Current investor sentiment towards SA indicates a country punching well above its weight
Current investor sentiment towards SA indicates a country punching well above its weight
It seemed an impossible task. After being stripped of his heavyweight title in 1967 due to his refusal to be drafted into the US military during the Vietnam War, and being refused a boxing licence in all 50 US states, Muhammad Ali’s career seemed dead and buried.
But Ali refused to throw in the towel. In 1974, in a ferocious eight-round bout against George Foreman in what is now Democratic Republic of Congo, Ali’s return to greatness became the stuff of legend.
With intelligent tactics, sharp reflexes, dedication, agility and astonishing strength of character, Ali reclaimed the heavyweight title in what became known as the “Rumble in the Jungle”.
The punishment Ali withstood with his rope-dope tactics of leaning back on the ropes to absorb Foreman’s punches while conserving his energy reminds me of the relentless battering the SA economy has been subjected to over the last decade and a half.
Glancing at a few statistics exposes the punches we have had to withstand, each as bruising as Foreman’s right hook (68 of his 76 wins came by KO).
Our annual GDP growth rate has averaged barely 1% for the last decade, well below the population growth of about 1.6%. Inflation averaged 5% a year over that period, another low blow.
Our shocking unemployment figures have been on an upward trajectory since 2004. And, as the Stats SA figures for the last quarter reveal, the figures have grown again to 8.4-million individuals without jobs.
Moreover, infrastructure is crumbling. Potholed roads, nonexistent passenger and freight rail networks, ports, electricity generation and transmission and water and sanitation facilities are no longer fit for purpose.
The stability of energy supplies and realistic electricity tariffs must also be addressed. Load-shedding has subsided these last three months, which is encouraging. But little is being done to lower the crippling cost of electricity for businesses and families.
From 2007 to 2022 electricity tariffs increased by an eye-watering 653%.
It’s time for the gloves to come off
SA may be on the canvas, but the ref hasn’t finished counting. Call me a die-hard optimist, but just as my boxing hero made that extraordinary comeback, I believe wholeheartedly that SA can equal that feat and stimulate the nation’s economy.
Here are some of the reasons for my optimism. First, there has been a significant positive reversal in our political stability thanks to the recently formed centrist and business-friendly GNU. Investment pundits describe this development as a “watershed shift” and “seminal moment” for SA. And rightly so.
Current investor sentiment towards SA indicates a country punching well above its weight. Our bond markets have enjoyed the highest net inflows since pre-Covid-19 days. The JSE has received a 5% shot in the arm over the last two months. And during this time the rand has been the leading performer among emerging-market currencies against the dollar.
Early days they may be, but so far so good. Another positive sign is that government ministers are talking earnestly about infrastructure development, which can trigger the growth we need to eliminate poverty and reduce our gaping inequality.
This is not as far-fetched as it may sound to the cynics. Infrastructure spending creates long-term job opportunities and advances new skills training. It also creates a substantial multiplier effect by creating new supply chains that include manufacturing plants, transportation, logistics, related industries and support services.
Developing infrastructure also facilitates economies of scale, propelling efficiencies and productivity that lower business costs.
There are numerous examples of sustainable economic growth through infrastructure investment. The US dragged itself out of the Great Depression thanks to then president Franklin D Roosevelt’s New Deal, an extensive programme that built roads, bridges, dams, hospitals, schools and airports.
Post-war Germany and Japan’s recovery was primarily due to infrastructure spending. South Korea and China also established the foundations for their impressive economies by investing in infrastructure such as high-speed rail networks and expressways.
Knockout punch for unemployment
SA needs more educational institutions and health facilities besides roads, rail, new energy generation plants and power grids. To my mind the most urgent need is mass housing. About 12-million of our fellow citizens are forced to live in the squalor of informal settlements.
Yet, as the International Finance Corporation (IFC) has demonstrated, building an average-sized family home in Africa as part of a mass programme creates up to four permanent jobs. This ratio is based on the finding that 2.9 jobs are created for every house built in the US. However, with Africa being more labour intensive and wages being lower, the IFC estimates that this figure could exceed four jobs.
In the first decade of our democracy, the ANC government achieved sterling results by constructing 1.8-million RDP homes. If such an effort could be replicated it would — according to the FIC’s ratio — create 7.2-million jobs.
That alone would do to our unemployment figures what an Ali right hand lead would do to an opponent — cause an enormous dent.
• Dr Matjila is a former CEO of the Public Investment Corporation, which manages the SA Government Employees Pension Fund.
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