Covid-19: Government’s “moment of reckoning”

09 Jul 2020

Ingrid Booth

Digital content specialist, Investec

The pandemic has pushed South Africa to the end of the economic track and hard calls have to be made or else the IMF may be the only option, says Investec Chief Executive Fani Titi.

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In a Classic Business “View from the C-Suite” interview, Investec’s Fani Titi says that the Covid-19 crisis presents a “moment of reckoning” for South Africa. “We have run out of road physically, our debt to GDP is unsustainably high, and with Covid, the revenue side of the equation will suffer a lot.”
 
To make up for the “lost decade” of growth and restart the economy, radical, bold and courageous structural economic reforms need to happen, and they need to happen quickly, says Titi. “The President has to lead from the front, there’s no more wiggle room, or else we will end up at the door of the IMF,” he warns.
 
Pointing to the elephant in the room, the high government wage bill, Titi says that a compact is needed where workers are treated fairly but not to the detriment of service delivery. “I do not believe that it’s the case that government should be anti-union,” he says, “but they have to insist on productivity, effectiveness and delivery of services”. If they can get this right, he says, it will create a virtuous circle of progress as better service delivery will enable more revenue, fair pay and training of government employees.

Listen to the podcast

Listen to the full conversation between Classic FM's Michael Avery and Investec's Fani Titi.

A solution to the education crisis

One underperforming service delivery area that Titi is passionate about is education. Talking about how education took him from a little farm school in the Free State to head of a global investment bank, Titi believes that solving the education conundrum is key to South Africa achieving its potential.
 
Per capita, South Africa spends more on education than most developed economies including the US and the UK, yet our primary education system is rated a dismal 126th out of 138 countries in the World Economic Forum 2016-2017 Global Competitiveness Report.
 
So, it’s not really a resource issue as opposed to a quality and effectiveness issue, says Titi. To ensure that our children can compete on a global stage and that the school system is equipping them with relevant skills, we need to improve the quality of teaching and create an environment of accountability, he says: “We need to make sure that teachers can be measured for performance and that you measure the quality of education on an international basis.”
126th
out of 138 - where South Africa's primary education system ranks globally
Fani Titi, Group CEO, Investec

In times of crisis, it’s about sharing the pain. The corporate and private sector will play its part in supporting the overall economic objective of keeping as many people employed as possible.

Fani Titi, Group CEO of Investec

And he has an interesting idea for a solution: introduce more competition. “At a philosophical level, I do believe the state has to open up the possibility of increasing more significant competition into the education sector through a provision of funding.”
 
“At the moment, the state is the predominant provider of education. If for the same cost that a state spends on a child, you provided for instance, parents with vouchers to buy education from other providers, I think you would see more provision of education and better quality of education and it would force the state to increase the quality of education, otherwise people will migrate from the state to the private sector.”
 
“If I had my way, I’d create a smaller but smarter state where the private sector can come to the fore and help in delivery, but we are not at that point as the levels of trust [between government and corporates] are too low for government to pull back.”
 
Of course, this idea would also be met with resistance from the teaching unions. “One of biggest decisions for government to make is the balance between the power of the unions and the right of the child to a quality education. The ANC government still has to address that particular tension,” says Titi.

Covid-19 Loan Scheme

One area where government and the private sector have successfully collaborated is the Covid-19 Loan Scheme that will provide R200 billion to support SA business. The initiative is supported by all the big banks, including Investec, but, Avery points out, take up has been relatively low.
 
Titi says that this is not a uniquely South African issue, take up of similar schemes in the US and UK was also slow initially. “Take up is still low, but conditions have to be universal to all banks and we are hoping we can iron out some of the teething problems around implementation,” says Titi.
 
“Some businesses were in trouble before Covid. Even with a guarantee of government, you still have to make sure that a business will likely survive,” explains Titi who says that the banking industry and the government are prepared to look at these in a case-by-case basis.
 
“In times of crisis, it’s about sharing the pain. The corporate and private sector will play its part in supporting the overall economic objective of keeping as many people employed as possible.”

About the author

Ingrid Booth image

Ingrid Booth

Lead digital content producer

Ingrid Booth is a consumer magazine journalist who made the successful transition to corporate PR and back into digital publishing. As part of Investec's Brand Centre digital content team, her role entails coordinating and producing multi-media content from across the Group for Investec's publishing platform, Focus.

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