Much concern for the future of SA, but some still have hope


The Economist has done it again with a scathing headline and an even more critical article about the poor state South Africa is in, expressing even more concern for the future than a similar piece did in October 2012.

The article comes in light of Africa’s most advanced economy’s recent finance minister shuffle when a couple of weeks ago, President Jacob Zuma “redeployed” Nhlanhla Nene with the fairly unknown David van Rooyen, plunging the rand to record levels. The president then swiftly shifted back to the tried and tested hands of Pravin Gordhan, which restored some faith in the currency.

The article addresses South Africa’s finance issues since Zuma’s current presidential term started such as the 3.8 per cent budget deficit, the doubled public debt and the expected downgrade to junk status in 2016.


“The commodity bust is partly to blame, but the main problem is the way Mr Zuma governs,” cites the article.

The theme continues on that basis – that issues in the country stem from President Jacob Zuma’s lack of ability to govern the country. (Read more)

On a more forward-moving perspective, just a month ago, Goldman Sachs released a report presented by Colin Coleman where he expresses a more optimistic approach to the country.

Coleman is Managing Director of Goldman Sachs, Sub-Saharan Africa; he is also reported to have, together with other banking heads approached the ANC about the disastrous consequences van Rooyen as finance minister would lead to. 

Coleman agrees that there is cause for concern in the country, in terms of recent economic slowdown, higher unemployment and rising inflation and interest rates but adds that the country is “resilient”.

He substantiates this with independent and strong institutions such as the South African Reserve Bank (SARB) and a solid country balance sheet.

Pros And Cons - GS

“South Africa is the strong corporate, very independent SARB, strong national treasury, low levels of foreign debt, flexible exchange rate – these are all major assets that really when you reflect on South Africa’s trajectory as a framework of economic architecture makes us very resilient and able to absorb shocks and having a significant cushion for the downside,” said Coleman.

One of the important issues is labour, because of a very high unemployment rate – a country of 8.3 million not working.

“This is kind of a design fault in the South African system, we need to get our bang for our buck in education and health but that relies on the public sector coming to the party in terms of accountability and performance.”

Coleman also suggests a more stable environment in terms of metals and mining and manufacturing which in turn feed the exports.

Commodities - GS

“And in turn deals with the current account particularly in a time where there is going to be pressures on portfolio flows,” he said.

Other methods he speaks on are fixing state owned enterprises, ensuring the regulatory environment is conducive and taking advantage of the rand appreciation for tourism and other sectors.

On the rand Coleman states that it would continue to be volatile but that it is more affected by global trends like the US Fed rate hike and China then only by domestic factors.

“One would hope that this re-balancing  on a lower exchange rate is going to drive a much more successful manufacturing and high value-add manufacturing sector will drive a more efficient tourism sector and encourage South African companies to also export services.”

He explains that from a systemic point of view, it’s beneficial to South Africa’s balance sheet because the majority of revenue of the Johannesburg Stock Exchange Top-40 are off-shore already.

“So we have a very diversified earning stream, very exposed to and benefits from offshore rand depreciation in terms of the value of the dividends and earnings to us in the longer term,” said Coleman

To summarise, the report looks at the basics and getting them right, he says leadership, business, labour and government need to work together and deal with the reforms in a smart way.

“We have to address what will drive growth forward and that’s a common problem for government, for businesses and labour – we have to all be smarter, we are all in it together and team South Africa has to rise.”