South Africa well-positioned for long-term growth
Despite all its problems, South Africa remains well-positioned to capitalise on its natural resources and potential to grow over the long term, Allianz’s chief economist Ludovic Subran said.
Subran spoke on Business Day TV following Allianz’s leadership forum titled, ‘South Africa at a Crossroads: Exploring Possible Scenarios’.
Surprisingly, Allianz said they do not think global investor confidence has deteriorated in South Africa.
“South Africans are harsher on South Africa than the world is on South Africa,” Subran said, as the country fails to promote its strengths and potential.
Short-term negative sentiment in the country is justified. However, the longer-term trends are positive, with labour force participation rates increasing, trade growth increasing, and a positive trade balance.
Further, these positive trends will likely accelerate into the future, with South Africa set to benefit from the global shift to renewable energy.
“South Africa is well positioned for the export of raw materials vital to the green transition,” Subran said.
The country can play a pivotal role in the decarbonisation of the global economy, provided the country plays its cards correctly.
How to unlock South Africa’s potential
The primary issue for the South African government now is to walk the diplomatic tightrope between the West and BRICS, China in particular.
South Africa has close trade and cultural ties to the West. However, its trading relationship with China has grown significantly.
According to Subran, the country “needs a kind of Swiss neutrality” as it has substantial external vulnerabilities.
There is a large chance of making mistakes in walking this tightrope, and if South Africa does not play its cards correctly, it may end up in a precarious position globally.
On the local front, South Africa must leverage its demographics with a young working population able to drive economic growth.
Subran also praised the country’s sophisticated financial services sector, which acts as a “shock absorber” from external financial dislocations.
However, South Africa must make critical choices in the regulatory and policy environments if it wants to unleash its potential.
In particular, the country needs to have a stable macroeconomic framework to encourage foreign investment.
To capitalise on the export opportunities of the global green transition, the country will also have to rectify the inefficiencies at the country’s ports and railways.