Thoko Modise is the General Manager for Communications at Brand South Africa
Germany is famous for rebuilding its economy and infrastructure after the Second World War brought the country to its knees.
Today, Germany is the world’s fourth largest economy, exporting high-end manufactured products to the rest of the world and employing millions of its citizens.
Germany’s economic miracle or Wirtschaftswunder is studied all over the world as many nations seek to emulate it.
The Nordic model, practiced by Sweden, Norway, Finland, Denmark, and Iceland, is another system of economic development that is a source of inspiration for countries that strive to achieve higher rates of economic growth and bridging the gap between the rich and poor.
Germany and Nordic countries have one thing in common – they have developed free market economies that have in-built welfare systems which create wealth and social protection for their citizens.
This level of economic success has been achieved on the back of strong co-operation and partnership between the countries’ governments, business sector, labour unions, and civil society.
As a young constitutional democracy, South Africa looks up to these countries for inspiration as it tries to eradicate the country’s legacy of colonialism and apartheid, which manifests itself in the form of high levels of inequality, poverty, and unemployment.
South Africa is aiming to develop its own blend of Wirtschaftswunder and Nordic model, which hopefully will culminate in high levels of economic growth, investment, and employment.
On 6 June 2023, the South African government and organised business met to thrash out a plan to co-operate to remove obstacles that hamper the country’s economic growth and job creation potential.
This partnership will see the government and CEOs of large companies representing Business for South Africa (B4SA), the implementation platform for Business Unity South Africa (BUSA), teaming up to find solutions to boost power generation to ensure energy supply security; improve operational performance of freight transport and logistics infrastructure; and combat crime and corruption.
The government is currently strengthening its crime-fighting, prosecutorial, and intelligence-gathering capacity in response to the recommendations made by the State Capture Commission of Inquiry, which drafted a detailed report on the extent of corruption and fraud at some of South Africa’s major state-owned companies.
Prior to the announcement of the partnership, government allocated R200 million to capacitate the Financial Intelligence Centre (FIC), South Africa’s anti-graft unit, to make it more effective in combating money laundering and terrorism financing. The allocation is one of many interventions by South Africa to get itself off the greylisting after the Financial Action Task Force (FATF) greylisted it in February this year.
The partnership between government and organised business will draw on the capabilities and resources that both social partners possess. This is not the first time government and organised business have collaborated to confront a crisis. At the height of the covid-19 pandemic, government and business worked together to implement a nationwide vaccine rollout, paving the way for the economy to re-open and bounce back quickly from a hard lockdown.
The partnership is a necessary intervention that will help accelerate the implementation of structural reforms currently underway. The reforms aim to boost South Africa’s economic competitiveness and reduce the cost of business, thereby helping our country to attract investment and find new export markets that will open following the establishment of the African Continental Free Trade Area (AfCFTA). AfCFTA, launched two years ago, has created the world’s largest free trade area spanning 47 countries that have a combined gross domestic product (GDP) of $3.4 trillion and 1.3 billion people.
Due to its world-class logistics infrastructure, natural resource endowment, and deep financial markets for capital raising, South Africa is suitably positioned to serve as a springboard for foreign multinationals aiming to access this continental market, which will liberalise trade on 5,000 goods currently being traded across Africa.
South African exports have seen an uptick in demand, thanks to a depreciation in the exchange rate of the rand, which has made the country’s exports more competitive in international markets. Demand for fresh citrus has gone up in Asia, Middle East, and Europe, where 40% of South African citrus exports are consumed.
The rand’s positive impact was also reflected in South Africa’s first quarter economic performance, where the economy grew 0.4%, buoyed by the manufacturing and finance sectors. These sectors made positive contributions of 1.5% and 0.6% respectively to overall economic growth. This performance overturned last year’s 1.1% fourth quarter contraction, which was caused by rising interest rates and crippling power cuts. Manufacturing and finance were amongst the eight of the 10 industries tracked Stats SA that recorded growth in the first quarter of this year.
The South African public is confident that the economic recovery is not going to lose its steam following the recent appointment of Minister of Electricity, who is co-ordinating a response to end power the power cuts and boost energy generation. Since the appointment of the Minister of Electricity in March, the planned power cuts, also known load shedding, have subsided, helping to improve business productivity.
The structural reforms that President Cyril Ramaphosa introduced in 2020 to upgrade energy, rail, roads, ports, water, and telecommunications infrastructure are yielding positive results. Since their introduction, there has been an influx of new investment into the South African economy, helping the country to exceed its five-year investment target of R1.1 trillion. In the past five years, South Africa has received a total of R1.5 trillion of new investments, showcasing its status as an attractive investment destination.
The economic recovery and influx of new investments are expected to usher in a new era of industrial growth and employment creation that will catapult South Africa to attain its own Wirtschaftswunder or Nordic egalitarian society.
By Thoko Modise
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