Page 59 - IRMSA Risk Report 2023

Theoretically, the order of magnitude of pledged such a way that small business finds it very difficult
infrastructural investment projects is so massive that, to establish itself and to survive. Small businesses
if they were to come to fruition, it would be a total could be creating proportionately far more jobs than
game-changer in the economic performance of the big businesses do. All these factors are contributing
South African economy. We could see growth rates towards holding back economic growth and
of between 20% and 30% in capital investment, and investment, as well as the desire to invest.
between 4% and 6% in GDP growth. This would result
in the creation of a huge number of jobs. But there Another big challenge we have is that low economic
has been a singular failure in our ability to translate growth creates higher inequality and more and more
the intentions to embark upon major infrastructural capacity for social unrest. On the other side, you’ve
investment into actual action in that regard. got the government security services becoming
more and more inept and incapable of controlling
Sadly, we haven’t seen that investment flowing any violence and unrest that takes place.
through the economy in any large measure due to
issues such as procurement fraud and corruption. While there is no sign of the South African economy
We’ve also seen the development of all sorts of collapsing completely, it is degenerating gradually.
Mafia (so-called ‘business forums’), especially in In the best-case scenarios, we are looking at an
the construction sector. They threaten violence and economic growth rate from 1 to 1½% for at least
intimidation if they don’t profit from the intended another two years or so. Then there is a worst-
projects. Sabotage and intimidation have infiltrated case scenario, in which the country continues to
our economy in a significant way, preventing degenerate towards total economic collapse. Other
infrastructural projects from commencing. African countries are starting to take over where
South Africa used to be the leader, especially in
Other big headwinds underlying the economy transportation and port services.
are on the labour front. Our educational system is
largely dysfunctional and not producing the skills Greylisting of South Africa by global financial crime
that it ought to. South African schools, particularly in watchdog, the Financial Action Task Force (FATF)
rural areas, are entrenched in dysfunction with little for not fully complying with international standards
to no resource allocation. They are ill-supported around the prevention of money laundering,
to provide children with opportunities to excel terrorist financing and proliferation financing could
academically, resulting in school leavers probably discourage foreign investors from doing business in
not being employable in the growth sectors of the South Africa, which could in turn affect South Africa’s
job market (such as technology). The unemployment GDP by approximately 1-3%.
rate has been increasing for over a decade now, In addition, should South Africa face censure due
but the rate of increase in unemployment has been to its stance on Russia’s invasion of Ukraine, in the
accelerating progressively in recent years. Hand worst-case scenario, where both the USA and EU
in hand with that increase in inequality, one has a withdraw from their respective trade deals, R443
toxic mix (militant trade unions), which creates a billion worth of exports will be placed on the line. To
very adversarial environment between workers and add to this, the Rand has collapsed and not only are
employers – especially in the public sector with the foreigners moving out of South African assets, but
result of more and more strike action. This is inimical local investors are also moving out of South African
to economic growth, with less and less incentive for assets.
employers – especially in the private sector – to take
on employees on a full-time basis. So, what we’ve Infrastructural investment and structural reforms have
seen is a progressive move towards more capital been promised by the ruling party. These are key to
intensity. More and more businesses can operate unlocking some of the potential within the economy.
through digital means rather than employing people, With national elections around the corner and the
but it does mean that the unemployment rate has spectre of coalition politics ruling the country, we
simply been escalating. need to be optimistic that decisions will be made for
The government is overregulating the economy in the good of the country and its citizens.

IRMSA RISK REPORT 2023/24 59