Unless the South African economy adds 3% to GDP growth, the country risks remaining static, say business leaders organised in partnership with the government to urgently fix three areas crippling the economy – energy, transport and logistics, and crime and corruption.
In June, organised business and the South African government agreed to form an initiative and work together to come up with urgent fixes to the country’s challenges which have for years constrained economic growth and helped to worsen unemployment. This, in their view, will add 3% to the country’s economic growth and pull the country of the current crisis it finds itself.
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The country’s erratic power supply, along with troubles at state-owned freight and rail company Transnet and high levels of crime and corruption have significantly weighed on the economy, which only grew 1.9% in 2022.
Progress
On Tuesday, business leaders – part of a growing list of 115 CEOs who have pledged to support the country and reverse the economic downturn – met with government and said progress, albeit slow, is being made.
Collectively, the companies are valued at R11 trillion and employ over 1.2 million people.
Speaking about the initiative and its progress thus far, Business for South Africa (B4SA) chair Martin Kingston said the view of business leaders is that addressing the three areas of concern will contribute some 3% to GDP growth.
“We recognise that we’re in a crisis and we need to arrest the crisis,” Kingston said.
“Unless we get to 3% and above, not only are we going to remain static, but we’re potentially going to see an exacerbation of unemployment in the country,” he said.
The 3% growth is more upbeat than the South African Reserve Bank (Sarb) forecast of 0.4% for 2023 and 1.1% for 2025. In its view, the Sarb sees energy and logistical constraints continuing to weigh on growth, limiting economic activity and increasing costs.
Unemployment
Key to the partnership is that it would keep South Africa’s rocketing unemployment from deteriorating further, Paul Hanratty, CEO of South Africa’s largest life insurance company Sanlam said, adding that the bigger challenge, however, is lifting growth above the 3% mark.
“If we can fix just these three things to a 3% trajectory post-2025, I think that’s something generally people expect can be done … The big challenge is, can we do other things to lift above the 3%?”
Without consistent growth of over 3%, the country faces increasing unemployment, he added.
By 2030, provided economic growth is accelerated to 5%, the initiative hopes to have created 2.5 million additional jobs.
“These three things can probably get us back. The question is then how quickly we can execute them.”
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