[Opinion] Don’t allow it to be just a sugar high

Source: https://x.com/PieterDuToit/status/1829974276104970657

The SABC even broadcast the game live; it was indeed a GNU day in South Africa. Positive market sentiment and (relatively) stronger investor appetite to take on South African risk (in the form of bonds) have followed the formation of the Government of National Unity, following the 2024 national and provincial elections. While not to be easily, snidely dismissed, (and I think many of us do not realise how significant the current iteration of the GNU is, and what it took from those involved to make it happen), the positive sentiment runs the risk of ultimately equating to a sugar high; a relatively short burst of energy, providing a shot of momentum, but meaning little in terms of nutrition or substance in the larger picture.

Due partly to four months without loadshedding (load reduction/management is in place, especially in Johannesburg), but largely thanks to a (relatively) stable national government (bouts of turbulence notwithstanding), the Rand remains below the R18/US$ mark (as of 1 September.) The government can borrow with some more breathing room. Whether it uses this room well or plumps for the easy options (the public sector wage bill jumps to mind), remains to be seen.

While a new era in South African politics is beginning, it is unlikely that a radically high GDP growth will be achieved overnight; 2% will be a good starting point, if still inadequate, given the country’s unemployment rate. As of September 2024, the next Local Government Elections are only 17 months away. As the GNU partners vie for positions and influence, just possibly also achieving a few reform wins along the way, the opportunity is there for business, civil society, and citizens to use the momentum and push for pro-growth reforms, solutions, and ideas directly, as well as behind the scenes. The various challenges and weaknesses in local government are especially urgent. (‘I wish we didn’t, but we have to fix our state). Work with local government politicians and bureaucrats where possible.

At the same time, business and civil society should use all available avenues to influence and convince all the parties in the GNU to push back against growth-inhibiting, individual freedom-curtailing ideas and policies, such as Expropriation Without Compensation, the National Health Insurance Act, and prescribed assets.

Given that matters on a national level at least appear positive – compared to what some of the alternative constellations could have been – some in business might fall for a sort of Ramaphoria 2.0. That would be fatal not just for them, but for the country too. Should the now open opportunities not be seized and the momentum built upon, a young, growing but unemployed population will not wait forever before being tempted by more radical, populist ideas and ‘solutions.’

A Reserve Bank cut in September will add another shot to consumer spending, but such spending will be mostly frothy – adding to the perception of activity on the surface, but ultimately without much substance – if activity in manufacturing and construction especially does not increase.

[Photo: by Karina Kungla on Unsplash]