Page 56 - IRMSA Risk Report 2023
P. 56

TOP 5 CHALLENGES                   TOP 5 RISK TREATMENT OPTIONS AND OPPORTUNITIES

         TARGETS                                                                                       ▶


         TO ACHIEVING  ▶
                                                        There must be serious consequences for corruption. Despite the cost of
                                                        the Zondo Commission – over R1-billion over a period of four years – very
       Ongoing  corruption  and incompetence  are a     few consequences have been enacted. Allegations of corruption continue
       major factor in the destruction of the economy.   unabated.
       The quality and competence of individuals   01.
       in the administration of the government has      The cost of legal fees incurred in pursuing claims of fraud and corruption
       deteriorated over the past decade.               are exorbitant, and the legal timeframes and delays seem to suggest to
                                                        criminals that crime does pay. Independent authorities such as the National
       On top of this, procurement fraud, middlemen and   Prosecuting Authority of South Africa and the Investigative Directorate
       procurement paralysis all inhibit the stimulation of   should be adequately resourced to deal with criminal cases in a timeous
       the economy.
                                                        manner, this to curb fraud and corruption, as well as to illustrate to the
                                                        citizens of the country that the rule of law is in place.



       Continual  loadshedding  and  the  intensification   Loadshedding is a deterrent to new investment from business and
       thereof, which reduces potential GDP growth by   confidence from households. Eskom is not in a position to fix the problem
       about 1.0%.
       Eskom is also a key risk for government, because   02.  alone. The solution is to focus on using public-private partnerships with
       it isn’t a sustainable entity. Government is taking   independent power producers to develop sustainable energy facilities.
                                                        In addition, Eskom should continue to employ the appropriate skills and
       on some of Eskom’s debt and will have to continue   use OEM suppliers to maximise output from existing infrastructure.
       doing so, which in turn limits its own ability to
       raise new debt for other expenditure priorities.


                                                        This is evidenced by the ongoing shift from rail freight to road freight.
                                                        Transnet’s recent strike action also highlighted how vulnerable our ports
                                                        are. Much of SA’s coal is now being exported from Mozambique rather
                                                        than SA.
                                                        In addition, collapsing infrastructure is seen as another ‘cost of doing
                                                        business’ and is eventually passed onto consumers.
                                                        Theoretically,  with  the  order  of  magnitude  of  infrastructural  investment
       Infrastructure collapses due to poor maintenance,   projects being so massive, we could see growth rates of between 20% and
       construction  Mafia,  this  leading  to  SOEs  and  03.  30% in capital investment, and between 4% and 6% in GDP growth, as well   info@mondialcons.com | www.mondialcons.com
       incompetence, strike action, sabotage and the
                                                        as the creation of a huge number of jobs. Government needs to make this
       municipalities not being able to meet demand.    happen.
                                                        There need to be more incentives for PPPs. This includes the transfer of
                                                        skills from the private to public sector, as well as incentivising the return of
                                                        skilled and experienced South Africans who have emigrated. This would
                                                        definitely contribute to improving the situation. Lastly, there should be zero
                                                        tolerance  towards  sabotage,  construction  Mafia,  extortion  and  the  like,
                                                        with authorities instituting criminal proceedings to put a halt to this drain
                                                        on the economy.

       BEE and the way it has been implemented is
       detrimental to the economy. BEE has been a
       major source of corruption and, on top of this,   It’s important to incentivise business creation and growth. A common
       significantly limits investment.                 misconception is that the economy is finite – that it has already been taken
       BEE is, at face value, a wealth-redistribution
       mechanism that has long shown that it doesn’t    and, therefore, existing businesses need to be carved up again and again
                                                        into BEE shares, this instead of BEE companies building new businesses.
       BEE restricts investment, contributes significantly  04.  There are much smaller countries than South Africa with little or no natural
       benefit the majority – only the elite.
       to the brain drain and increases the cost-of-    resources who  have economies that  are many times  bigger than South
                                                        Africa’s
       service delivery significantly at the expense of the
       taxpayer. This contributes further to the growing
       inequality.

                                                        Local factors have resulted in a dramatic increase in SA’s inflation and severe
                                                        interest-rate hikes, which stifle the economy. The expectation is for inflation
                                                        to subside through 2023. China also appears to be reopening, which would
       SA is very dependent on global growth. Advanced   help boost SA’s prospects.
       economies are expected to see pronounced   05.   India is expected to grow at 6.8% in 2023 vs China at 5.2%. Should South
       growth slowdown in 2023, which will have a       Africa learn from the “India” strategy. This could be a major opportunity for
       negative impact on the South African economy.    South Africa and we should not be bullied by BRICS.
                                                        The country should provide solutions to challenges inhibiting economic
                                                        growth within its borders and not rely on external factors to provide relief.

             56                                                                                   IRMSA RISK REPORT 2023/24
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