‘We can do it – we’ve done it before’: Kevin Lings says path to SA economic rebound lies in using past lessons

Once in a while, somebody produces truly superb work on a complex subject that demands the widest possible audience. Stanlib chief economist Kevin Lings delivers one of those rarities in this interview where he takes a look back at the past three decades and correlates foreign purchases on the South African share market with critical criteria like economic growth, unemployment and government debt. The result is a compelling argument and encouragement that SA’s desperate current situation is not pre-ordained; the road to success is no mystery – SA achieved it for more than a decade between 1996 and 2009. – Alec Hogg


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In this interview, Kevin Lings, the chief economist at StanLib, shares a compelling story about the role of foreign investment in South Africa’s development. Lings highlighted the significance of policy decisions and their impact on the country’s economic trajectory over the past three decades.

The GEAR blueprint and its lessons for today

Lings began by discussing the period following South Africa’s democratic election in 1994, which was characterized by uncertainty about the new government’s policies. The introduction of the Growth, Employment, and Redistribution (Gear) policy document in 1996 brought much-needed clarity. The Gear document, believed to have originated from private sector initiatives, outlined a balanced approach to economic development. It emphasized fiscal discipline, private sector involvement, infrastructure renewal, and social development.

Under the Gear policy, South Africa experienced remarkable progress. Over a decade, the country achieved an average GDP growth rate of over 4%, reduced the unemployment rate from nearly 30% to 21%, and lowered government debt from nearly 50% to 23% of GDP. Credit rating agencies recognized South Africa’s economic advancements, with Moody’s awarding it an A rating. Foreign investors were attracted to the country, leading to a significant influx of capital into the equity market.

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The Downfall: Changes in Leadership and Corruption

In 2009, a series of events disrupted South Africa’s positive trajectory. Trevor Manuel, a key driver of economic growth, was moved out of the position of Minister of Finance. The global financial market crisis further strained the economy, resulting in a recession. However, the most detrimental factor was the election of Jacob Zuma as president, which marked the beginning of state capture and widespread corruption.

Foreign investors quickly recognized the changing landscape and began divesting from South African equities. Economic growth slowed to 1-2%, the currency depreciated at a faster rate, credit ratings declined, and government debt skyrocketed to over 70% of GDP. The impact of mismanagement and corruption became apparent in failing infrastructure, declining income per capita, inadequate social services, and persistent unemployment.

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Lessons Learned and the Path Forward

The interview with Kevin Lings serves as a stark reminder of the importance of sound economic policies and strong leadership. South Africa’s experience demonstrates that policy shifts can have a profound impact on a country’s economic prospects. The successes achieved during the Gear era highlight the benefits of inclusive policies, fiscal discipline, and private sector involvement.

To regain economic stability and attract foreign investment, South Africa must address the challenges it currently faces. This includes tackling corruption, restoring institutional integrity, implementing effective governance, and prioritizing infrastructure development. Additionally, policy continuity, transparency, and accountability are crucial for rebuilding investor confidence and restoring the country’s credit ratings.

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Conclusion

South Africa’s economic journey over the past three decades has been shaped by policy decisions and their consequences. The Gear policy document exemplified the positive outcomes that can result from a clear and balanced approach to economic development. However, subsequent changes in leadership and rampant corruption derailed the country’s progress, leading to economic decline and significant challenges.

The interview with Kevin Lings underscores the need for South Africa to learn from its past and forge a path toward sustainable growth. By recommitting to transparent and accountable governance, investing in infrastructure, and fostering a favorable business environment, the country can regain investor confidence, attract foreign capital, and rebuild its economy. It is crucial for policymakers, stakeholders, and citizens to work together to ensure a prosperous future for South Africa.

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