MD of Goldman Sachs: why the S in BRICS is a dud

 Colin Coleman, MD of Goldman Sachs SA,  who spoke at the fifth Annual Super Return Africa Private Equity and Venture Capital Conference in Cape Town very diplomatically explains to the CNBC Africa PowerLunch team what is and isn't working in the SA economy. He touches on the usual causes of pitiful economic growth while hinting at the quality of the integrity of the people needed to make a change. – CP 

GUGULETHU MFUPHI: Colin Coleman MD of Goldman Sachs International spoke at the fifth Annual Super Return Africa Private Equity and Venture Capital Conference. He joins us now from our Cape Town studios for more. Colin, good to have you, as always. Looking at some of the opening remarks of your speech, you made commentary around Madiba's legacy. This comes at a poignant time. We're almost celebrating a year since his passing. Are we working in the right direction?

COLIN COLEMAN: Well, yes. Fundamentally, with a year looking back, which is what we did with the speech, South Africa is not alone in underperforming in terms of economic growth. When you compare South Africa to the BRICS countries, China and India are at the best end, and Brazil, Russia, and South Africa are sort of, grouped together. Sub-Saharan Africa is operating much more like India and China, and South Africa is below trend so we have to up the game in terms of our performance. In particular, there are some identified areas where we are shooting ourselves in the foot whereas globally, the conditions are things that we don't control. We can control certain things and in the main, those are areas of labour, state-owned enterprises, public sector efficiencies, and generally creating a much more harmonious environment at home for domestic investment.

ALEC HOGG: You didn't mention corruption Colin, and that came out very strongly this morning where Transparency International brought its latest numbers out. David Lewis from Corruption Watch was saying that we've very lucky that it was done before Nkandla. Putting it all together, – corruption on the one side and the Zuma administration on the other – are they on the right path?

COLIN COLEMAN: I'm much more interested in growing the economic pie than how we fight over the spoils of it in a downtrending environment. What we're trying to put forward without in any way, paving over the issue of governance (and we do address it in the speech) is that we just have to be much a lot more efficient with the resources we have. The fiscal picture has worsened slightly and the Government is doing a good job of trying to manage that and maintain fiscal austerity but it's not so much that. It's more about how we're doing with the investments we are making, the large investments we are making with education and health, for example, where the outputs are still miserably below where they should be and we don't have the resources, particularly with regard to state-owned enterprises that are being poorly run (in some cases) to do this.

These are essential services, which keep our economy going and we need them to perform much better. What I talked about in the speech was the introduction of a much more aggressive model of modernising the state-owned enterprises and changing the structure to allow for the listings of some of these enterprises to get the managements in place. Just as the Chinese model brought about an era of large capital raises for the state and at the same time, a much more efficient state enterprise environment and building of infrastructure.

GUGULETHU MFUPHI: Do we have the right administration in, under President Jacob Zuma?

COLIN COLEMAN: Well, it's the one we have and I'm quite sure that there are positives and negatives everywhere. This administration can bring – if they really apply their minds to it – a much better performance in respect of labour stability and in terms of infrastructure. The good thing in terms of when we are not performing well in certain areas is that if we turn it around, we put the right people to work and South Africa's full of talent to do this. Based on merit as opposed to other criteria, we can get this turned around quite effectively. We're operating at one-point-four percent growth this year, with two-point-three percent forecast next. We need to get that way up to at least three percent, but trending towards the five percent that we need, to bring unemployment and poverty down in the country.

ALEC HOGG: That is Colin Coleman, MD of Goldman Sachs International. 'Based on merit rather than other criteria'… I guess Gregory Mofokeng would not agree with that, would he? Anyway, best of luck.

GUGULETHU MFUPHI: That's where we leave it for today unfortunately, but we do return tomorrow.

ALEC HOGG: See you then. Cheerio.

GUGULETHU MFUPHI: Indeed. Goodbye, everyone.