Resignation of Jacob Zuma paves way for better economic prospects
According to renowned economist Prof Raymond Parsons from the North-West University’s School of Business and Governance, the resignation of President Jacob Zuma and the expected accession of Deputy President Cyril Ramaphosa to the presidency of South Africa now paves the way for better economic prospects for the country.
Prof Parsons says it marks the end of a period of political and policy uncertainty in which South Africa sacrificed considerable potential growth. State capture and widespread corruption have sapped the country's economic performance.
“In particular, South Africa's public finances and those of state-owned enterprises have deteriorated badly over time. It is now still possible for the country to avoid universal junk status if the right decisions are taken in the forthcoming budget on 21 February to stabilise South Africa's public finances and promote growth. A credible budget needs to rest on the foundations of new leadership and political stability if the economy is to be successfully turned around.
“Policy certainty needs to be restored to the economy. This could be cumulative, just as its decline has been, and therefore beginning the process through political change is half the battle. The change in the top leadership of government creates the prospect of higher economic growth and employment, supported by policies which are growth oriented, rather than patronage driven.”
Prof Parsons says much higher growth and investment levels are necessary if South Africa is to successfully address the continuing challenges of unemployment, poverty and inequality. “The rand has continued to react favourably to the latest political outcomes which, if sustained, will reduce inflation as well as inflationary expectations, and thus might encourage the South African Reserve Bank to lower interest rates later this year.”
He says that the latest political developments could now restore business confidence in ways which might lift South Africa's growth rate closer to 2% in 2018/19. “However, for pressing social-economic reasons, the economy needs much higher growth rates of more than 3% in the longer term, underpinned by structural reforms. With new political leadership has come new hope, but it needs to be backed by real reforms which will boost South Africa's economic performance sooner rather than later.”