[Letter] This is why SA is a risk for Sub-Saharan Africa

Thuletho Zwane’s article refers (“SA, Nigeria and Ghana are risks for Sub-Saharan Africa in 2023, says Fitch”, January 3). That SA is one of the countries cited as a potential drag on the Sub-Saharan African region’s growth prospects for 2023 stands to reason given the ideological and policy constraints imposed on the country’s potential by the government.

In the area of basic logistics, inefficiencies at the ports will persist for the short to medium future. As rail is too constrained by state control for competition to arise, businesses, importers and exporters will need to use road transport — with the consequent higher fuel and security costs and risks.

In terms of policy risks, while African countries stand to benefit from the implementation of the Africa Continental Free Trade Area, SA is proceeding with localisation master plans. These are likely to lead to higher trade barriers, increased tariffs on imported goods, and higher costs for businesses and consumers.

Regarding the wider policy space, expropriation without compensation, the National Health Insurance scheme, the Employment Equity Amendment Bill and Land Court Bill, all remain on the table, with some closer to adoption than others. If any or some combination of these should be adopted, the effect on economic viability (never mind growth), fixed capital formation and job creation will be severe.

Tighter economic conditions worldwide, especially in the two biggest export markets for SA — Europe and China — will mean less demand for raw materials and other commodities. Mining companies, farmers and other exporters that explore opportunities away from those areas, in Latin America or Southeast Asia for example, could experience better fortunes.

SA cannot depend on global winds to boost its sails, but given adherence to ideology and policies that constrain growth and job creation, global difficulties will worsen South Africans’ economic problems over the short to medium term.

Letter originally appeared here.

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