Latest news with #AshorSarupen
Daily Maverick
14 hours ago
- Business
- Daily Maverick
The strategic reforms that could transform South Africa's economy
The key is to break the strangleholds that Eskom and Transnet have on our electricity, ports and railways. Introducing real competition into electricity generation and the operation of ports and railways is the key to unlocking real growth in South Africa's stagnant economy. So said Deputy Finance Minister Ashor Sarupen at a seminar organised by the In Transformation Initiative last week, where Jakkie Cilliers, head of the African Futures unit at the Institute for Security Studies (ISS), presented the unit's latest report, co-written with Alize le Roux, which forecasts SA's growth trajectory to 2043. The seminar pondered why, despite the creation of a government of national unity (GNU) last June and the virtual end of load shedding, the South African economy only grew by a miserly 0.1% in the first quarter of 2025. Cilliers said South Africa was caught in a 'classic upper middle income growth trap'. From 1990 until 2025, South Africa's economy had grown by an average of 2.3% a year, and on its current path, without significant reforms, he forecast it would grow at an average 2.4% annually from now until 2043. That would expand GDP from about $402-billion in 2025 to about $628-billion in 2043, in constant 2017 US dollars. This 'slow but steady growth' would not be enough to dent poverty. It would barely keep pace with the population, which the unit forecast would expand from about 65.5 million in 2025 to about 77 million in 2043. Cilliers said annual GDP per capita would therefore rise from $12,600 in 2025 to about $14,700 in 2043 — with South Africa falling behind the rest of the world (except Africa) where he forecast average annual GDP per capita would climb from $20,300 in 2025 to $28,500 in 2043. He noted that on its current development trajectory it would take South Africa until 2037 to return to the peak GDP per capita of $13,800 that it reached in 2013. South Africa had been stagnating for years, with steady deindustrialisation, weak investment, and a growing dependence on social grants undermining growth, particularly during the Jacob Zuma presidency, Cilliers said. Cilliers noted that 740,000 South Africans entered the labour market every year, and because of slow growth and a very capital-intensive economy the number of unemployed people increased annually. In 2023, the International Labor Organization (ILO) found that South Africa had the highest unemployment rate globally after only Eswatini. Because being part of the informal sector is considered 'work' by the organisation, South Africa's relatively small informal sector contributed to this high percentage. In South Africa, only about 18% of the labour force is employed in the informal sector. Cilliers noted that about 62% of South Africans were now living below the World Bank's poverty datum line for upper middle income countries, of $6.85 per person a day. On South Africa's current economic path, that percentage would decline 'modestly' to 58% in 2043, though the absolute number of people living below that poverty datum line would increase, from some 40.9 million in 2025 to 44.4 million in 2043 (because the overall population would rise). Cilliers said South Africa should now be reaping a 'demographic dividend' because its ratio of working age population – aged 15 to 64 — to its dependent population (children and elderly) had now reached 2.1. In the African Futures calculations, the demographic dividend should kick in when the ratio of working people to dependents reached 1.7. he said, Economic growth stunted by poor human capital But South Africa was not earning this dividend largely because economic growth was being stunted by poor human capital, mainly an unhealthy population, many of whom were still afflicted by HIV/Aids and tuberculosis and low-quality education. The question, he said, was why South Africa did so poorly on social capital, education and health, given the very high levels of expenditure on those services. 'And the only answer that you can come up with is government inefficiency, the poor use of existing funds. And the question is, how do we escape the middle-income trap?' Cilliers asked. He said the African Futures team had modelled the effects of reforms in eight different sectors on South Africa's economic development. These were demographics and health; agriculture; education; manufacturing; infrastructure and 'leapfrogging' (i.e. bypassing older technologies); free trade; financial flows; and governance. They found that the largest return was from increased manufacturing, followed by freer trade and then better governance. So, for instance, all eight sectors combined would increase GDP per capita in 2043 by about 33%, from the $ 14,750 on the current path to $19,650. Of this, increased manufacturing would contribute about $930; freer trade (with the full implementation of the African Continental Free Trade Agreement) would contribute about $900; and better governance about $800. The combined impact of those eight reforms would decrease the percentage of South Africans living below the $6.85 a day poverty rate to 50% by 2043, down from 62% in 2023. This would represent 6.1 million fewer poor people than if the economy remained on its current path, though still leaving South Africa with a large poverty burden, Cilliers said. The African Futures team had compiled a laundry list of recommendations, starting with the need to strengthen governance and accountability through evidence-based policies, curtailing corruption and increasing accountability and inclusivity. Deputy Finance Minister Sarupen, of the DA, said much of Cilliers' analysis resonated with assessments by the Treasury's own economic policy team and the work being done by the government's Operation Vulindlela and by various parties in the GNU. He agreed that merely 60% growth in the size of the economy over the next two decades 'will not get us out of the trap that we're in' and that South Africa was in danger of falling from upper middle to lower middle income status. Structural constraints The low growth was driven by structural constraints, weak productivity, low investment in capital, higher inequality and an underperforming formal labour market. The Treasury was 'acutely aware of this'. But he said the government had to prioritise its reforms to tackle the problem because of the many competing demands of a massive amount of social ills and a very strong active civil society. He noted that South Africa had a system of fairly autonomous government ministries that made it harder to pursue coherent policies. Cilliers had identified manufacturing and freer trade as South Africa's best paths forward. Sarupen noted that cheap reliable energy with stability of pricing and supply underpinned manufacturing and industrialisation . 'And one of the drivers of our de-industrialisation has been excessive pricing and inefficiency of supply that really hurts manufacturing in South Africa,' he said. He noted that while prices in the rest of the economy had risen 196% since 2009, Eskom's prices had increased by 403%. So Eskom was driving inflation and deterring investment. Sarupen added that part of the reason GDP growth had been so low over the past year, despite an end to load shedding, was because companies had sunk so much money into load-shedding-proof themselves over the past few years that they had not spent enough on actual business expansion and employment. Sarupen also noted that free trade — another key reform advocated by Cilliers — 'requires you to be able to actually move goods and services cheaply and easily around, so the logistics reforms need a lot of depth and need to maximise competition. 'And so in the reform process that we're undergoing we need to be careful to not just bring the private sector into Transnet's monopoly structure. But rather how do we create competition, across multiple ports for example.' Likewise, South Africa had to maximise competition in railway freight lines. He agreed with Cilliers that crime had to be tackled much better as it was discouraging investment as well as acting as a deterrent to economic activity inside South Africa because, for example, citizens were fearful of using public transport to go to work. Rule of law He said the rule of law was the foundation of all other economic reforms, followed by macroeconomic stability, and then better education and health, and only after that global competitiveness and industrial masterplans. Sarupen did note though that South Africa's foundation of macroeconomic stability was 'probably one of our saving graces'. He also said that the government had to reduce debt. He noted that about 90% of South Africa's debt was denominated in rands, and about 75% of that was purchased by domestic markets. Rand debt was generally better than debt in foreign currency but the scale of government borrowing, about R300 to R400-billion a year, was crowding out the amount of capital that could be invested in business ventures and therefore growth. He added that the relatively high premium of about 11% on a 10-year South African Government Bond was discouraging businesses from investing in riskier ventures. He noted that many of the investments in this year's controversial national Budget were important — such as in public transport. He said, for example, that while a lower income worker in Vietnam earned a similar wage to a lower income worker in South Africa, the Vietnamese worker spent about 10% of his or her income on transport, the South African workers spent around 50%. 'People are going to work to earn money to be able to go to work,' he said. And this was diverting money away from workers buying goods and services, which was essential for economic growth. DM
IOL News
4 days ago
- Business
- IOL News
How aligning transport and housing policies can boost South Africa's job market
Experts say cities like Durban can leverage work opportunities by tackling urban planning, cutting red tape and aligning housing and transport policies. Image: eThekwini Municipality To unlock job creation, South Africa needs reform to ease barriers to business, align its transport and housing policies, as well as tackle urban planning. This includes prioritising housing near public transport, promoting rental housing near city centres and reforming restrictive building regulations. This is according to the latest Organisation for Economic Cooperation and Development (OECD) report which says that South Africa has extraordinary growth potential, however, low public investment and high costs of doing business have been holding back growth. Major structural reforms are needed to boost productivity and advance the country towards meeting its goals of durably reducing poverty and unemployment, the report said. The latest OECD Economic Survey of South Africa projects that real GDP will grow by 1.3% this year and 1.4% in 2026. It said unemployment would remain elevated, at close to 32% in 2026. Inflation is projected to decline to 3.2% this year before increasing to 4.2% next year as economic activity gains momentum. Structural reform 'Prudent macroeconomic policies and structural reforms are central to durably boost productivity and employment,' Luiz de Mello, the OECD Director of Country Studies said, presenting the survey in Pretoria alongside Ashor Sarupen, South Africa's Deputy Minister of Finance. 'Public spending should be controlled through strengthened fiscal rules and refocused, notably to allow for higher public investment while protecting social spending,' he said. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. 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Advertisement Next Stay Close ✕ Ad Loading For many South Africans, the housing scenario can be described as a 40 sqm house, some 40 km from the place of work and households spending 40% of their income on transport, according to Associate Professor Francois Viruly, of the Department of Construction Economics and Management at the University of Cape Town (UCT). Affordable housing He said recently that while historic factors such as the apartheid city planning continue to influence spatial inequalities, there is much more that could be done to redress the situation. For this to change, the professor said the country needed to densify areas of Cape Town that are well located and have the appropriate infrastructure capacity. It also means shifting from "green field '' to ''brownfield'' developments and changing the use of existing buildings, which have become obsolete, he added. Unless the economy manages to recoup the loss of 245,000 jobs that occurred in the first quarter of this year, it would be tantamount to self-inflicted economic sabotage if the Monetary Policy Committee (MPC) does not continue with its rate-cutting cycle, which is progressing at a snail's pace, said Dr Roelof Botha, an economist and advisor to the Optimum Financial Services Group. The current climate of uncertainty is being felt universally, with geopolitical tensions contributing to economic volatility, not just here in South Africa, but across the globe, said Adrian Goslett, Regional Director and CEO of Remax Southern Africa. 'While challenges exist, we have always seen that the South African property market shows remarkable resilience when approached with the right strategy,' Goslett said. Global tensions The real estate company said in today's unpredictable economic landscape, property investment remains one of the most reliable methods for building and preserving wealth. It added that whether it's VAT hike reversals, interest rate changes, or global political tensions, savvy investors know how to navigate volatility to their advantage. The secret lies in adopting the right strategies tailored to suit uncertain times, it said. Local buyers in South Africa are facing material shortages, steep price increases, and longer lead times for essentials such as steel, aluminium, solar panels and electrical components, due to the mooted US tariffs, said Nolubabalo Tsolo, the Executive Director of the Association of South African Quantity Surveyors (ASAQS) earlier this week. She explained that contractors were struggling to manage the rising costs and this leads to risks to premiums to tenders. According to the professionals' body, this meant that projects - from roads and bridges to schools and affordable housing - risked exceeding their budgets. In addition, currency fluctuations are making dollar-priced imports even more expensive. All this puts strain on both public and private projects, with affordability and delivery timelines being reassessed, she said.
The Herald
27-05-2025
- Business
- The Herald
‘No one is out to get SA' — Calls for ruthless approach to courting investment
Deputy minister of finance Ashor Sarupen said with global investment flows tightening, South Africa would have to become more uncompromising in its efforts to draw investment for infrastructure development in the coming years. He was addressing a panel at the Sustainable Infrastructure Development Symposium South Africa (Sidssa 2025) in Cape Town on Monday afternoon. He said South Africa was competing with other emerging economies for capital and needed to be 'ruthless' about courting investment. 'What we have got to figure out is does our regulatory environment, our systems and so on allow us to maximise inward investments when we are competing globally and against other emerging markets for the kind of investment that would pull most people out of poverty and into employment. 'And so, when you write regulations and policies, that has got to be the overarching objective ... when we look out there at global systems and global governance and so on, a couple of things we are going to have to accept is that people aren't out to get us and South Africa needs to come to terms with that. Global best practice exists for a reason.' The deputy minister's remarks come after finance minister Enoch Godongwana tabled a budget for the third time in the space of three months. While the National Treasury had to scale back additions to spending areas in this year's budget, it managed to keep economic development spending at R289.8bn and R1-trillion for infrastructure in the medium term. Over the medium term, R1.03-trillion will be allocated to public infrastructure, with major allocations to roads at R402bn, energy at R219.2bn, and water and sanitation at R156.3bn. The main budget adds R33.7bn for infrastructure projects over the medium term. Sarupen said South Africa remained open for business and was working 'very much down the path of reform and with a determination to unlock, in that pipeline, tremendous amounts of growth'. 'I think it's an interesting journey that we're going to be on as a country. We know that the state balance sheet cannot provide what we've got to turn to the private sector. The other problem with the scale of debt ... is because we borrow so much, we are also kind of crowding out private capital for the kind of infrastructure investment we need as well.' He said South Africa had to do all it could on a policy and efficiency level to draw investment that would bring much-needed growth to the economy. UK trade commissioner for Africa John Humphrey said the estimated $100bn a year gap faced in infrastructure funding on the African continent had a real impact on African economies and African lives and no government alone can close the gap. 'All governments now, I don't just mean South Africa, I think all governments are feeling the pinch, particularly since Covid-19 and there are huge increases in levels debt, particularly in countries like the UK where there is a smaller tax base than we might have had previously against an ageing population. Here, in Africa, the problem is sort of the other way about where you've got a large demographic but to be able to expand the economy ... a lot of people are in the informal economy.' He said the government would have to create a 'fiscal line' that makes it approachable by the private sector. This would require African economies to have 'well-run economies where people have confidence that they will not have to worry about interest rates and inflation'. Gauteng Government Development Agency CEO Saki Zimxaka said South Africa needed levels of investment as a percentage of GDP to consistently stay above 25%, though they were now at about 15%. 'There is a biochemical factory that is going to be put up in Heidelberg, but for that to happen, they needed R70m invested in bulk infrastructure. Now, if you don't put bulk infrastructure in place because the public sector does not have money, it means that project is not going to happen.' He said the sequencing of budgets will be critical going forward as investments tend to get delayed in instances where the government does not deliver on the infrastructure needed to facility a smooth investment. TimesLIVE
TimesLIVE
26-05-2025
- Business
- TimesLIVE
‘No one is out to get SA' — Calls for ruthless approach to courting investment
Deputy minister of finance Ashor Sarupen said with global investment flows tightening, South Africa would have to become more uncompromising in its efforts to draw investment for infrastructure development in the coming years. He was addressing a panel at the Sustainable Infrastructure Development Symposium South Africa (Sidssa 2025) in Cape Town on Monday afternoon. He said South Africa was competing with other emerging economies for capital and needed to be 'ruthless' about courting investment. 'What we have got to figure out is does our regulatory environment, our systems and so on allow us to maximise inward investments when we are competing globally and against other emerging markets for the kind of investment that would pull most people out of poverty and into employment. 'And so, when you write regulations and policies, that has got to be the overarching objective ... when we look out there at global systems and global governance and so on, a couple of things we are going to have to accept is that people aren't out to get us and South Africa needs to come to terms with that. Global best practice exists for a reason.' The deputy minister's remarks come after finance minister Enoch Godongwana tabled a budget for the third time in the space of three months. While the National Treasury had to scale back additions to spending areas in this year's budget, it managed to keep economic development spending at R289.8bn and R1-trillion for infrastructure in the medium term. Over the medium term, R1.03-trillion will be allocated to public infrastructure, with major allocations to roads at R402bn, energy at R219.2bn, and water and sanitation at R156.3bn. The main budget adds R33.7bn for infrastructure projects over the medium term. Sarupen said South Africa remained open for business and was working 'very much down the path of reform and with a determination to unlock, in that pipeline, tremendous amounts of growth'. 'I think it's an interesting journey that we're going to be on as a country. We know that the state balance sheet cannot provide what we've got to turn to the private sector. The other problem with the scale of debt ... is because we borrow so much, we are also kind of crowding out private capital for the kind of infrastructure investment we need as well.' He said South Africa had to do all it could on a policy and efficiency level to draw investment that would bring much-needed growth to the economy. UK trade commissioner for Africa John Humphrey said the estimated $100bn a year gap faced in infrastructure funding on the African continent had a real impact on African economies and African lives and no government alone can close the gap. 'All governments now, I don't just mean South Africa, I think all governments are feeling the pinch, particularly since Covid-19 and there are huge increases in levels debt, particularly in countries like the UK where there is a smaller tax base than we might have had previously against an ageing population. Here, in Africa, the problem is sort of the other way about where you've got a large demographic but to be able to expand the economy ... a lot of people are in the informal economy.' He said the government would have to create a 'fiscal line' that makes it approachable by the private sector. This would require African economies to have 'well-run economies where people have confidence that they will not have to worry about interest rates and inflation'. Gauteng Government Development Agency CEO Saki Zimxaka said South Africa needed levels of investment as a percentage of GDP to consistently stay above 25%, though they were now at about 15%. 'There is a biochemical factory that is going to be put up in Heidelberg, but for that to happen, they needed R70m invested in bulk infrastructure. Now, if you don't put bulk infrastructure in place because the public sector does not have money, it means that project is not going to happen.' He said the sequencing of budgets will be critical going forward as investments tend to get delayed in instances where the government does not deliver on the infrastructure needed to facility a smooth investment.
TimesLIVE
17-05-2025
- Business
- TimesLIVE
Last chance budget to get green flag
Another insider said: 'There's happiness throughout. I don't know how he came up with this, I don't know how he made it [the budget] this good, but it just means it was doable from the start. He did his job.' This source said Godongwana was 'even working very well' with his DA deputy minister Ashor Sarupen. A fourth source said the spending cuts might have an even worse effect on poor people than a VAT increase would have had and predicted there would be 'long faces' in parliament. 'The amount of cuts or reductions is bigger than what VAT would have been had we left it,' this source said. The trade-off was that instead of increasing VAT, 'you will have to wait longer for your clinic, or you have to wait longer for us to fix this road, or you will have to wait for a train because we can't put in all the signalling equipment'. Godongwana's first budget included an additional R232.6bn over the medium-term expenditure framework to address spending pressures. One of the sources said the opposition to the VAT hikes meant Godongwana had no choice but to cut spending. 'So that's what parties have been doing since February,' this source said. 'In fact, what they said was 'we're not going to give you the means to spend an extra R232bn, we reject your proposal'. Then he came back in March with I think it was R179bn. 'The parties said 'we don't want to give you R179bn'. So, he is coming back now, and he is saying from the March version we are going to have to cut another R75bn.' Godongwana said last month scrapping the VAT hikes would result in a R75bn shortfall in his budget. To cover this, and in the absence of other revenue mechanisms, the minister is believed to have decided to slash expenditure by at least R60bn. 'Well, let's just say the tough choices finally have to be made,' one of the sources said, citing the International Monetary Fund's decision last month to cut its projection for GDP growth in South Africa this year from 1.5% to just 1%. 'We can't borrow more because revenue projections track GDP, so reducing the amount by which we add to the baseline [last October's medium-term budget] is the only option,' the source said.
