080212 Standard Bank’s Chief Economist, Goolam Ballim briefing the media at their offices in Johannesburg.photo by Simphiwe Mbokazi 453 080212 Standard Bank’s Chief Economist, Goolam Ballim briefing the media at their offices in Johannesburg.photo by Simphiwe Mbokazi 453
Ethel Hazelhurst
South Africa’s investment climate must improve if the government hopes to create jobs. Goolam Ballim, the Standard Bank chief economist, said at a presentation in Johannesburg yesterday: “The private sector is the dominant employment creator and the private sector will invest when it feels far more secure about the investment climate.”
He said bluntly: “The quality of political narrative needs to improve.”
And he called for more policy certainty – “everything but what we have seen, for example, in the mining sector”.
Policy uncertainty and radical statements on the restructuring of the mining industry has seen the sector decline over the past 10 years, in a period of booming commodity prices.
Ballim said slow economic growth in the years ahead would prove a challenge to the target set by Economic Development Minister Ebrahim Patel, of creating 5 million jobs by 2020. South Africa’s jobless rate of just under 24 percent is among the highest in the world.
Ballim said the hopes of achieving the jobs target had been dealt “a substantial blow” both by offshore and domestic developments.
“Every day, week or month delay in creating jobs compounds the difficulty of reaching the target. The later we are out of the blocks the lower the chance of achieving our aims.”
Only 365 000 more people were employed last year – well short of the 500 000 a year needed to achieve the target. And Ballim said this year could bring jobless growth.
On investment by the government itself, Ballim said: “Government needs to return to the period 30 years ago, when 50c of every R1 of investment in the economy came from the public sector. This drifted to a low point of about 30c in the early 1990s.”
The government currently is responsible for only about 32c of every rand spent on investment. The ratio of total fixed capital formation to gross domestic product (GDP) is under 20 percent. And savings to GDP is about 16 percent. Both are well below the 25 percent or more seen in high growth economies.
“The seriousness of the situation must not be lost on the state,” Ballim said.
He stressed that the multiplier effect of public sector investment was higher than that of the private sector.
He highlighted the importance of “rail and transportation logistics infrastructure”.
Ballim warned that the days when the South African economy grew an annual average 5 percent would not return. The growth trend in place between 2004 and 2007 was disrupted by the global recession of 2008/09, which pushed South Africa into three quarters of contraction.
Like the rest of the world, the country is struggling to remain in positive growth territory against a threatening global backdrop.
This year the economy will grow only 2.8 percent and, even when the cycle turns, the economy will remain trapped in a low growth zone of below 4 percent, according to Ballim, largely due to low levels of investment in the country.