Driving ourselves into a new economy
With the victory of Cyril Ramaphosa and the ANC, it is now time to get on with the business of economic recovery
I write this as the dust has barely settled on the election results. Election posters remain on lamp poles for now, or lie sadly on the pavement, or hang waywardly on fences.
As was predicted, the ANC was elected to create the government of the day, albeit with a reduced majority. Surprises also came from the performance of many smaller parties, but understanding what this means for the next five years would require the skills of an adept political scientist.
However, it is important to consider how economic growth can be brought back.
In the short-term, the biggest change we can hope to affect is a change in confidence. As Ramaphosa begins to get serious about fighting corruption and getting rid of the decay within the ANC and, more importantly, gets serious about growth-enhancing policy initiatives, perhaps the screams from business for policy certainty will finally be heard.
This is the most achievable effect we are likely to see in coming months, and will go a long way to ensure that it arrests the slide in economic growth. Even with economic indicators like freight activity continuing to slow, if business confidence can rebound and operators remain upbeat, fleet replacement will pick up and begin to have a positive impact on the underlying economic activity.
However, we need to consider where growth will come from over the next decade. Failure to prepare during the Zuma administration meant that long-term investment in new economic opportunities fell, capacity fell and the trajectory of the economy fell to a lower path.
Structurally, the economy is still faced with high and rising inequality, weak education outcomes and high youth unemployment. Furthermore, the traditional drivers of the economy (manufacturing and mining) have struggled with low productivity and high labour costs that have limited their potential.
What about the transport sector? Following a discussion with a certain heavy-vehicle manufacturer, it was agreed that freight demand activity remains steady even in economic downturns. The belief that South Africa remains the gateway to Africa still holds tremendous weight, and means that there is a comparative advantage to expanding fleets from South Africa.
According to Stats SA, the sector was the largest positive contributor towards growth in the fourth quarter of 2018, at 0,7 percent. With the sub-Saharan African economies expected to grow at above three percent in the next two years, there is significant untapped potential as the wealth of these populations is set to increase.
In the medium term, the government should focus on giving strong support and investment into innovation in the sector. The government should provide clarification on clean-fuel policies, and investment into research and development of alternative fuels and related activities, to make South Africa the leader in African transport.
Improved efficiencies would allow for higher margins or lower prices of consumer goods, which would boost demand. It would also make the sector resilient to changes in the fuel price, financing issues, and reliance on the price of mining commodities to drive demand.