NWU Business School

Postponement of Budget will have unintended consequences

BELINDA BANTHAM — Thu, 20 Feb 2025 10:30:38 +0000

Postponement of Budget will have unintended consequences BELINDA BANTHAM Thu, 02/20/2025 - 12:30

The unprecedented decision by the Government of National Unity (GNU) Cabinet to postpone the Budget until 12 March because of disagreement over tax increases will inevitably have unintended consequences for South Africa’s political economy.

Prof Raymond Parsons, economist from the NWU Business School, says if the eventual Budget in March turns out to be truly committed to growth and job creation (as was outlined in the recent GNU Medium Term Development Plan) the delay would have been worthwhile if the GNU gets agreed trade-offs and better outcomes for the economy as a whole.

“Fundamentally, the sharp controversy about the tax burden can basically be seen as symptomatic of the fact that economic growth in South Africa has been too low for too long. The tax base as a whole has shrunk as a result, given persistently low growth, thus limiting financing options.”

He says the postponed Budget will nonetheless create an elevated level of policy uncertainty for now, which has already been reflected in the rand.

“Markets will be carefully monitoring the progress being made by the GNU from now on in finding sufficient consensus about the final Budget. It also comes at a time globally when risks to South Africa are also higher.”

However, according to Prof Parsons, the fiscal situation has not been left open-ended, and the amended Budget is to be presented on 12 March.

“In the interim, National Treasury communication strategies will need to be adapted to the new circumstances. Between now and 12 March there should be an informed and reasonable debate about what fiscal options are indeed available to South Africa to strike the right balance between spending, borrowing and taxing in ways that promote policy certainty and job-rich growth.”

South Africa needs to respond urgently and make the economy as “Trump-proof” as possible

BELINDA BANTHAM — Tue, 11 Feb 2025 06:34:06 +0000

South Africa needs to respond urgently and make the economy as “Trump-proof” as possible BELINDA BANTHAM Tue, 02/11/2025 - 08:34

“We should not underestimate what may ultimately be at stake for the South African economy and business in the face of the current sharp breach in bilateral political and diplomatic relationships between the United States (US) and South Africa.”

In commenting about the latest tensions in the US-South Africa political and economic relationships, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says disinformation about the situation in South Africa and negative US statements about the country’s policies have triggered a worrying spike in economic uncertainty, which is not only bad for business but also for the country more broadly.

“Apart from the growing concerns about the future of the African Growth and Opportunity Act (AGOA) and its economic significance to South Africa, a serious break in economic relationships with a major trading partner like the US could have other collateral consequences for South Africa – particularly its quest to generate higher investment and job-rich growth.”

Prof Parsons points out that, as President Cyril Ramaphosa reiterated in his SONA last week, the top priority for South Africa is higher inclusive growth and job creation. This is now the overall thrust of the Medium Term Development Plan of the GNU. As a small open economy that is at present aiming for a much higher gross domestic product (GDP) growth rate of 3% in the medium term, South Africa therefore needs to play its cards well and smartly.

“To minimise the possible impact of external shocks, South Africa needs to respond urgently to the latest threats from the Trump administration and make the economy as ‘Trump-proof’ as possible.”

According to Prof Parsons, it is therefore necessary to do battle with disinformation about South Africa at several levels.

In addition to the various political and diplomatic initiatives that are now under way, the business sector has a crucial role to play in the escalating saga.

Affected companies in both the US and South Africa need to enlarge their spheres of influence in the face of these challenging developments.

“Chambers of commerce in South Africa and the US are already intervening. However, in the period ahead, affected business firms also need to take positive steps to reinforce South Africa’s longstanding economic engagement with the US.”

Prof Parsons says companies have suppliers and customers to mobilise for support. Business needs to apply skilful and coordinated messaging that continues to advance South Africa’s national economic and strategic interests.

“Indeed, business needs to be more united than ever in presenting its case to the Trump administration and other stakeholders. Intervention by business should be conducted in a calm and focused manner, though, proposing better ways – supported by facts – to manage and preserve US–South Africa economic relations in the short and longer terms.”

Business School’s Pitso discussion analyses SONA 2025

BELINDA BANTHAM — Mon, 10 Feb 2025 07:47:59 +0000

Business School’s Pitso discussion analyses SONA 2025

by Bertie Jacobs

BELINDA BANTHAM Mon, 02/10/2025 - 09:47

“We won’t be bullied.” These words by President Cyril Ramaphosa during his State of the Nation Address (SONA) in response to US president Donald Trump’s verbal attacks on South Africa grabbed headlines, but SONA 2025 had much more to unpack than that.

On Friday, 7 February, the North-West University (NWU) Business School hosted its Pitso discussion analysing SONA 2025 under the theme of: In pursuit of “sufficient consensus”: SONA 2025.

The discussion examined whether President Ramaphosa’s speech reflected the principles of “sufficient consensus” and what this means for the future of South Africa’s Government of National Unity (GNU).

Columnist and analyst Khaya Sithole served as moderator, while the panel of experts consisted of Duma Gqubule, columnist and founder of the Centre for Economic Development and Transformation, Dr Ntsikelelo Benjamin Breakfast, the acting director of the Centre for Security, Peace and Conflict Resolution at the NWU, and Samkele Thabani Maseko, who is a political reporter at the SABC.

The trio, with Sithole organising proceedings, critically evaluated the policy priorities outlined in SONA 2025 and their potential to strengthen unity or heighten divisions within the coalition government. Other points of discussion included the durability of the GNU, indicators with reference to the budget and economic growth expectations.

Both Dr Breakfast and Sithole agreed in their assessment of SONA 2025 that it felt like an ANC-centric speech and not one reflective of the GNU. Gqubule delivered a scathing criticism of President Ramaphosa’s approach to unemployment and growth, calling him the worst president since 1994. “I wanted to cry listening to that speech,” he said of President Ramaphosa’s tenth SONA. Maseko also noted the number of pipe-dream projects that have been hallmarks of President Ramaphosa’s previous SONAs. In this case, all agreed that the projected 3% GDP growth is unattainable.

Another major point of discussion was US-South Africa relations in the aftermath of recent remarks by President Trump and some of his allies.

Each panellist gave President Ramaphosa’s speech a score out of 10, with Maseko giving it an overall 7, Dr Breakfast gave it an overall 5, while Gqubule focused on the economic aspects of SONA 2025, and gave that area a 3.

Achievement of SONA targets will depend on faster implementation of growth-friendly policies

BELINDA BANTHAM — Fri, 07 Feb 2025 07:36:04 +0000

Achievement of SONA targets will depend on faster implementation of growth-friendly policies BELINDA BANTHAM Fri, 02/07/2025 - 09:36

President Cyril Ramaphosa’s wide-ranging State of the Nation Address (SONA) agenda that confirms the tangible commitment of the Government of National Unity (GNU) to faster and higher job-rich growth is positive.

In commenting on the SONA, which was delivered on 7 February, Prof Raymond Parsons, economist of the NWU Business School, says the South African economy is indeed eventually capable of even much higher economic growth than 3% if the right choices are made.

“The present slow and uneven economic recovery nonetheless illustrates the extent to which accelerated structural reforms are urgently needed if South Africa is to even reach a 3% gross domestic product (GDP) growth by 2027.”

Prof Parsons says achieving the socioeconomic targets outlined in the SONA will therefore depend heavily on the accelerated implementation of growth-friendly policies and projects, better governance and less corruption at various levels, and ensuring that the country’s vulnerable public finances are properly stabilised.

“The SONA recognises that it will indeed also be essential to harness the participation of the business sector on an even bigger scale to reach much higher job-rich growth. Stricter timelines would be helpful to expedite the delivery of the much higher infrastructural spending emphasised in the SONA.”

Prof Parsons says on the global front, the SONA recognises the extent to which 2025 is going to be a roller-coaster year of change for many economies, including South Africa. As a small open economy, South Africa needs to play its cards smartly and, in particular, make its economy as “Trump-proof” as possible.

“South Africa’s economy needs to remain globally competitive in order to deal with both the risks and opportunities of a shifting geopolitical scenario. The SONA emphasises the extent to which South Africa’s hosting of the G20 this year is a big opportunity to ‘showcase’ the South African economy.”

Prof Parsons explains that the SONA thus seeks to advance the progress made by the Government of National Unity (GNU) to date.

“The overall challenge for GNU policy is now to build on the existing better short-term business confidence and convert it into long-term investor confidence. It is elevated investment that enables more growth. A clear and predictable policy environment and a high degree of policy certainty from now on will encourage business to take a long-term perspective on growth and development in South Africa,” he concludes.

Electricity tariff increase will inevitably cause the cost of doing business to rise

BELINDA BANTHAM — Fri, 31 Jan 2025 10:19:51 +0000

Electricity tariff increase will inevitably cause the cost of doing business to rise BELINDA BANTHAM Fri, 01/31/2025 - 12:19

Although it is still painful for business and consumers, the decision by the National Energy Regulator of South Africa (Nersa) to allow a much lower increase of 12,7% in Eskom tariffs, instead of the 36% previously sought by Eskom, is a significant outcome.

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says Nersa has acknowledged the critical inputs it received last year from extensive public hearings on Eskom’s original massive application and its potential socio-economic impact.

“The usual cost-plus approach to Eskom finances has therefore now been considerably ameliorated. However, even with a 12,7% Eskom tariff hike, allowance must be made for the additional municipal surcharges that usually follow such tariff rises. Hence the electricity costs of doing business will inevitably rise later this year.”

According to Prof Parsons, higher power tariffs will nonetheless also encourage the search for alternative energy options and further reduce dependence on Eskom. “The Nersa decision does not resolve the much bigger challenge of how Eskom is to be properly financed in the longer term – and how soon its present restructuring will facilitate more viable outcomes for the troubled state-owned enterprise.”

Better inflation figures gradually translate into lower interest rates

BELINDA BANTHAM — Fri, 31 Jan 2025 07:12:13 +0000

Better inflation figures gradually translate into lower interest rates BELINDA BANTHAM Fri, 01/31/2025 - 09:12

The better news on the inflation front is gradually being translated into lower interest rates, thus modestly easing borrowing costs for businesses and consumers. At its latest meeting, the Monetary Policy Committee (MPC) again – by a four to two vote – cut interest rates by another 25 basis points (bps).

In commenting on the latest decision by the MPC to once more reduce the repo rate by 25 bps, Prof Raymond Parsons, economist from the NWU Business School, says it was widely expected.

He says with inflation now expected to converge well within the 3% to 6% target range of the South African Reserve Bank (SARB) in the period ahead, the recent winding down in the rate of inflation has therefore created the space for the interest rate cutting cycle to continue this year.

“Hence, although future MPC decisions are said to be outlook-dependent, further cuts in borrowing costs this year would nonetheless further underpin consumer and business confidence. Monetary policy is still in restrictive territory and – given the present slow and uneven economic recovery in South Africa – needs to be further supported by lower borrowing costs wherever possible.”

Prof Parsons says the GDP growth is generally expected to rise to around a modest 1,7% in 2025 and the MPC itself expects GDP growth to reach 2% only by 2027.

“However, as was emphasised in the MPC statement, the global economic outlook is now becoming increasingly uncertain in the medium term. The MPC warns that the tariff and related policies announced so far by the new United States (US) Trump administration have injected a large element of unpredictability into the global inflation and interest rate outlook, including for South Africa.”

He explains that if renewed inflation does eventually develop in the US, this will influence the monetary policy of the US Federal Reserve and possibly mean global rates staying higher for longer.

“Nevertheless, MPC research revealed today has also confirmed that, in the event of accelerated structural reforms taking place in South Africa, there is a prospect of a much higher 3% GDP growth (with low inflation) by 2027. Economic policy must therefore urgently implement growth-friendly policies and projects that strengthen South Africa’s economic performance in the years ahead.”

Dr Anna Mokgokong opens MBA Summer Study School

BELINDA BANTHAM — Tue, 28 Jan 2025 08:23:25 +0000

Dr Anna Mokgokong opens MBA Summer Study School

by Bertie Jacobs

BELINDA BANTHAM Tue, 01/28/2025 - 10:23

Success awaits those who are bold enough to seek challenges and embrace opportunities. There was no shortage of such people when the North-West University (NWU) launched its 2024 MBA Summer Study School at the Khaya Ibhubesi conference centre in Parys on 27 January.

The Summer Study School will conclude on Friday, 31 January and brings together MBA students for a week filled with information sessions, guest speakers, networking sessions and so much more.

The chancellor of the NWU, Dr Anna Mokgokong, opened the MBA Summer Study School with a keynote address titled The role of ethical leadership in driving change in Africa.

Dr Mokgokong was introduced by the deputy vice-chancellor for Teaching and Learning at the NWU, Prof Linda du Plessis, who encouraged the MBA students in attendance to set themselves goals, to implement effective time planning, to challenge themselves and to use their own voice instead of relying on artificial intelligence tools.

Dr Mokgokong was dressed in the NWU’s distinctive purple garb and expressed her passion for the topic of ethical leadership.

“Among other commitments, the NWU through its teaching and learning strategy seeks to produce graduates who are innovative, well-rounded, critical thinkers, principled future leaders, and responsible, engaged members of society. Therefore, I hope that my talk and interactions with you this morning will contribute to the NWU’s strategic goals and enable us to reflect about leadership on our continent and indeed in the various organisations that we manage and lead,” she said.

“Every hour of each day someone somewhere is talking, affected or impacted by ethics and leadership. Leadership and ethics go hand in hand. Leadership and ethics are not mutually exclusive, they are extremely dependent upon each other. Without ethical leadership, organisations, companies and people find it difficult to overcome obstacles and meet day-to-day challenges. You are business students and leaders in your own right, and I hope we can tackle this topic with a defined objective and a clear vision. We all know that in today's world, an authoritative form of leadership is under siege, hence the topic The role of ethical leadership in driving change in Africa,” Dr Mokgokong continued.

She ended her thorough examination of the topic of ethical leadership by asking: “If you were to ask me if I could leave one legacy for ethical leadership, what would it be? For me to be an ethical leader, it is very important that one should be driven by passion and patriotism. Patriotism involves placing your country first, placing your community first

rather than your own material gain. Passion unlocks a lot of elements in your development because you will enjoy what you do and give your very best. The financial gains will follow naturally. My mantra is that of: ‘raise your hand, be seen and be counted’. It is very important as a leader to be impactful, not only to yourself or to your affirmation, but also to realise and recognise the role that you play as a leader in the company as well as in broader society. The issue of ‘self-first’ is not progressive – it should be inclusiveness that is your guiding value for ethical leadership. It is important for you as you rise and as you have risen to also consider those coming after you: those who still need to be given an opportunity of growth for them to unlock their true potential. It is one’s responsibility as a leader to guide, lead, mentor and groom our future leaders. That is the exciting part about leadership – when you look back and you see the impact you have made. And I believe that is the rich legacy that you leave behind.”

GDP growth figures underscore urgency of implementing growth-friendly economic reforms

BELINDA BANTHAM — Wed, 04 Dec 2024 06:47:22 +0000

GDP growth figures underscore urgency of implementing growth-friendly economic reforms BELINDA BANTHAM Wed, 12/04/2024 - 08:47

The unexpected and disappointing gross domestic product (GDP) growth figures for the third quarter of 2024 confirm the extent to which South Africa’s growth prospects remain vulnerable to negative factors such as adverse weather conditions, weakened exports and other lagging sectors.

In commenting on the release of the growth figures for the third quarter of 2024 GDP by Statistics South Africa, Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the negative economic and other factors in Quarter 3 of 2024 have clearly outweighed the positive ones.

“To the extent that tough climatic circumstances have made agriculture the largest negative contributor to lower growth, there is potential for a future turnaround if weather conditions improve sooner rather than later.”

He says South Africa’s economic recovery is evidently slow and uneven. “Looking at the bigger picture, these negative growth trends therefore confirm why the GNU policy of seeking higher, inclusive, job-rich growth must remain the overriding priority.”

According to Prof Parsons, much higher levels of total fixed investment in particular are needed.

“High-frequency economic data remains mixed. The latest growth data suggests that the forecasts of already modest GDP growth in 2025 and beyond may have to be revised. Nonetheless, the clear message of the GDP figures for Quarter 3 of 2024 serves to reinforce the need for both the public and private sectors to urgently expedite the implementation of growth-friendly economic reforms.”

Prof Raymond Parsons awarded an honorary doctorate by the NWU

BELINDA BANTHAM — Thu, 28 Nov 2024 08:20:24 +0000

Prof Raymond Parsons awarded an honorary doctorate by the NWU

by Bertie Jacobs

BELINDA BANTHAM Thu, 11/28/2024 - 10:20

On Thursday, 28 November the North-West University (NWU) conferred an honorary doctorate on the renowned economist Prof Raymond Parsons.

The honorary doctorate was awarded in recognition of the exceptional contribution Prof Parsons has made to the country throughout his distinguished career as an organised business leader, academic, media personality, economic commentator and author. Among his many achievements is the groundbreaking work he has done on the development and refinement of the NWU Policy Uncertainty Index, the first of its kind in South Africa.

He has also made a significant contribution to thought leadership at the NWU Business School, helping to keep the school and the university at the centre of discussions and debates about South Africa’s economic and political choices and future.

“At the outset I must convey my deepest thanks to the university Council and management for the honour of receiving an honorary doctorate from the university today. I am extremely grateful and humbled to have joined the distinguished list of previous recipients of honorary degrees from this esteemed institution. But there are many others to whom I owe my thanks and gratitude,” said Prof Parsons, before adding:

“I see this prestigious award as recognition of the important role that economics and economists play in making South Africa a better place in which to live and work, especially given the country’s well-known and formidable challenges of unemployment, poverty and inequality. Often described as the ‘queen of social sciences’, economics tries to answer the fundamental question of how best to satisfy the unlimited wants and desires of society using limited available resources.”

Prof Babs Surujlal, executive dean of the Faculty of Economic and Management Sciences said: “Renowned for his deep expertise, Prof Parsons is widely recognised as an authority on the South African economy and its implications for the business community. Professor Raymond Parsons has had a distinguished career as a leading South African economist, respected for his political independence. This impartiality has enabled him to engage critically with economic policies across various administrations, earning a reputation for balanced, objective analysis. His non-partisan approach has enriched public understanding and solidified his credibility over decades. By upholding rigorous analysis and open dialogue, Prof Parsons has achieved lasting influence as a trusted policy advisor and economic commentator, respected across sectors and political divides.”

Prof Parsons is currently a professor at the NWU Business School. He is also chairperson of the advisory board of the Business School. He studied economics at the universities of Cape Town, Oxford and Copenhagen before playing a leading role in organised business in South Africa for many years. Professor Parsons is a former director-general of the South African Chamber of Business (SACOB).

Until 2012, he was the deputy CEO of BUSA and subsequently a special policy adviser to that organisation until April 2014. He has also lectured at the Department of Economic and Management Sciences at the University of Pretoria. From 2000 to 2003, he was a visiting professor at the School of Economic and Business Sciences at the University of the Witwatersrand.

Professor Parsons was the overall business convenor at the National Economic Development and Labour Council (NEDLAC) until 2010. This is the major social dialogue institution in South Africa. He is a key contributor to public and academic debate on a broad spectrum of issues of critical importance to the political economy of South Africa. He is a recognised authority on the South African economy and its implications for the business community.

Professor Parsons was mainly responsible for the creation of South Africa’s first quarterly Policy Uncertainty Index, which was launched under the aegis of the NWU Business School in 2016.

He also holds an honorary doctorate from the Nelson Mandela University (NMU) and is an honorary professor there. He is a past president of the Economic Society of South Africa (ESSA). In 2017, ESSA conferred honorary life membership on him in recognition of his distinguished contribution to the economics profession in South Africa.

In 2004, former President Thabo Mbeki appointed Professor Parsons to the board of directors of the South African Reserve Bank, and he was reappointed in 2008. He was also a director of the South African Mint.

In August of 2024, Prof Parsons was appointed by the North West premier, Lazarus Mokgosi, to his new Economic and Investment Advisory Council to advise on economic development in North West.

He is the author/editor of eight books.

Prof Raymond Parsons.

Good news for interest rates as 2024 draws to a close

MARELIZE SANTANA — Fri, 22 Nov 2024 07:15:57 +0000

Good news for interest rates as 2024 draws to a close MARELIZE SANTANA Fri, 11/22/2024 - 09:15

It is good news for business and consumers that the repo rate was unanimously reduced by 25 basis points (bps) on 21 November.

In commenting on the latest Monetary Policy Committee (MPC) statement to again reduce the repo rate by 25 basis points (bps), Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says it was widely anticipated that the MPC would continue its cautious stance on easing monetary policy.

“The outlook for inflation now seems benign, with inflation likely to settle around the 4,5% midpoint of the target range of the South African Reserve Bank (SARB). Barring shocks, there must now be scope in the early months of 2025 for further interest rate cuts to underpin the incipient but uneven economic recovery.”

Prof Parsons says the SARB now projects a 2% gross domestic product (GDP) growth rate for South Africa by 2027.

“The MPC emphasises that this better growth path is based on sustaining domestic reform initiatives, maintaining prudent public debt levels and keeping wage settlements in line with productivity.”

According to Prof Parsons, there needs to be wider recognition of the extent to which short-term business confidence must steadily and deliberately be converted into long-term investor confidence, upon which higher job-rich growth ultimately depends.