NWU Business School

South Africa needs to redefine its economic diplomacy in the light of Trump victory

BELINDA BANTHAM — Thu, 07 Nov 2024 07:12:24 +0000

South Africa needs to redefine its economic diplomacy in the light of Trump victory BELINDA BANTHAM Thu, 11/07/2024 - 09:12

The pivotal and definitive outcome of the historic United States (US) elections for control of the White House and the Congress has wide-ranging implications for the US economy and for the rest of the world.

In commenting on the outcome of the crucial 2024 US elections, Prof Raymond Parsons, economist from the North-West University (NWU) Business School says the American electorate has spoken.

“The clear focus by President-elect Trump will be mainly on the US economy. While the decisive American election mandate has strengthened political certainty within the US, it has heightened market volatility and uncertainty elsewhere, including among emerging economies.”

Prof Parsons points out that the US financial markets and dollar have strengthened in the immediate aftermath of the American elections, but the rand, for example, has already weakened. Policy uncertainty may eventually prevail over political continuity in the current global economic outlook.

“Political rhetoric will eventually be converted into policy outcomes such as heightened protectionism by the Trump administration next year. Among the more tangible immediate policy commitments by a Trump presidency are a general US tariff imposition of 20% on all imports and as much as 60% on Chinese imports. As a small open economy, South Africa has a vested interest in the multilateral trading system.”

The greater risks to South Africa’s overall exports in general, and also whether it will eventually affect the AGOA duty-free benefits in particular, are what is of importance to the South African economy about a Trump victory and the prospect of higher protectionism.

“In the light of the latest American political changes South Africa will therefore need to redefine its economic diplomacy with the US in ways that safeguard the basic shared economic interests that we still have with America, regardless of political changes there.”

According to Prof Parsons, this is also embedded in former President Thabo Mbeki’s recent call for South Africa to review and adjust its foreign policy stances in the light of major shifting geopolitical trends in general.

“Nonetheless, irrespective of the outcome of foreign elections, South Africa’s Government of National Unity (GNU) must continue to prioritise implementing the right domestic policies needed to build South Africa’s economic resilience.

“The way to offset any adverse external trends is to ensure that South Africa’s economic house is in order, so as to achieve higher inclusive growth.”

Latest MTBPS outlines a new sense of economic direction

BELINDA BANTHAM — Thu, 31 Oct 2024 07:15:45 +0000

Latest MTBPS outlines a new sense of economic direction BELINDA BANTHAM Thu, 10/31/2024 - 09:15

Given the fine budgetary line that still had to be walked by Finance Minister Enoch Godongwana, the first Medium-Term Budget Policy Statement (MTBPS) of the Government of National Unity (GNU) comes across as a pragmatic, realistic and credible strategy to tackle South Africa’s challenges of low economic growth and high public debt again.

In commenting on the MTBPS of 30 October, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the 2024 MTBPS was broadly aligned with the overarching commitment of the GNU to higher inclusive economic growth and job creation.

“It is welcome news that South Africa is now achieving a primary budget surplus, and that the debt-to-gross domestic product (GDP) ratio is to be stabilised at 75,5%, although debt reduction is to be spread over a longer period. Also, the risks to the fiscal outlook remain elevated. On the spending side, the public sector wage bill remains the biggest single immediate risk to South Africa’s public finances.”

Prof Parsons points out that the emphasis in the 2024 MTBPS was to further consolidate longer-term fiscal buffers and guard rails that must help to ensure fiscal sustainability. The fiscal data and commitments supporting the MTBPS will nonetheless need to be further interrogated when the promised Medium-Term Development Plan is available in January, and the main Budget is presented in February.

“In identifying better growth prospects for a more sustainable future fiscal balance, the MTBPS has now been able to build on the policy momentum created by the GNU, as well as the tangible evidence of an incipient economic recovery.”

According to Prof Parsons, the MTBPS also recognises the importance of unleashing investment and infrastructural development as the kingpins of sustained stronger growth and job creation.

“The emphasis in the MTBPS is therefore on investment-led growth, with increased participation for the private sector. The Finance Minister is right to say that South Africa’s problem is basically a growth one. The MTBPS assumption of a modest average 1,8% GDP growth over the next three years reinforces the need for an action-orientated agenda to improve on these growth prospects.”

Prof Parsons says what South Africa needs is a couple of years of steady and irreversible economic growth to convert short-term business confidence into long-term investor confidence.

“This means that the GNU must ‘stay on message’ regarding its economic commitments in the period ahead. The latest MTBPS has outlined a new sense of economic direction which, if properly implemented, would now make it easier over the next three years to strike the right balance between growth-enhancing measures on the one hand, and stabilising the still challenging high debt-to-GDP ratio on the other.”

He says the challenge to GNU policymaking is therefore to create a macro-economic environment indisputably based on the pillars of efficiency, stability, consistency and certainty, which would also resonate with the theme of South Africa’s presidency of the G20 in 2025.

NWU Business School launches Advanced Leadership for Women short learning programme in partnership with the LGSETA

BELINDA BANTHAM — Thu, 24 Oct 2024 04:52:44 +0000

NWU Business School launches Advanced Leadership for Women short learning programme in partnership with the LGSETA BELINDA BANTHAM Thu, 10/24/2024 - 06:52

The North-West University (NWU) Business School is proud to announce the launch of a new cohort for its Short Learning Programme on Advanced Leadership for Women, aimed at empowering women in leadership roles across municipalities in South Africa. This initiative is supported and funded by the Local Government Sector Education and Training Authority (LGSETA), underscoring the importance of developing women leaders in South Africa.

Participants will gain comprehensive knowledge in the fields of self-management, organisational behaviour, diversity, conflict and change management, and leadership. They will also be trained in research methods and techniques, enabling them to apply these skills practically through case studies and real-world projects.

Prof Leon Jackson of the NWU Business School developed this programme in 2011 and presented the first programme in 2012 to 50 beneficiaries from the Department of Basic Education in North West, funded by the ETDP SETA. In 2022, 50 beneficiaries from the Department of Basic Education in the Northern Cape benefited from the programme, which was also funded by the ETDP SETA. In 2023, 100 women from the local government sector, funded by the LGSETA, formed part of the programme and were awarded their certificates at a ceremony held in Johannesburg in November 2023.

This year, over 200 women are set to receive training. This initiative supports the national call for women empowerment and encourages them to assume leadership positions in their workplaces. The focus of the programme is on theoretical and practical leadership skills, which makes it a key contributor to the growth and development of women leaders in local government.

The launch event will take place on 25 October 2024 at The Roots in Potchefstroom. Attendees will include the leadership of the NWU Business School, LGSETA delegates, representatives from the NWU and the selected participants in the programme.

This partnership with the LGSETA not only supports the local government sector but also strengthens the commitment of the NWU Business School to developing the next generation of women leaders in local government. Through its comprehensive Executive Education offerings, the NWU Business School continues to equip professionals with the skills and insights needed to thrive in today’s fast-changing world.

For more information, media representatives can contact:

Mbali Skosana Clara Vilankulu

Email: mbali.skosana@nwu.ac.za Email: clarav@lgseta.org.za

Phone: 018 389 2937 Phone: 011 456 8579/082 678 6794

Tito Mboweni leaves a tangible economic legacy

BELINDA BANTHAM — Mon, 14 Oct 2024 07:02:28 +0000

Tito Mboweni leaves a tangible economic legacy BELINDA BANTHAM Mon, 10/14/2024 - 09:02

“Tito Mboweni was a formidable leader, with deep economic insights that greatly shaped South Africa’s post-apartheid policies and structures, such as the South African Reserve Bank (SARB), labour law and Nedlac.”

Reacting to the death of former Finance Minister and SARB Governor Tito Mboweni, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says he was saddened to hear of his unexpected passing over the weekend and sends his condolences to his family.

“His roles over the years ranged from Labour Minister (5 years) to SARB Governor (10 years) and much later to Finance Minister (3 years). All of these roles expanded his sphere of influence in policy making at various levels of government,” says Prof Parsons.

As a result, he says, Tito Mboweni increasingly brought his undoubtedly tough skills and experience to bear on policy-making in South Africa.

“He was a leader of integrity and people knew where they stood with him in a debate. On behalf of organised business, I had regular interactions with Tito Mboweni in the early years of South Africa’s democracy, but later more closely in his position as SARB Governor when I was on the SARB Board.”

Prof Parsons says his solid understanding of South Africa’s political economy was always evident, and he was a strong defender of the SARB’s autonomy.

“Tito Mboweni’s time at the SARB was his longest tenure in any role, and where he probably made the greatest impact through his firm commitment to, and strong leadership of, the institution. His decade as SARB Governor was a defining one in the evolution of monetary policy in South Africa during an often challenging period, including the introduction of inflation targeting in 2000.”

Overall, he says, Tito Mboweni leaves a tangible economic legacy in South Africa as a dedicated public servant over many years.

More interest rate reductions likely if inflation outlook continues to improve

MARELIZE SANTANA — Fri, 20 Sep 2024 06:39:46 +0000

More interest rate reductions likely if inflation outlook continues to improve MARELIZE SANTANA Fri, 09/20/2024 - 08:39

The widely expected pivot for the Monetary Policy Committee (MPC) to now commence its interest rate cutting cycle by a modest 25 basis points (bps) is good news for business and consumers.

In commenting on the decision by the South African Reserve Bank (SARB) on 19 September Prof Raymond Parsons, economist from the Business school of the North-West University (NWU), says that, although the decision remains marginal in terms of present high borrowing costs, it nonetheless represents a positive turning point in the interest rate outlook.

“Monetary policy is still in restrictive territory, but the SARB has now recognised that the time has come for interest rate policy to begin to adjust to a largely improved inflation outlook.”

Prof Parsons says the timing and pace of further interest rate reductions by the MPC will obviously remain data-driven, but are now likely to continue if the inflation outlook continues to improve.

“Although the MPC statement emphasised external uncertainties, both global and domestic economic trends on balance strongly indicate that, barring shocks, another 25 bps cut should be possible at the MPC’s next meeting in November.”

Prof Parsons says as it is still early days in the implementation of the two-pot system of access to pension funds and, given the firm rules of engagement, the MPC is right not to be too concerned about its possible inflationary effects.

“On present evidence, the macroeconomic implications of the two-pot system over time are likely to be quite balanced, in other words, a ‘Goldilocks’ impact – not too hot, and not too cold.”

According to Prof Parsons there were also key references in the MPC statement to administered prices in general and Eskom tariffs in particular that are continuing to pose upside risks to the inflation outlook.

“In the next three years, Eskom is seeking 36%, 12% and 9% price increases respectively over that period.”

Prof Parsons says that, fortunately, there is now a convergence of pressure from the Minister of Electricity, Parliament, the Presidential Climate Commission and other key stakeholders for electricity pricing reform before any final decisions are made.

“Finally, the MPC statement recognised that South Africa’s economic growth has been too low for too long. The MPC also acknowledged that a major weak link in South Africa’s growth prospects was total gross fixed capital formation (GFCF), which has declined for four successive quarters.”

He concludes that, apart from structural remedies and reforms, however, strengthening GFCF also needs progressive lowering of borrowing costs of capital to help improve the risk-reward ratio of private investment plans, especially for SMMEs.

GNU should expedite key growth-friendly reforms for better GDP figures

BELINDA BANTHAM — Wed, 04 Sep 2024 08:55:07 +0000

GNU should expedite key growth-friendly reforms for better GDP figures BELINDA BANTHAM Wed, 09/04/2024 - 10:55

“After the revised zero growth (0,0%) in the first quarter of 2024, the better news is that real gross domestic product (GDP) in South Africa grew by a modest 0,4% in the second quarter of 2024.”

In commenting on the second-quarter GDP figures that Statistics SA released on 3 September, Prof Raymond Parsons, economist from the NWU Business School, says it could represent a turning point in South Africa’s business cycle, as the growth performance has clearly been too low for too long.

“The weak growth performance confirms the top priority now given to inclusive job-rich growth by the Government of National Unity (GNU). They also confirm the extensive damage to South Africa’s economic growth that Eskom’s previous load-shedding, in particular, did earlier in terms of widespread disruption, heavy costs and debilitating economic uncertainty.”

Prof Parsons says as load-shedding has recently receded, so business and consumer confidence have recovered to better levels.

The GDP growth figures for the second quarter of 2024 show that renewed energy security since March 2024 has helped the country’s growth performance to gradually cross an important threshold.

“In Quarter 2 of 2024, growth seems to have been largely dependent on much stronger household spending. The economy is not, however, on cruise control. Both gross fixed capital formation (GFCF) and exports remain weak links in the second quarter 2024 growth scenario.”

Prof Parsons explains that total GFCF, especially, is a major driver of future economic growth. He says complacency must therefore be avoided, as salient risks to the growth outlook linger, and there are still daunting socioeconomic challenges to be tackled.

“Key growth-friendly reforms, policies and projects therefore still need to be expedited by the GNU in collaboration with the private sector to ensure putting the economy on a much higher and sustainable growth path. If South Africa plays its cards well from now on, it becomes possible to visualise South Africa’s real GDP growth broadly at 1% in 2024, improving to about 2% in 2025, and perhaps even reaching 3% by 2026,” he concludes.

North West Premier appoints two esteemed professors in his new advisory council

BELINDA BANTHAM — Fri, 30 Aug 2024 03:30:32 +0000

North West Premier appoints two esteemed professors in his new advisory council

by Oscar Mosiane

BELINDA BANTHAM Fri, 08/30/2024 - 05:30

North West Premier Lazarus Kagiso Mokgosi has appointed Prof Raymond Parsons and Prof Mokgadi Molope from the North-West University (NWU) as members of the provincial Economic and Investment Advisory Council (EIAC). The announcement comes at a critical period in the developmental trajectory of the province, with the expanded unemployment rate stubbornly at 54%. The announcement was made on Thursday, 22 August 2024 at Cooks Lake just outside Mahikeng.

Premier Mokgosi made his first appearance in Parliament and emphasised the necessity for a well-balanced advisory council to guide key economic aspects, investment and job creation. The council members will be chosen at the Premier's discretion. "As a province, we have a high rate of unemployment, particularly among the youth, so we must have experts and professionals from various sectors of the economy, including mining, agriculture, tourism and others, who can advise the province on the initiatives, strategies and tactics needed to create sustainable jobs," stated Premier Mokgosi.

Prof Parsons from the NWU Business School is well placed to advise the province and the Premier on unlocking the economic potential of the province. "There are significant socio-economic challenges, and we all know where the problems lie. Now, the council needs to work together to assist North West. We need to unlock the economic potential of both the government and the private sector, particularly in sectors such as mining, agriculture and tourism, to start creating jobs that will boost the growth rate," he remarked.

Prof Molope also welcomed the inclusion of academics in the council as an opportunity to contribute to the social and economic development agenda of the province. “Success in this role requires us to collaborate beyond our areas of specialisation so that we can give advice that will facilitate unlocking opportunities in the province. I am appreciative of the fact that this council will not be about rehashing the existing plans, but proposing and promoting new ideas that may catalyse and accelerate economic development in the province. This is in line with the NDP (RSA), SADC, AU and BRICS economic development agendas,” said Prof Molope.

The council will play a crucial role in speeding up the implementation of projects and policies that will enhance the growth prospects of North West, leading to increased job opportunities. In addition, the council will play a more strategic catalyst role in ensuring that the agreed-upon decisions are implemented and have a positive impact on the ground.

Standing in the back from left are Prof Thekiso Thabo, Prof Mokgadi Molope, Mr Konopi, Prof Raymond Parsons and Prof John Lamola. Seated in front are Mr Lazarus Kagiso Mokgos, Premier of the North West province, and Mr Madoda Sambatha, MEC of Agriculture and Rural Development.

CPI figures set the table for lower interest rates

BELINDA BANTHAM — Wed, 21 Aug 2024 14:08:38 +0000

CPI figures set the table for lower interest rates BELINDA BANTHAM Wed, 08/21/2024 - 16:08

Much better news on the inflation front has continued to emerge with the July statistics, with a significant drop in the inflation rate from the June level.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the latest (July) consumer price index (CPI) figures confirm that inflation is steadily winding down and settling around the midpoint inflation target (4,5%) of the South African Reserve Bank (SARB).

The figures were released by Statistics SA on 21 August. “These cost-moderating trends are now being further reinforced by factors such as the present strong performance of the rand and the continued prospect of lower fuel prices.”

According to Prof Parsons, with core inflation now at 4,3%, it suggests South Africa is moving closer to low and stable inflation if current trends persist.

“Lower inflation trends have developed earlier than the forecasts of the last Monetary Policy Committee (MPC) meeting. It would now be difficult for the MPC to justify keeping interest rates unchanged in the face of the much-improved inflationary outlook.”

Prof Parsons says the table is clearly being set for an initial cut in interest rates when the MPC meets again next month.

“Although the rate reduction may only be 25 basis points at this stage – and no silver bullet for low growth – it would begin a welcome cycle of easing borrowing costs for business and consumers.”

Disappointing unemployment figures reinforce urgency for higher, job-rich growth

BELINDA BANTHAM — Wed, 14 Aug 2024 06:30:47 +0000

Disappointing unemployment figures reinforce urgency for higher, job-rich growth BELINDA BANTHAM Wed, 08/14/2024 - 08:30

Not unexpectedly, the latest unemployment figures for the second quarter of 2024 rose to 33,5% against the background of previous weak economic data that negatively influenced job creation.

In commenting on the release of the Quarterly Labour Force Survey for the second quarter of 2024 by Statistics SA, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the gross domestic product (GDP) growth figures in recent quarters have been disappointing.

“It was inevitable that poor growth would be reflected in yet higher unemployment. Narrowly defined, one in three of the working-age population is now unemployed. The continued high level of youth unemployment remains of great concern.”

According to Prof Parsons, the latest overall unemployment figures again reinforce the urgency outlined by the Government of National Unity (GNU) for South Africa to prioritise much higher inclusive and job-rich growth.

“Already, the prospects for stabilising and eventually reducing the high level of unemployment are being improved by the phasing out of load-shedding, higher infrastructure spending, stronger business confidence and reduced policy uncertainty. These could, in time, build a sustainable platform for increased job creation in future.”

However, he says it also reinforces the need to expedite those structural economic reforms that will turn the South African economy around sooner rather than later and put it on a much higher growth trajectory.

“Current forecasts of about 1,0% GDP growth this year are simply not good enough. The prevailing bad news on the unemployment front therefore can only be converted to better news in future if the economic remedies South Africa needs are given high priority.”

Growth prospects will strengthen if policy uncertainty recedes

BELINDA BANTHAM — Fri, 19 Jul 2024 12:11:59 +0000

Growth prospects will strengthen if policy uncertainty recedes BELINDA BANTHAM Fri, 07/19/2024 - 14:11

Not unexpectedly, for the seventh time, the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) decided by a four to two majority vote (as opposed to a unanimous decision in May) to again keep interest rates unchanged for now.

In commenting on this decision of 18 July, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the MPC viewed the risks to the inflation outlook as now being on the upside again and wants to see low and stable inflation entrenched at its 4,5% target.

“The majority of MPC members therefore saw ‘stickiness’ in the inflation outlook as needing to be overcome before they would vote to change their present stance. Borrowing costs for business and consumers will therefore remain high for longer.”

However, Prof Parsons says that on present evidence, if inflation and inflationary expectations continue to unwind gradually, there is still a strong possibility of lower borrowing costs for business and consumers by the end of 2024.

“The latest MPC statement embodied some perceptions and trends that opened up the prospect that, barring shocks – and if the current MPC vote shifts in that direction – a lower interest rate cycle might commence later in the year, perhaps even by the MPC’s next meeting.”

According to Prof Parsons, global factors – such as easier US monetary policy in the near future – will also play a role in MPC decisions as to the timing and extent of domestic rate cuts. In any case, any eventual interest rate easing by the MPC is likely to be modest, possibly an initial reduction of 25 basis points. Monetary policy will therefore still broadly remain in restrictive territory in the foreseeable future.

“The MPC maintained its gross domestic product (GDP) growth forecasts for now as 1,2% in 2024 and 1,6% in 2025, while the latest IMF economic growth predictions for South Africa remained at only 0,9% in 2024 and 1,2% next year.”

Prof Parsons says the underlying message of the MPC statement was nevertheless clear. “The more reforms gain momentum, the more policy uncertainty will recede, and investor confidence and growth prospects will be strengthened.”