Lynn Bolin

Head of Communications and Media

August 2016

What does Trevor Manuel say about the state of SA?

In a synopsis of his speech at Prudential’s Face to Face national roadshow, he shared insights on the challenges of economic reform and growth we face

We have overcome worse

Former Finance Minister Trevor Manuel began with a global view, noting that the world “is not a very happy place” at the moment and a difficult macro environment in which to make decisions – either as a political or business leader. Yet, he said, while conditions were indeed bad at present, it was important to remember how much worse things had been in South Africa’s recent past, in our lifetimes, and how much progress the country had made since 1994. “It’s a key issue that we demonstrated significant economic growth of over 5% and job creation of more than 500,000 jobs a year until 2007. This was partly fuelled by the commodity super cycle, but also by the most significant consumption boom.” Then things came apart after the 2007 Global Financial Crisis.

Economic growth, job creation inadequate

He identified a number of challenges facing the country, saying it was “worrisome” both that economic growth was too slow and that the economy was not creating enough jobs, with the high number of young unemployed people creating “any manner of social problems”. Inequality had not been addressed enough, and there was a huge deficit on the infrastructure budget. Manuel also worried that the labour and industrial relations environment was still too unstable, saying, “we can’t threaten to strike at the drop of a hat”.

Where’s the public discussion?

Another concern was the degree of regulatory uncertainty. Too much of the debate around regulations ended up in court, he said, which was the wrong place, causing too much delay and inappropriate expenditure. This was partly because business was too quiet on such matters.

“There is insufficient discussion; we are too quiet about too many things,” the former Finance Minister observed. “This is irrational and goes against everything that we are, that we are capable of and the places we have been as a country.

“One thing we need in order to grow the economy, with many things pitted against us, is policy certainty. Decision makers like businesses, banks and investors need policy certainty because otherwise they are playing a lottery with their clients’ money and their own; because otherwise they don’t know how to position the decisions they need to take. But we aren’t having these discussions in the country at the moment.”

Don’t panic over a downgrade

Turning to the matter of a potential downgrade of South Africa’s sovereign credit rating to “junk” (non-investment grade) status, Manuel noted that such a move was not as extreme as that painted by the media. “If you want to look at junk status, junk is Mozambique, which dropped to a CCC rating recently,” he explained to the audience. “This is a different order of magnitude and not near the zone we’re talking about for South Africa [currently BBB-]. So, let’s not be driven to panic about this issue.”

Restoring trust is the key

Manuel believed that a missing dimension right now was leadership – but not the “big man” notion of leadership. “No, it’s about how each one of us takes responsibility for where we find ourselves, for the decisions we take, how we remain accountable to others and to our clients,” he told the audience. “It’s about how we reconstruct a relationship of accountability, how we give life to words on paper in our constitution that will actually provide sustainable growth.

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