[Opinion] CHRIS HATTINGH: Is SA serious about growth?

Business Leadership SA (BLSA) CEO Busisiwe Mavuso recently stated: “I’m not a proponent of over-regulation and hard measures put on business, but I really think it is for the good of the citizens of this country [to change] the structure. We are not doing enough; we should be doing more.” (“Transformation key to SA’s economic growth, says Business Leadership CEO”, June 9).

Using the official definition of unemployment, in 2007 the unemployment rate for black South Africans was 23%; in 2024 the rate sat at 37.6%. Between 2012 and 2023 SA averaged 0.8% GPD growth. Per World Bank data, real GDP per capita was lower in 2023 than it was in 2007. The majority of South Africans — precisely those who were supposed to benefit from transformation-focused policies — have been left behind.

The SA government has tried development through onerous regulation, and the fruits of this are clear to see. Those of us who are serious about turning things around need to be radically honest in our assessment of the economic policies.

The burden of proof rests not on those who advocate for effective reform that challenges vested political and business interests, but on those who argue for a continuation of established policies. It is the defendants of the current policy trajectory who have to justify the evident consequences, including low growth, high unemployment and growing immiseration. 

Mavuso was right on the money when she said: “When I look at how far we have come on transformation, we created a few billionaires but we are still sitting with a society that is vastly untransformed.” There is little surprise to this reality. SA has put in place policies that reward political connections and influence, rather than creating new businesses and employing more people. 

Few things in life are guaranteed but one of them is that countries with overbearing, all-controlling central governments experience lower rates of growth and higher rates of corruption. The policies, legislation and regulations that flow from a state that wants to “shape” the economy and society will always be implemented such that patronage and political influence are worth more than real, broad-based economic growth. Increasing one’s political influence and securing government contracts becomes far more important than growing one’s business venture in a competitive market. 

In a recent report auditor-general Tsakani Maluleke wrote: “Although there is no legislation that prohibits municipalities from making awards to suppliers in which close family members or business associates of employees or councillors have an interest, such awards create conflicts of interest for these employees or councillors and/or their close family members or business associates.

“The possibility of undue influence cannot be discounted, especially if the person could have influenced the procurement processes for these awards, potentially creating opportunities for irregularities.”

Instead of supporting meaningful transformation, SA’s various transformation-focused policies have made it inordinately easy for vested interests to benefit, to the ultimate cost of the country and the majority of citizens. 

It is easy to say one is pro-transformation. Where the tekkie hits the tar is in the policies and legislative changes for which one advocates. The state can proceed with more aggressive BEE enforcement. But doing so will not fix the country’s dysfunctional ports, railways, border posts, roads and bridges. It will not keep the lights on or keep the taps running. It will not bring down persistently high rates of crime, which affect all South Africans and black South Africans the most.

In the education chapter of the latest Centre for Risk Analysis Socioeconomic Survey of SA, we report that in 2012 there were 1,208,973 pupils in grade 1. By 2023 only 740,566 had made it to matric, and 572,839 attained their national senior certificate. Of the various infrastructure, crime and education challenges South Africans face, it is unclear how transformation policies address any of these in a meaningful way. 

Stating that the government needs to be more aggressive in its transformation-enforcement initiatives will do nothing for struggling black farmers, industrialists, miners, exporters and businesses whose endeavours are stymied at every turn by failing state services. Whether the board or upper management of a given company is not “sufficiently” transformed will do nothing for those struggling businesses. 

Fixed capital investment — a necessary ingredient for a higher rate of economic growth — is like water in a river; it flows along the path of least resistance. Where there are more rocks, sticks and garbage, the flow of water is blocked. Gross fixed capital formation refers to investments in fixed assets such as factories, heavy plant, machinery and equipment, roads, transmission lines, rail, ports and other real assets that are difficult to move out of a country.

The 2012 National Development Plan sets a fixed investment target of 30% of GDP for 2030. The only time SA came anywhere near that target was in 2008/09, at 21.6%. Generally SA achieves a fixed investment rate of 13%-15% of GDP. This is in contrast to the world average of 26%. Many of our emerging market peers record rates well above 30%. After a 0.5% decline in quarter four 2024 fixed investment in SA contracted by 1.7% in quarter one 2025.

If we don’t question — and subsequently change — the policies and legislation that have placed SA in this position, we are not serious about attaining the kind of transformation the country needs. 

Article originally appeared here.

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