[TOP STORY] Navigating strategic growth and leadership in SA

Simon Brown (0:02)

MoneywebNOW, on the money.

This podcast is brought to you by Standlip Asset Management. Invest in more certainty to navigate volatile market conditions. Chilly and I are with Maarten van Doesburgh. He's economist and head of economics at the Cape Peninsula University of Technology. Maarten, I appreciate the time. A piece you had out in the weekend press talking around the economy. You reminded me of the gold and foreign exchange contingency reserve account. I had forgotten that we had tapped into that. Some 150 billion that we have taken. We've got a final 25 billion, I think, in this current financial year. My understanding is this really has been used by government to reduce debt, to reduce our borrowing requirements.

Maarten van Doesburgh (0:46)

100 percent. That is exactly what has happened. And the last 25 billion is still to be utilized.

Simon Brown (0:55)

So we're getting our debt down. We've got a primary budget surplus, which means before interest payments, we've got a surplus. The question now really is, we've got to get that growth going. My previous guest said maybe 2 percent. We've really got to get growth going. What are the key things that government needs to do? We've got some extra revenue. We've got a bit of wiggle room.

What would you be whispering in the minister's ear?

Maarten van Doesburgh (1:17)

A hundred percent. I think the biggest stimulus that we really need to see on a more structured level is private investment or private-public partnership as it's known.

I think we have seen, and let's give credit where it's due, we've seen some movement in that space, in the transport sector, in ports, in electricity. But I honestly believe that that is a significant opportunity that we keep missing. I don't believe that this government has the energy, if you like, to really tackle private partnerships. And you said it in the beginning. We know the figures. You have the huge amount of debt, more than 75, 76% of GDP, the interest burden being the limiting factor in terms of... And if we just unlock that, that was my...

You know, what I was saying is that if we can just unlock those interest payments and transfer that capacity, if you like, into spending, into real infrastructure, with public partnerships, with the private sector, I believe that that's where the future lies. And we're seeing it on a limited scale. I think it's got to be more structured. I think it's got to be more definitive. I believe we've got to set that out as a goal, and we've actually got to have targets in the specific areas where we need it, such as rail, such as logistics, such as, well, even water.

Simon Brown (2:49)

Yeah, yeah, yeah.

Maarten van Doesburgh (2:51)

And thereby, give this economy the tools that it needs to grow, because we are being stifled by transport and logistics, as we were by electricity previously. And we're still being stifled by electricity. Everybody that talks about growth, we've got to bear in mind, can our, you know, power generation, can our electricity sector maintain the growth that we're looking for?

Simon Brown (3:15)

Yeah, if we hit 3%, would ESCOM still be able to supply? Take your point on that. And the beauty of the likes of infrastructure is A, we build a road or railway line or a power plant or a water treatment, whatever, which is of huge benefit. But we also get, we get employment, we get construction going, which is, you know, we just haven't as a country, I don't know when last we were building enough. It might go back to the 2010 World Cup. And it's so fundamentally important to an economy.

Maarten van Doesburgh (3:42)

Absolutely. Expenditure, I mean, it's the economics 101 Expenditure, especially through, you know, the multiplier effect creates income. It's that simple. So we spend in the right areas, creating productivity, creating GDP, that becomes income in other people's hands, which then multiplies and becomes spending again in the economy, grows the economy. And here we are, government increases your tax base.

Simon Brown (4:08)

Yeah.

Maarten van Doesburgh (4:08)

I think the impact of growing the economy on revenue into government is huge, both indirect taxes, VAT, as well as direct taxes, personal tax, company tax, et cetera. And we're missing it. We're just not growing this economy.

I've got to the point in my writing of saying, is there something we're missing? Why is government not striving for that? Because obviously, the unemployment, the direct impact on unemployment, which is crippling the nation, and never mind the economy, you know?

Simon Brown (4:41)

And I mean, so, because I mean, public-private partnership, we talked to be, as a country, we've been talking about in an age.