BUSISIWE MAVUSO: We survived state capture and the pandemic so there is hope for us

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Many of the country’s strengths have been tested to the limit in our recent history with state capture having extensively damaged the economy, followed by the Covid-19 pandemic driving our unemployment to emergency levels.

With many challenges still threatening our economy – globally and domestically – it’s easy to fall into despair. But we not only survived state capture and the pandemic, we are also trying to shape our country to be stronger. That’s some achievement and gives me confidence that we can overcome our current and future challenges and prepare the path for a brighter future.

South Africa has many strengths. The way the country emerged from the pandemic, having had to endure among the most severe restrictions in the world, has won respect globally. That point was emphasised repeatedly at the forum BLSA hosted earlier this month with the IMF team responsible for the Financial Sector Assessment Programme it undertook on South Africa.

A session focused on how SA was able to respond as quickly as it did to ease monetary conditions, and the SA Reserve Bank (SARB) was widely praised. It cut the repo rate by 275 basis points by May 2020, with the first, harsh lockdown having kicked in at end-March, with more rate cuts following. It also introduced what it called “extraordinary” changes to both monetary policy operations and prudential regulations to ensure an adequate flow of funds in the banking and financial systems. These measures eased liquidity strains and prevented the outflow of foreign funds to safe havens from becoming a panicked exit.

What came out clearly (and I think I should point out here that the SARB wasn’t at the IMF forum) was that it was able to act quickly because, through its track record, the Reserve Bank had developed a relationship of trust with the financial sector. Because of that, it was able to call meetings at short notice and get the measures in place quickly – with co-operation from the banks and other financial institutions involved.

Furthermore, its communication with the markets has always been excellent, giving reasons for its decisions. That kind of transparency is rare within government but as BLSA repeatedly emphasises, policy certainty is extremely important for the private sector.

The fact that the SARB was able to act with such speed in cutting rates also reflects the robustness of the financial sector, particularly as far as liquidity management is concerned.

The IMF assessment is a vote of confidence in SA – though it doesn’t shy away from highlighting our problematic issues, it paints a positive picture of regulation broadly in SA.

The strength of our financial sector is something to be nurtured and we must keep adding to its resilience where we can, ensuring we remain in the “best practice” category in the eyes of the world. Because there will be future shocks – the global economy faces risks including climate change, global recession, inflation and geopolitical uncertainty.

I get confidence in our future from other strengths. We have a strong constitutional democracy and judiciary and through the Zondo commission the country is trying to address the sins of the state capture era and establish powerful anti-corruption institutions for the future.

The economic reforms we’re undertaking are also hugely positive despite the many blockages – but even most of those are being addressed. And as bleak as the energy picture is now with load shedding a daily occurrence, it will improve. Some of those blockages have ensured that loadshedding will have to extend beyond 2024 but once we’ve added 6GW of new generation, load shedding will end.

From that point, with that restriction on economic activity lifted, we’ll be well positioned for growth. The energy market will continue to expand and we now have an investment plan to tackle the just energy transition. Although it still requires a lot of work, it’s a solid starting point and that’s another strength.

Other reforms will have kicked in by then and hopefully our rail and ports system will have at least improved its capacity so that our miners, manufacturers and farmers can export as much as they can produce. Additionally, should government manage to streamline the process for public-private partnerships, our infrastructure programme could be up and running, injecting billions into the economy.

Of course, in SA, optimism can never be unbridled and there’s a lot of hard work still to be done to get things right.

But BLSA firmly believes that the country has the core strengths to build a better future for our children and will be rigorous and determined in pursuing that goal.

• Mavuso (@BusiMavuso2) is BLSA CEO. This article first appeared in Business Day.

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