The South African economy has been hit hard by a perfect storm of negative factors which have ensured that the Rand has depreciated while investors have been viewing the situation in the country with caution.
There are issues that are out of the country’s control, while other factors are well within the powers of authorities to affect change.
With this in mind, we take a look 8 ways in which South Africa can turn its ailing economy around.
Regain investor confidence
The economy has lost investor and business confidence over the last few years, and this is something that needs to be addressed urgently in order to bring investors back and bolster the economy, as well as a flailing rand. Investors need to be convinced that putting their money into an emerging market like South Africa is a positive move that will guarantee them growth for their investments.
Deregulate from the top down
Government needs to take a long hard look at what needs to be done to remove unnecessary red tape and regulation that is making it difficult for businesses in South Africa to operate optimally, while this is also the case for businesses and investors wanting to come into the country. Deregulation will create long term relationships with SA business and international investors, and for better operating conditions in the country’s private sector.
Remove an incompetent leader
President Jacob Zuma has eroded his reputation with the international community, and within the country there is a massive movement geared at the removal of the president from office following corruption allegations, controversial issues surrounding his presidency, and the most recent knock to the rand caused by his sudden change of financial minister which was reversed days later, showing instability within government and treasury.
Pray for rain
While this particular point may not be within the capabilities of South Africa and the authorities of the country, sufficient rain throughout the country, especially the hardest hit disaster areas of the nation would go a long way to easing the burden on the agricultural sector and assisting with the worry of food security. Government needs to assist struggling farmers financially to ensure stability in the sector going forward
Stabilise the supply of power
Eskom has done well to stop the need for loadshedding over the past few months, but the debate over the availability of power rages on, and investors are watching closely to see if the energy crisis in South Africa can be remedied. If government is able to ensure power for industry so that the private sector can flourish, with specific focus on industries such as manufacturing, construction and mining, the economy will respond positively.
Create more jobs
The high unemployment rate in the country, which is around 25% at the moment, is a bane on the economy. The creation of more jobs through new businesses and the expansion of current companies would allow for additional jobs to be created, while a focus on developing the necessary skills missing in the economy would allow graduates to fill the gaps and find jobs available for them after they graduate, bringing the unemployment rate down and boosting the economy.
Avoid further credit rating agency downgrades
Various credit ratings agencies have downgraded South Africa’s status due to weak economic policies and general concerns over internal issues such as corruption and the energy crisis that affected business. The problem here is that these ratings affect investor sentiment with regards to the country, and a further downgrade to junk status could have devastating consequences which need to be avoided at all costs.
Control local factors
The frustrating thing for South Africans is that international elements out of their control affect the local currency. The South African Rand appreciates or depreciates versus the US Dollar or Euro due to factors that are based outside of South Africa’s borders, as these factors see investors buying or selling emerging market currencies. Little can be done about those factors, but the South African government and the private sector need to be in control of local factors, ensuring that a repeat of the finance minister type mess is never made.
Source: AFK Insider