News


Structural reforms required to encourage investment

October 2021 News

South Africa requires creative and innovative solutions to put the economy back on a sustainable financial path. Structural reforms are needed to enable a more business-friendly environment aimed at encouraging investment to grow the economy.

The country has benefited in recent months from a commodities boom which provided an unexpected tax windfall.

This has resulted in an unprecedented trade surplus – meaning that more capital has flowed into the country than out of it. This has helped to underpin the rand, contained inflation and kept interest rates at historical lows. The state’s finances have benefited from the mining sector’s stellar results through improved tax collections, which has, in turn, increased calls for a universal basic income grant.

No commodity boom lasts forever. What happens when the price of commodities inevitably cools and the state’s finances no longer benefit from improved tax collections? Any commitment to a universal basic income grant must be based on sustainable sources of revenue.

All indications are that the recent economic tailwinds are not enough to alleviate the tenuous position of the country’s debt to GDP ratio or avoid further future ratings downgrades unless government is able to reign in public sector expenditure.

South Africa’s economy was in trouble even prior to the Covid-19 pandemic, characterised by low levels of growth, growing unemployment and poor business confidence. The pandemic has exacerbated the challenges facing the country.

The fragile state of the economy is reflected in the disappointing month-on-month manufacturing output figures. According to Statistics South Africa, manufacturing production fell by 0,7% for the third consecutive month in June this year, indicating that a recovery in this sector has stalled and failed to reach pre-Covid levels.

There is extensive research available showing a strong correlation between economic growth and social stability. The former must urgently be prioritised with quick wins from low hanging fruit. These include the introduction of a business-friendly regulatory environment, which is aimed at restoring private sector confidence and encouraging investment into local operations.

Labour laws need to be amended so that they don’t dissuade businesses from hiring staff. We need to increase the beneficiation of extracted minerals into higher-value products and urgently increase the country’s manufacturing output. At the same time our country’s youth need to be armed with the necessary skills to ensure their employability in a rapidly approaching Industry 4.0 world.

South Africa requires creative but practical policies that enable inclusive economic growth, boost confidence and encourage investment. The country has the potential to create a more positive future for itself, fuelled by opportunities for greater levels of trade because of the African Continental Free Trade Agreement. The time is now ripe for meaningful reform.


Credit(s)



Share this article:
Share via emailShare via LinkedInPrint this page

Further reading:

From the editor's desk: Is additive manufacturing poised to go mainstream?
March 2021, Technews Publishing (SA Instrumentation & Control) , News
As digital manufacturing technology pushes its way further towards the production floor, additive manufacturing (3D printing) is emerging as a viable option to complement the more traditional methods ...

Read more...
GE Invests $2,5 million in Johannesburg engineers
October 2021 , News
The Next Engineers program aims to increase the diversity of young people in engineering and reach 3500 local students.

Read more...
Webinar on radiometric level measurement
October 2021, Mecosa , News
Experts from Berthold discuss the advantages of a rod source/point detector arrangement.

Read more...
Africa Automation Technology Fair 2023 moves to Johannesburg Expo Centre
October 2021, Reed Exhibitions , News
The well-established infrastructure, versatility and the extensive experience of the Johannesburg Expo Centre staff make the venue the perfect new home for AATF.

Read more...
Parker Hannifin announces new two-day online oil and gas event
October 2021, Parker Hannifin - Sales Company South Africa , News
Parker Hannifin has announced that it will hold an online trade show dedicated to the oil and gas industry, on 6 and 7 October.

Read more...
Pepperl+Fuchs acquires Aava Mobile Oy
October 2021, Pepperl+Fuchs , News
On 2 September, Pepperl+Fuchs strengthened its Mobile Computing and Communication business unit through the acquisition of Aava Mobile Oy.

Read more...
Demystify plant modernisation
October 2021, Nidec Control Techniques , News
It is now well understood that technology can offer businesses the cutting edge, putting them ahead of their competitors thanks to increased efficiency.

Read more...
ABB and Stäubli to develop solutions for electric mines
October 2021, ABB South Africa , News
Global industrial electrical connectors providers Stäubli and ABB to explore technologies to support the decarbonisation of mining operations.

Read more...
Exacting industrial gearbox requirements met for DRC mine
October 2021 , News
When a project for a copper mine in the DRC required 55 conveyor drive packages and 25 spare industrial gear units, the mine turned to SEW-EURODRIVE to meet its highly demanding needs.

Read more...
Rockwell Automation launches TechEd Tuesdays
October 2021, Rockwell Automation , News
Connected training using a ground-breaking interactive platform will enable IT professionals to prepare for the future of smart manufacturing.

Read more...