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NEW YORK, 14 NOVEMBER 2019: Standard Bank’s Corporate and Investment Banking Chief Executive, Kenny Fihla, has expressed optimism about South Africa’s long-term economic trajectory, driven by a reform agenda that casts the country on an accelerating growth path.
Addressing investors and policy makers at the 7th South Africa Tomorrow Investors in New York today, Fihla said an improvement in governance, the re-building of institutions, and a more deliberate approach to policymaking had laid the foundation for better business confidence.
“I remain completely confident about South Africa’s long-term economic trajectory,” said Fihla, adding that the country’s constitution and democratic system promoted prudent policymaking.
He explained that a lack of explicit deadline and timelines, and insufficient attention to the political economy of reform, have historically been the two persistent faults in policy execution.
“Too often, we have tended to behave as if there was no urgency. Too often, we have tended to assume that people will somehow just be happy to cooperate in implementing difficult and demanding reforms. I am delighted that the Ramaphosa administration is much less prone to these errors,” Fihla said.
In a welcome shift, he added, the new administration is incorporating explicit timeframes in the policymaking process, while also engaging a wide spectrum of stakeholders before finalising policies.
The plan to fix Eskom, for instance, commits to having a functionally separate transmission business, with its own board, by March next year.
“In consulting stakeholders, government is often seen as being ‘soft’ – National Treasury has been criticized for saying it’s essential to consult with labour on how to bring the government’s wage bill under control.
“But, in our democracy, that is profoundly necessary. Stern unilateral action would fail – the only viable path forward is one that is compatible with South Africa’s political economy,” he added.
Of course, all parties must acknowledge that an agreement on the wage bill needs to be reached soon to stave off a Moody’s downgrade, he said.
However, even if Moody’s downgrades South Africa, Fihla said he does not expect major movements in bond yields, as a downgrade has already been largely priced in by the market.
He expects to see meaningful progress in stabilizing the fiscal deficit in coming months. “I think we will see excellent progress on stabilizing Eskom’s’ operational and financial performance over the next twelve months. Additionally, business confidence and slightly faster growth will return by the time we reconvene here next year”.
“The new administration has been repairing relations with organized business and labour. There have been joint efforts to tackle barriers to investment and develop sectors with growth potential, and this augurs well for business confidence going forward” explained Fihla.
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