Given our structural weaknesses, South Africa is enjoying a remarkably good moment. On the one hand, all our core problems remain unresolved: corruption, crime, local government, a weak skills base, high unemployment, terrible inequality, chronic disease, gender-based violence and a threatening international environment. The strength of the currency is of particular importance.
A strongrand, combined with a muted oil price, has helped to keep inflation low and to support lower interest rates. This in turn provides impetus to growth on the consumption side and improves government finances. A virtuous circle may be on the horizon.
Two things are driving rand strength at present. The first is the dramatic improvement in commodity prices. The rand is, first and foremost, a creature of mineral exports, strengthening as prices and volumes rise.
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The second is sentiment. There is a recognition that the government of national unity (GNU) has stabilised, and progress is being made with key reforms, even if this is happening more slowly than it should. Government finances are being managed responsibly, and there is progress in a variety of areas, including agricultural exports and service exports such as tourism.
But this can change very quickly. Commodity prices could come off their current highs quickly if the international environment returns to some semblance of stability, and sentiment could change quickly if progress stalls. Added to this are all sorts of global risks, made more difficult by our fragile foreign policy.
And then there are the upcoming local government elections, with all the instability they could bring. But for now the rand is strong, inflation is low and government finances are improving. The iron is hot, and this is the moment to strike.
The president’s state of the nation address (Sona) and the budget speech provide the perfect opportunity to signal determination on various fronts. First, we must accelerate the current reforms of the network industries — electricity, water, freight and logistics — without becoming distracted by special interests. Second, after many years of austerity, we must invest in infrastructure, and we must do so efficiently.
Third, we must undertake a fundamental restructuring of the local government system, especially of the way in which electricity and water services are organised. These services must be ring-fenced, professionally run and properly funded. The strongest levers we have are to fix the passenger rail system, to bring down the price of municipal services and to incentivise investment in affordable housing nearer to economic opportunity.
Fourth, we need urgent solutions to root out organised crime in the state. If we were not convinced about that before the Madlanga commission, surely we must be now. Fifth, we must address affordability — the ability of the average family to afford the basics of life.
India pursued a strong economic reform programme over a 15-year period from the mid-1990s. Manmohan Singh led boldly and drove an ambitious plan despite difficult conditions. India is reaping the fruits of that today.
In South Africa we are often so preoccupied with our problems that we don’t notice when the sun comes out. Now we must use the momentum we have generated to build a far stronger foundation before the next storm blows in. • Bethlehem is an economic development specialist and partner at Genesis Analytics.
She has worked in the forestry, renewable energy, housing and property sectors as well as in local and national government. She writes in her personal capacity.
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