Bright young minds tell Government: ‘Act now and we can recover!’ #TipsforTito

South Africa’s top young thinkers are most concerned about high levels of corruption in government and the barriers this creates in attracting investment.

The best and brightest young talent in the field of economics are cautiously optimistic about the potential for the South African economy to recover. The leaders of tomorrow are calling on Finance Minister Tito Mboweni to act decisively ahead of next week’s Budget Speech, imploring the government to take the necessary action to repair the country’s purse.

This is according to Farhad Sader, Managing Director of Old Mutual Wealth, who revealed the major take-outs from the annual Nedbank and Old Mutual Budget Speech Competition. Sader says that the most ardent recommendation by tomorrow’s economic leaders was to root out corruption by any means necessary. “For the finalists, the number one barrier to attracting investment and fostering economic growth is corruption. All the entrants cited this as a major obstacle to creating a supportive business environment and securing the stability required to allow for the effective implementation of macro-economic policies,” says Sader.

Tasked with evaluating President Cyril Ramaphosa’s economic stimulus package, jobs summit initiative and bold USD 100 billion investment target, competition participants are understandably pessimistic about the possibility of short- to medium-term gains. “Citing government inefficiency, corruption, the lack of a skilled workforce, all the finalists agree that these reforms are unlikely to meet their goals unless the problems at the root of the economic turmoil are addressed,” says Sader.

“Even so, these outstanding young thinkers remind us not to overlook the reasons for optimism in these troubled times”.

“Most students highlighted South Africa’s robust financial services and banking sector as a key asset in attracting investment. The independence of Reserve Bank and our stable monetary policy were also frequently mentioned by finalists as a draw for investors. After all, South Africa boasts some of the most sophisticated and sound financial institutions in the world,” says Sader.

On the whole, the finalists see the country’s strong regional, continental and global trade networks — particularly our role as a gateway into emerging African markets — as a key factor in favour of attracting investment. “The views expressed by the finalists echo the calls from broader society for decisiveness and action. Hopefully these views are not falling on deaf ears,” concludes Sader.

“Their ideas aside, every year, these bright young minds remind us that we have a whole new generation of talented and innovative leaders in our country eager to make a difference. Just listening to the enthusiasm with which they debate opportunities and ideas fills me with hope and optimism for the future.”

Other findings include:

1. All the students cited high levels of corruption as a barrier to investment, particularly in relation to state-owned enterprises (SoEs).

2. The mismanagement and decline of state-owned enterprises were also often mentioned as a barrier, in particular Eskom, because of the harm of an unreliable energy supply to industry as well the bailouts putting enormous pressure on the fiscus.

3. A threat to property rights and the rule of law as well as political interference with institutions were frequently mentioned by students as undermining the likelihood for investment. In particular, land reform, mining and reform in SoEs were a concern.

4. The budget deficit was mentioned as being a deterrent to investment because it makes the country look financially unstable. Government inefficiency and instability were also mentioned as barriers to investment frequently mentioned by students. One argued that poor governance structures create uncertainty around the safety of investments. Political risk and instability were frequently mentioned barriers.

5. The high cost of labour and restrictive labour regulations was argued by a number of the students as a barrier to investment. However, one student made the case that high unemployment makes labour relatively inexpensive compared to some other emerging economies.

6. The instability in society as a result of inequality and poverty also reduces investor confidence, according to a few students mentioning crime and theft in particular.

7. Other barriers specifically mentioned were the difficulty of doing business and low business confidence; exchange­-rate instability; challenges to the rule of law; infrastructural challenges as well the low-skilled labour force.

ENDS

About the Nedbank Old Mutual Budget Competition

Over the last 48 years, the Budget Speech Competition has recognised and supported the most talented economics students in the country as they continue on their path to becoming thought leaders and decision-makers in the field.

This year is no exception with the ten undergraduate and ten postgraduate finalists flexing their analytical muscles to answer some of the most complex economic questions facing our nation yet.

Undergraduates were tasked with making the case for and against investing in South Africa: a top priority for policy makers; while postgraduates were given the challenging task of assessing the likely outcomes of Ramaphosa’s initiatives to stimulate economic growth announced in 2018.