The "one thing" that would get South Africa's economy back on track

Read the transcript

BW: Bruce Whitfield

AG: Adrian Gore, Discovery

ST: Sim Tshabalala, Standard Bank

CM: Cumesh Moodliar, Investec

• Intro

  This is The Money Show. I'm Bruce Whitfield. I'm having a huge amount of fun and getting very excited and very inspired by the astonishingly detailed responses that I'm getting from a large number of people. And then I'm also in the background sending messages to people saying, we can't talk to everybody, but I'd love to hear your view.

  Please drop me a note. And people are panicking because they think they're going to be outed.  And then, of course, they're going to be outed, because we're looking for the best ideas, the very best ideas, the micro steps, if you like, toward finding solutions to the future of the country. Let's talk to Adrian Gore.
  

  Adrian is the founding chief executive of Discovery, and Adrian, I mean, you're a big believer that the Discovery business has grown the way it has through making, I think you call them infinitesimal  adjustments every day. And over time, the compounding effects of those adjustments are almost exponential in their effect.
  

  And you've also been doing a lot of work recently in terms of how people change habits. And I wonder what your one small thing would be to change South Africa's trajectory for the good?
  

• Adrian Gore, Group Chief Executive, Discovery

  AG: Bruce,  I would start at some of the stuff I've been involved in with government. I know it works and I know it can change the country. 

  So let me just give some context. Fundamentally, we need economic growth.  It's a fundamental issue to lift everything. It creates jobs. It's a fundamental issue. So my entire focus is on growth to create jobs.  Backing it up is a few, I think, counterintuitive truths that people often don't appreciate.
  

  The first is that our economy is pretty resilient. Our GDP is resilient. So even without energy and with the loadshedding, our economy actually did not contract if you look at the data. So that's an important point. And it also tells you of the potential. It can, it needs like a defibrillation. It needs to be kicked up.
  

  It's like a, an athlete, you know, an Olympic athlete is walking at five kilometres an hour. You can put a hundred kilo weight on their back. They can still walk at five times an hour. That's our economy. It needs to be defibrillated out. That's the first point. The second is something that isn't appreciated.
  

  And it has to be said, the data shows when we get economic growth, we create jobs. I know that's a often disputed point, but if you look at the data, when the economy grows at 3 percent or more, and it's done that in the past, you get  0.7 percent of that in jobs. It's an amazing issue. When the economy is stable or grows at 1%, you get a contraction.
  

  Economy grows, you get jobs. The third point I want to mention, and there's a lot of news now about OV - Operation Vulindlela, and the presidency. That's got fantastic traction over the years on a number of things. There's amazing goodwill in the country. There's amazing expertise in both the public and private sector.
  

  We need to harness it. We've seen this business-government partnership working with excellent people in the public sector. You can get change quickly. In eight months, loadshedding has turned the corner. It's remarkable. You can get change. And then the fourth point, backing my idea, it's not my idea, it's actually something we're doing, but I want to propose it on steroids.
  

  The fourth point is that narrative drives fundamentals. I don't know if you've said it, but hope is the best economic stimulus, right? And if you doubt what I'm saying, look at what happens to our fundamental economic indicators when the GNU was announced, the hope we can get out of it when the GNU was announced a few weeks back.
  

  All right. Every single indicator, the stock market index, long term rates of interest dropped, etc, etc. Narrative drives fundamentals. So, my idea, if you gave me one shot at it, would take the OV idea or the unit in the presidency, whatever you want to call it, create a unit focused on one thing, economic growth, great jobs.
  

  It does that by, as we've done, clear work streams, capacitated with excellent public and private sector capabilities on clear things that we know to, in the economy, we focus on energy, crime, logistics, road and rail, et cetera. Do more of those. Number one. Number two, have an absolute focus on narrative on that.
  

  So publish targets that have to be achieved by it, get the public behind it, celebrate successes, explain failures, and communicate every single month to the public about what's going on, where we're succeeding, where we're failing. Make it fashionable, to progress, to create targets, to succeed. And in that process, create a defibrillator that just turns the economy back to where it should be.
  

  The economy has amazing potential. If we grow it, we'll create jobs. If we create jobs, we create prosperity, we reduce poverty. It's a fundamental issue. So that is my simple idea. I know it works. 

  BW: And we know all of it is absolutely true. And here's the thing, what is that first step, Adrian, that first, you know,  the first thing that needs to happen in order to begin to precipitate the, the unfolding of many, many more things that have to happen in order for this machine to start moving on a sustainable basis? What would that first fundamental step?

  AG: I think that, I think that step,  look, I think giving people hope, as soon as people get a sense of hope, the entire environment changes.  And I think that we've got elements of that. Hopefully we get this government and national unity over the line in the right form.

  But I think that is a massive stimulus, an important issue. I think we've seen already the ability to get progress and progress needs progress. I think there is a first step.  But I'm not sure you can identify that simply. I think we've got catalysts of change right around us now. This election, this GNU, it offers the potential of the right leadership, both in public and private sectors in government.
  

  If we can harness that. Something we did, Bruce, that I think was quite powerful. We got 130 or more CEOs to sign a pledge in this process. Not commenting about where the country's at, but actually committing to the potential of the country.  It sounds fluffy, but it's remarkable to me. What it does when you kind of just create a step change of your view to what the potential is, you know, and let's get behind it.
  

  When we signed that pledge, did we think we'd turn the corner on loadshedding eight months later or nine months later? It's not just our work, Eskom and government people did amazing work,  but it's remarkable that you can kind of turn the corner quickly. Things can change quickly.  So perhaps that first step is to create common ground, a common base from which to work.
  

  Maybe that's the first step.  Possibly, I think that's hard.  I think people generally agree with potential, not with where you're at. People have all different lived experiences of where they're at.  But I think leadership is about potential and hope and vision.  I think that's the first step. 

  BW: Fabulous contribution. Thank you, Adrian. Still to come this evening, we've got Cumesh Moodliar from Investec Bank and Sim Tshabalala at Standard Bank. They're very kindly still standing by, with them in a moment.  The Money Show. Shapeshifters.  It's a shape-shifting conversation because that's what we're trying to do this evening.

• Sim Tshabalala, Chief Executive, Standard Bank

  BW: To Sim Tshabalala, we go to the Chief Executive at Standard Bank. And if you could do just one thing with all the power that I would bestow upon you, because that's how I roll, Sim, what would that one thing be that you think would fundamentally shift the future of the country for good? 

  ST: Thank you very much, Bruce.

  Bruce. Just having heard Adrian, I would echo much of what you said. I would actually start with the end in mind. I'd say, well, we need growth. And you saw the report by BER [Bureau for Economic Research] where they calculated what would happen if Operation Vulindlela was implemented. And they say you could add growth of 1. 5 percent to the country's GDP.
  

  That gets us to 5. 5 trillion Rand in 2029 - that is huge. That creates more jobs. It gives the country more fiscal space. And it creates space for businesses such as Standard Bank to do what they do best, which is create more jobs, prosperity for for our stakeholders.  So what is the one thing I would do to drive that?
  

  It would be, excuse the joke, but it would be pouring old wine into new bottles.  I would take what the president has said and what various people have said when talking about the need to professionalise the public service.  I would use the momentum that is already existing in a number of organisations in the public sector like the FIC, Reserve Bank, the Department of Science and Technology.

  Education and health system has actually got some excellent aspects to it. Like, for example, remember what South Africa did with the National Department of Health during the pandemic, it was just world class. And so creating that capacity and then creating strong and working partnerships.

  And again, Adrian used examples and I've just used this example of the pandemic. There are many other examples that one can think of that would accelerate this group, which would include, you know, both corporate partnerships with people, for example, who would build our grid, using the example of the Gautrain, so forth.
  

  So the one thing Bruce would be to capacitate the state, those parts of it that need it. And work in partnership with civil society and business to accelerate growth. 

  BW: One small thing, this, I mean, you're a big thinker and your job is to manage a network of, you know,  40,000 people on a daily basis and to have really high level thinking and drive an organisation in a direction.
  

  But if there was one small thing, I mean, capacitating the state and that's a massive task. I wonder what  the, the one small step that you would. do, to facilitate that so that it almost ran by itself a little? 

  ST: I would do whatever was within my power to accelerate the passing of the Public Service Amendment bill.
  

  For example, through the legislative system, get it signed, get it implemented, you know, introduce transparent and competitive recruitment processes in the public service, improve the pay, improve the status of civil servants. Follow the example of Singapore. That's not a small step, but it's something I think that is already on track, but I would accelerate it. 
  

  BW: Sim, thank you very, very much indeed. Singapore coming up again this evening as a model to look at. We don't want the sort of dictatorial powers of a single leader, of course, but what you do want is a fundamental shift.  In a moment, we will talk to Cumesh Moodliar at Investec Bank. 
  

• Cumesh Moodliar, CEO, Investec Bank

  BW: And to Cumesh Moodliar we go, who is the Chief Executive of Investec Bank. And Cumesh, yep, we're getting so many ideas, and so many of them have got broad brush strokes. I wonder if you could whittle it down to its barest essence, and find one thing that could be the catalyst for driving huge opportunity for our future. 

  CM: Evening, Bruce, and thank you for having me on the show. I think what we're really excited about, I think the country, as some of your earlier interviews have said, is at an incredibly pivotal moment. And we are at a moment where we've actually got to literally, as you'd say in cricket terms, put runs on the board and put them on the board very quickly.
  

  And one of the clear opportunities, which I think builds on both what Adrian and Sim spoke about was the power of the economic flywheel. And how do we drive that? We all see economic growth is driving employment. And that is the wheel that unlocks the next exciting chapter for South Africa. And has a lot of the challenges.
  

  What would be the one project, one series or philosophy of things that we'd focus on? And for us, it would really be public private partnerships.

  We're dealing with a situation where the state sits with a debt to GDP ratio  of over 74%. And what that ultimately means is the ability for the state to raise capital on international capital markets within the context of the local market is, is getting more and more limited.
  

  The opportunity, however, to unlock private capital with the support and integration into a public private sector partnership, as you've seen already a few successful ones that have come to fruition. And I think some reference the Gautrain project we've seen also similarly with some of the toll roads, and we've seen one or two others that have really shown proper opportunity and how this could be unlocked.
  

  And for us, that's something that we'd focus on. If you look at the impact that's already had in renewable energy projects and through the REIPPPPs and just unlocking via legislation and by partnerships, what can be achieved, you've seen the impact. I think what we need to do is really focus on what would be the next set of projects we can do to do that.
  

  And my personal focus would be on rail and ports. And the reason for that is we've got existing manufacturers, we've got existing producers, we've got existing mining companies who need that capacity to firstly maintain existing employment and allow export of product, but also mobility of product within the country itself.
  

  If you take the motor industry, for example, in the Eastern Cape, the ability for them to send manufactured vehicles from the coast to Gauteng on road is 84 hours versus on rail would be 16 hours. Just like that is a quick win. And I recently saw an interview with the CEO of VW South Africa and the CEO  of Isuzu South Africa spoke about how having a proper rail corridor would unlock significant value in their businesses. And similarly that rail corridor would unlock value for manufacturers in Gauteng wanting to get their finished products down to the port.

  So those are some really quick wins available to us right now that we could partner with private sector and public sector entities to bring together a solution, which firstly preserves existing employment, but potentially unlocks and grows further employment. 

  And, you know, Bruce, I was going to say public private partnerships lead to infrastructure development, job creation, innovation and technology transfer, skills transfer, improve service delivery, and ultimately revenue generation. So if you take all of those things coming together, it talks to driving that economic flywheel. 
  

  But creating the environment in which private capital wants to invest, not to be forced to invest, because we were at one stage talking about prescribed assets and that just upsets people a lot. It's a case of creating the incentive to do this.  Very much, and I believe those incentives are already in place.
  

  You've got private sector players who are happy to sign the appropriate offtakes that would need to support some of those initiatives. And you do have other private sector players who'd be happy to provide the service that's needed with those offtakes in place. But you need the regulatory environment to allow that.

  And you need to be able to be approaching the Transnet of the world and other SOEs in a way that is a collaborative approach. And that those assets at the end of that period, whatever the period may be, actually revert to the state. So the state actually at the end of it, inherit, for example, if I use my rail corridor example, it's a working rail corridor that's efficient, that will continue to generate revenue for it in time to come. 

  BW: Cumesh, thank you very, very much indeed. What a superlative range of contributions this evening. And you know what?  It's not over because we've got more to come on the next Money Show.