it.\u201d<\/p>\n Economic policy, in turn, should create an enabling environment for the private sector to invest in technology and spend more cash on research and development, among other functions.<\/p>\n Five game-changers for South Africa Inc<\/strong><\/p>\n Lings listed five positives that will make it easier for the public and private sector to collaborate on much-needed investments and address South Africa\u2019s economic growth and employment imperatives.<\/p>\n Lings singled out the private sector\u2019s participation in new energy projects and proposed improvements to port infrastructure as having game-changing potential for South Africa Inc.<\/p>\n \u201cGovernment has recognised the need to partner with the private sector to drive infrastructure investment, now it is just a matter of acting on this, and implementing accordingly,\u201d said Lings.<\/p>\n\n
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