26 Feb SA has a long road ahead to economic recovery – SAICE
26 February 2021: South Africa has significant work to do in enabling economic recovery despite the forecasted 3.2% GDP growth rate for 2021, and the encouraging R791.2 billion committed to infrastructure development, says Vishaal Lutchman, CEO of the South African Institution of Civil Engineering (SAICE).
Finance Minister Tito Mboweni revealed during his 2021 Budget review, on 24 February, that the 3.2% GDP forecast is amidst a 7.2% contraction in 2020; while the country’s BRICS counterparts are showing resilience in a time of crisis with GDP growth in India forecasted at 11.5% and 8.1% for China.
The Minister also highlighted the drive towards infrastructure development and the importance of public-private partnerships (PPPs), adding that government will continue to partner with the private sector to roll out infrastructure through initiatives such as the blended finance Infrastructure Fund. “There needs to be more work done to formalise and to mature such intentions through respecting the need for social compacts,” says Lutchman.
“The Minister’s review presented many of the key ingredients needed to re-vitalise the economy, but consideration must also be given to the 32.5% unemployment rate, which is the highest in the last 13 years with 7.2 million people unemployed. This is a testament of the economic decline impeding our ability to improve our socio-economic circumstances if the country’ plans do not translate into meaningful and well implemented projects.
“Further, the tax relief measures are welcoming and comforting but we require similar type of measures in terms of fast-tracking economic growth. In other words, how do we move ahead and incentivise the growth discussion,” adds Lutchman.
However, the call from the Minister to strongly collaborate through PPPs as an enabler of economic growth is encouraging. “It must start with eradicating corruption and professionalising by depoliticising the public sector. Politicians should no longer leverage political aspirations on the back of infrastructure development. Public servants must serve the public,” he adds.
Advocating and recognising the importance of partnering with the private sector is a step in the right direction, says Lutchman, but he believes that the true success is to develop active, strong, strategic, and collaborative partnerships that are underpinned by trust, good governance, and importantly, strong and improved procurement processes.
“I will re-emphasize the need for all stakeholders entering into PPPs to have a common vision that enables growth and the ability to deliver on the vision of the National Development Plan 2030.”
Lutchman was further encouraged by the country’s aim to improve access to African markets with the upgrade of the six busiest border posts using the PPP model. The first project is the upgrade of the 92-year-old Beitbridge border, which was last upgraded in 1995. “Africa must be the focus, where new markets are created on the back of growing our manufacturing base. Therein lies untapped potential to activate growth in multiple market sectors.”
Meanwhile, Lutchman says he is awaiting the details around the “more modern risk-based capital management” system and new regulations, that will be published by the Reserve Bank, for the Africa Continental Free Trade Agreement (AFCTA), part of which came into effect earlier this year.
“Yes, this is an opportunity to enable South Africa to deepen and expand its trade relations within the continent and is a step in the right direction. However, how do we define what is a meaningful discussion around free trade when most of Africa’s imports come from China. What is South Africa really trading?
“Meaningful trade occurs once you are manufacturing – so the first step is to drive discussions around increasing South Africa’s and Africa’s manufacturing capacity to actually activate the free trade agreement. It does not make sense for countries in Africa to be importing goods from China to become resellers on the continent.
“The existing sovereign debt of Africa to China will influence trade and perhaps negatively affect Africa’s industrialization agenda. Much of Africa’s economy remains based on primary activities or resources. As such markets do not adopt high technology or are not highly industrialized. At this stage, it is not clear as to what will be traded. The adoption of new technology will assist Africa in becoming price competitive – an opportunity that remains to be fully exploited.”
However, Lutchman concludes that if South Africa can strengthen and develop its manufacturing capacity, the AFCTA will prove hugely beneficial to the country. “We are up and running and can actually deliver value to the other countries. I strongly believe this is an additional opportunity for the engineering sector to be an enabler for socio-economic growth in South Africa. We have to seize opportunities knowing that time is not on our side.”