SA needs to ditch growth-retarding policies – Investec CEO

South Africa’s economic policies retard growth and government should adopt a growth agenda rather than a redistribution agenda if it wants the economy and country to gain much-needed positive momentum, says Investec CEO, Stephen Koseff.

“When you adopt a growth agenda, redistribution will automatically happen if you build the right skills and support entrepreneurship,” Koseff told Moneyweb, after presenting the specialist bank and asset manager’s full-year results to March.

Investec’s operating profits were hurt by the weak rand, which depreciated by 16.3% against the pound over the period. Statutory operating profits were up 2.5% to £505.6 million (R10.7 billion) – growth of 13.5% on a currency neutral basis.

“I believe in transformation but it should be oriented towards education and entrepreneurship,” Koseff said, noting that Investec invests its entire social spend into building entrepreneurs and educating people.

“We [South African corporates] understand that there is a lot for us to do to fix up the past. This is a 50-year game and we have not made the progress we could have made because of our policy framework,” he said.

For example, a proposed minimum wage will not help small businesses and entrepreneurs flourish, Koseff argued.

“Put a minimum wage on Investec, it makes no difference. Big business, generally speaking, will be way above the [minimum wage] threshold. But you can’t put a minimum wage on those businesses employing 100 to 150 people, they will close up shop and then you lose employment,” he maintained.

South Africa’s unemployment rate jumped to 26.7% in the first quarter of 2016, up from 24.5% in the fourth quarter of 2015, figures from Statistics SA revealed. The South African Reserve Bank (Sarb), meanwhile, revised its GDP growth forecast downwards for 2016, from 0.8% to 0.6%.

SA could be best developing country in the world

Koseff was positive about recent engagements between business and government focused on staving off a credit ratings downgrade and reigniting economic growth.

Among those present at a feedback session he attended at the Union Buildings last week were the president, deputy president, minister of finance, minister of trade and industry, the unions, as well as large and small businesses.

“There was quite good momentum and then we saw this big headline in the newspaper over the weekend,” Koseff said, referring to allegations that finance minister, Pravin Gordhan faces imminent arrest.

Koseff said there was no indication of any arrest in the meeting, which was “business as usual”.

Hopefully the presidency’s immediate denouncement of the allegations as misinformation is true and the minister can get on with his job, he said.

“The story is the work of dangerous information peddlers who wish to cause confusion and mayhem in the country,” the presidency said in a statement issued over the weekend, reiterating its commitment to work together with business and labour in bolstering economic growth and job creation.

If there is any element of truth in it, “the government needs to back the finance minister”, Koseff added. “He’s very well respected globally.”

“We need a team as South Africa,” he stressed.

Citing South Africa’s good infrastructure, strong corporate sector and well-respected institutions, Koseff said the country should be the best developing country in the world “by a long shot”.

“It’s just a shame that we’re not actually focusing and putting competency into the right place,” he said.

Asked whether Investec was pricing in a downgrade, Koseff commented, “We are factoring in that we have to be resilient for a downgrade. So we’ve ensured we’ve lengthened our dollar liability base and have got a lot of surplus dollars, because that’s where the big impact is going to be.”

Koseff stressed that government officials must understand the importance of the investment community worldwide. “Investors have no emotion. They go where they see opportunities and where they see problems they run. We can create opportunity,” he said.

The private bank and asset manager – which in 1981 posted R280 000 in profits following its first year of trading – made R12.3 billion in pre-tax profits from ongoing operations for the 12 months to March and today manages R2.5 trillion in third party money.

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