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Ramaphosa adviser Trudi Makhaya explains SA’s economic strategy

By Xolisa Phillip, in Johannesburg
Posted on Thursday, 4 July 2019 19:13

Strikes hurt South Africa's mining output and GDP in early 2019. REUTERS/Siphiwe Sibeko

The South African economy may have experienced its worst GDP contraction in a decade in the first quarter of 2019, but the country is not running on empty, says Trudi Makhaya, who has just completed her first year as President Cyril Ramaphosa’s economic adviser.

The road to economic recovery and rebuilding will include a renewed focus on industrial policy, a consolidated and streamlined five-year plan, a reform agenda aimed at improving the ease of doing business and the formation of an economic advisory council comprising the best business brains in South Africa and beyond.

About that GDP decline…

The 3.2% decline in GDP came against the backdrop of worse-than-expected unemployment data, adding to increasing pessimism about the state of the South African economy. However, for Makhaya, context is key.

According to her, these were some of the one-off events which contributed to the dire outcome:

  • Adverse weather conditions that affected agriculture and rendered South Africa unable to source electricity from Mozambique – “so load shedding had a bite”.
  • The Sibanye mining strike, which had a huge impact on mining output.

“That confluence of factors – bad luck and unfortunate decisions in terms of the strike – all converged at once to create that GDP figure. But those events are not going to be repeated. It’s not that there will be significant growth soon, but that was an anomaly,” Makhaya tells The Africa Report.

Growth strategy

She says that South Africa will use a reworked industrial policy to start making inroads on its growth problems. But, unlike in the recent past when this was driven by the state, business is a key stakeholder.

In the recent past, Rob Davies drove industrial policy at the ministry of trade and industry. In the new administration, that ministry is now part of the wider ministry of economic development, which is lead by Ebrahim Patel. Patel oversaw the genesis of South Africa’s competition policy regime, while Davies took care of industrial policy. Patel will now have influence over South Africa’s industrial policy.

Public and private together

The state is engaging with the private sector on industrial policy through the Public-Private Growth Initiative, which is headed by captains of industry, including co-founder Johan van Zyl, the CEO of Toyota Europe and Africa. The group is assisting the government to identify sectors that should be prioritised and discussing where the opportunities are.

“We have always had some incentives and a desire to support industry, but this is the first time I am seeing business participating in that discussion. That is important so that industrial policy is not seen as something that comes from the Department of Trade and Industry and it goes to a quiet death,” explains Makhaya.

“In essence, the focus on industrial policy is an attempt to be market friendly in ensuring that sectors succeed by removing all the impediments that prevent sectors from thriving,” adds Makhaya.

The five-year plan will have fewer indicators and greater clarity of purpose. South Africans got a glimpse of this during Ramaphosa’s state of the nation address in June, when he identified seven priorities for his administration.

Business-climate reform agenda

To reform the business climate, Makhaya and her team have collaborated with the World Bank to devise a detailed roadmap that has five priorities. These include ensuring that property and company registrations, which have been identified as constraints to investment, are done in a co-ordinated manner. The Ramaphosa administration is looking to improve its score on the World Bank’s Ease of Doing Business survey.

Economic envoys

Makhaya’s appointment in 2018 coincided with the hiring of economic envoys including former finance minister Trevor Manuel, erstwhile deputy finance minister Mcebisi Jonas, former Standard Bank CEO Jacko Maree and businesswoman Phumzile Langeni. They were the faces of South Africa’s campaign to attract $100bn in investment.

The envoys submitted a report to Ramaphosa about their experiences, but their continued role is the subject of an ongoing conversation within the presidency. Plans are afoot to form an economic advisory council that would include international players, says Makhaya. “So, the conversation is about whether the envoys will be part of the advisory council or what form their continued involvement will take,” Makhaya says.

The country should expect a growth bump in the coming quarters because some of the investment pledges made at the November 2018 national investment conference are coming on-stream. “Factories are being built, some projects are being launched and money is beginning to flow,” Makhaya says.

Some of the projects include Mercedes-Benz’s R10bn ($712m) investment to expand its East London, Eastern Cape, plant, where the carmaker will assemble its latest C-Class and GLC SUVs. Mining company Vedanta is going ahead with its investment into a zinc production facility in Gamsberg, Northern Cape. Meanwhile, the miner is also conducting a feasibility study on building a smelter in the Northern Cape.

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