Page 57 - IRMSA Risk Report 2023

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
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 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
incompetence, strike action, sabotage and the 30% in capital investment, and between 4% and 6% in GDP growth, as well
construction Mafia, this leading to SOEs and as the creation of a huge number of jobs. Government needs to make this info@mondialcons.com | www.mondialcons.com
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
benefit the majority – only the elite. into BEE shares, this instead of BEE companies building new businesses.
There are much smaller countries than South Africa with little or no natural
BEE restricts investment, contributes significantly resources who have economies that are many times bigger than South
to the brain drain and increases the cost-of- 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 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.

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