Sona 22: Ramaphosa must focus on bringing SA to a Buffalo Miracle growth

The Antswisa Transaction Advisory’s expectations from President Cyril Ramaphosa on Thursday evening is to deliver a State of Nations Address that will give confidence to global and domestic institutional investors to enable us to expand the economy.  

In the medium and long run, our goal, vision, and aspiration are to strive towards a strong and prosperous South Africa.

The Sona must focus on plans for manufacturing and production that will include multiple industries as diverse as the future of automotive industry, chemicals, electronics, healthcare and textiles. Light and heavy manufacturing has been the foremost source of economic growth and development, jobs and innovation in emerging markets and advanced economies. For sustainability purposes, we need to have maximum economic impact while highly managing environmental consequences.

The Sona must further explore a strategy to enhance supply chain connectivity and resilience in South Africa, elevate the country’s position in the global value chain, strengthen investor confidence in the country, and explore new drivers of economic growth and development, with a particular focus on the role of public-private collaboration, innovation and technological transformation. Collaboration can establish a strong research and innovation ecosystem, boost ideas and share resources.

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South Africa needs to improve productivity and competitiveness in the priority productive sectors to attract investors, that can assist the nation in creating employment and impact desired investment value for institutional investors.

South Africa needs an economic strategy that will predominantly prioritise creating massive industries in mining, manufacturing, agriculture and technological development and competitiveness, to reposition the country back to 35 rank of global competitiveness rank. With the challenges we are facing in importing oil, South Africa needs to look at Investing in building oil refineries and import crude oil from Senegal new oil discovery.

To do this, South Africa will need to strengthen the supply chain for Africa Continental Free Trade Area Agreement and also collaborate with countries such as Germany, Singapore, United States and China to help in areas we need to improve on for production, trade, investment, finance, and technology as vehicles for inclusive and sustainable development. The economic collaboration strategy must guide the country to address macro-level and industrial development challenges, expand the export market continentally and globally, diversify economy to make balance dependence on commodities and new future markets.

There must also be better management of government debt to GDP, attraction of investment and improvement in the doing business frontier, creation of more SME hubs for high digital technologies, promote entrepreneurship and innovation, help local firms move up value chains, invest in regional trade systems to speed up the flow of goods across borders. In addition the state must curb regulations that stifle competition and market access and finally adapt to climate change and use natural resources more effectively for economic impact and less environmental consequences.

Manufacturers today are seeking efficiencies in production, and the ability to deliver a broader mix of customized products to their customers. South Africa needs engineering and finance consulting firms to prepare these projects for execution purposes.

Extending the power of connectivity beyond traditional operators will encourage new industries to partake in this mobile ecosystem. As a result, these early adopters of the future of manufacturing have the opportunity to learn best practices from operators while also piloting new uses that inject novelty and innovation into their production processes. Building an economy needs patience but short term timelines must be evaluated the foundation of that development is being created.

South Africa is the 67th most competitive nation in the world out of 140 countries ranked in the 2020 edition of the Global Competitiveness Report published by the World Economic Forum. South Africa was ranked 35th in 2007 and 45th in 2008 -2009 overall and which was the highest ranked country in sub-Saharan Africa, with a very stable performance.

South Africa ranks poorly in labour market flexibility, encompassing hiring and firing practices, flexibility of wage determination, and poor labour-employer relations. Looking at fast developing nations, China, Vietnam and South Korea, they all have better labour market flexibility and that’s assisting them to attract foreign direct investment currently and when they’ve equalized, they can reduce flexibility.

South Africa’s innovation and sophistication is very low, we deserve to be transitioning to Sophistication driven economies now but we are stuck since 2007.

For education, science and development, we need partners that are doing well in production and manufacturing , Supply chain technology and Space economy to build strong markets in those industries. The World today emphasize the role of human capital, innovation, resilience and agility, as not only drivers but also defining features of economic success in the Industrial Revolution fourth and fifth.

South Africa’s challenge, similar to developing countries, reduced fiscal pocket, increased indebtedness and slow pace of economic recovery and underperforming industries. Behind this divergence, however, lie decades of deepening economic and social divisions, an unstable insertion into global financial markets subject to mercurial flows of capital and diminished policy space, rebuilding the economy needs commitment from public and private sector and all other stakeholders including churches.

South Africa’s external debt will be increased, the best solution is to secure production debt that can help in economic rebuilding and recovery for sustainability levels. South Africa is likely to record a 100% plus government debt to GDP, which is a risk for a developing economy.

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Climate Change, electricity generation, economic impact and environmental consequences will also feature in the Sona discussions. Climate Change promoters must innovate financing for the just transition to be successful. The imperative of scaling up climate investment and directing it to where it is needed, requires that the international trade and global Institutional financial systems are geared to supporting structural transformation, particularly in developing countries.

South Africa needs a debt relief and debt restructuring have post pandemic repayments and avoid non repayments or higher repayments.

South Africa needs a grace of a Buffalo economic growth miracle similar to the German Miracle-on-the-Rhine after World War II and the Miracle on the Han River after South Korea War in the 1950 to 1953. South Korea maximized export products through light and heavy manufacturing and the United Nations Conference on Trade and Development (UNCTAD) upgraded Korea’s status to a developed economy. South Korea is now at a critical inflection point and I believe South Africa needs to experience the same to be ranked as part of advanced economies.

The Department of Small Business Development must review their strategy to focus a mission statement and objectives to a national incubation for manufacturing, Agro-processing and technological advancement and space economy, to create born to list enterprises.

In conclusion, South Africa will only emerge stronger from the pandemic when there is a commitment to the economic recovery, and primarily consider a decentralised agriculture and manufacturing industries.

Miyelani Mkhabela is a CEO and Chief Economist at Antswisa Transaction Advisory