It was a real treat to attend the recent Sake Economist of the Year awards, where our chum Ulrich Joubert was once again anointed as Economist of the Year.   Not only is he a great economist; he is also a very likeable person. ZA Confidential caught up with Ulrich to get his views on a few issues which worry us….. 

 

ZAC:   We are now in July.   The data for Q2 is not in yet, but do you believe it was a second quarter of GDP contraction, which would technically place us in a recession? 

UJ: Some of the first indicators for the second quarter – namely April mining and industrial production – were better than expected. Those indicated that we could see positive second quarter growth. My view is that the quarter could show some positive growth, but just above the zero level.

 

 ZAC:   Jacob Zuma has shuffled his cabinet following the latest election.   Do you believe we have a better team steering the economy?

 A: No. Most of the ministers have no experience in their new portfolios. Therefore it will take time before they can take meaningful decisions and improve the environment in which we have to do business. Given the severe problems that the country faces due to the policies being followed over the past twenty years, government has to take decisive decisions changing the environment in which the economy has to perform. First of all we have to change the emphasis of the fiscal policy to support the production sectors rather than the consumption sector of the economy. Will the new Minister of Finance be able to convince his 70 other cabinet colleagues to change course? We have to have less intervention in the economy – unfortunately we do have the same Minister of Trade and Industry as previously. Will he be able to change his mind? We have to change the labour dispensation in the country and improve the quality of our training and education system. Unfortunately we have the same ministers in these portfolios and will they be able to handle the trade unions? I do have respect for the Minister of Basic Education, but can she really get SADOU out of the classrooms? I hope that Pravin Gordan will be able to bring some improvement into the performance of local authorities.   

 

ZAC:   Unemployment remains stubbornly high.   What would you do that isn’t currently being done to improve employment?

UJ: I would break the (ANC’s) alliance with Cosatu! We need a new labour dispensation, because the current environment ensures that the economy will become more and more capital intensive and less labour intensive. We also need a better quality out of the education and training institutions – rather have a 50% quality passing rate of grade 12s than an 80% passing rate that delivers people that cannot be utilised in the economy.

 

ZAC:   You again have the title Economist of the Year. Do you think economists in SA have the respect they deserve? Are they listened to enough?

UJ: Given the uncertain environment in which we have to operate, it is necessary to listen to different views of the economy, because we as economists interpret the information at our disposal in different ways. That is why I always try to listen to other economists’ views; because I could have missed something or interpreted something in a different way than the next guy/lady. I normally find that if the economy is not performing, then we are listened to, but when the going is good, people make enough money and think they do not need us! We of course know that it is the company/institution that controls its business effectively in the good times that will survive the bad times as well. I am of the opinion that the managers/engineers/accountants, and so on do not have the time to look at the environment while running their businesses and therefore need the interpretation of these economic, financial or commodity market trends by someone who keeps track of these trends on an ongoing basis.

 

 ZAC:   Is there one indicator which more than any other gives you a feel of how the economy is doing?

UJ: No! One has to be aware of the changes in the total environment – even the political environment – internationally and domestically.         

 

ZAC: Which sectors do you believe have the best potential for job creation in SA, and which the worst?

UJ: The best potential lies perhaps in the tourism industry. The worst sector at the moment is most likely the mining industry – and specifically the platinum mines. Unfortunately the government sector has created most jobs since the 2009 recession, and the country cannot afford this type of job creation.

 

ZAC: How would you characterise labour relations in SA?

 UJ: I think they are very tense and take too much time and effort to manage.

 

ZAC: And how would you characterise the relationship between business and government?

UJ: I think there is too much government intervention in the economy. It hampers the growth potential of the economy and forces the business sector to defend itself and try and limit the interventions of government. This results most likely in a more tense relationship between government and the business sector than what is advantageous for growth.

 

Conclusion:

Not much in all this with which we can disagree.  Does this mean ZA Confidential is in the running for next year’s award?

 

Tweet of the Day:

Funny Tweets (@Funny_TweetsQ): My favourite outdoor activity is going back inside

 

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There has been more, depressing confirmation about the ability of blinkered bureaucrats to sabotage the economy and destroy jobs through the mindless application of red tape. Business Day has reported that Cullinan Holdings CEO Michael Tollman is cutting back on additions to the company’s fleet of luxury coaches. Why?  Because he fears there will be fewer foreign tourists as a result of SA’s new onerous visa restrictions.  Obstacles in the way of people wanting to visit this country with their much-needed pounds, dollars, euros and yuan include the need to get visas at a SA Consular office.   If you don’t live in a big city, this is a major obstacle.  In addition the need for biometric data for a visa means the need to be physically present for the application. Of course, we need strong immigration controls, as does any country. But there appears to have been no consideration given to the impact of these new regulations on tourists.   Problems for the foreign spouses of South Africans, or for people legitimately in the country for their business have also been raised in response to the bureaucrats.   What do our experts make of this?

Sacci CEO Neren Rau:

SACCI has tabled its concerns in respect of the changes to the visa requirements on many occasions. These concerns were borne out from a trade perspective in respect of Kenya’s retaliatory steps and from a business perspective in respect of the reported commitment to halt investment by tour group, Cullinan Holdings. 

Gillian Saunders of Grant Thornton:

The need for unabridged birth certificates is a timing and a processing problem, from the perspective of its impact on tourism. But the biometric visa requirement is a very big problem – if people have to get them in their country of origin.   We would really like to change that and get biometric visas on arrival – supplementing a standard visa.   The big learning curve going forward is how we make sure government collaborates across the different departments that impact tourism, before legislation begins to bite.  We have to look at the implications of tourism from legislation coming from every department.   Tourism has the ability to be one of our major sectors in terms of delivering jobs and growth.

Raymond Parsons, North West University Business School:

This is another classic example of how policy decisions should NOT be taken without adequate prior consultation and without reference to the National Development Plan. Policy coherence and credibility now depend on tangible proof that policy alignment will progressively happen as promised by government. Although apparently the Immigration Board was consulted, it is clear from preliminary reaction that the tourism industry – and even the Minister of Tourism – have been unaware of what had been brewing regarding tighter visa regulations. Minister Radebe in the Presidency is now charged with the task of assessing whether existing and new legislation is NDP compliant, so in that spirit – and together with Minister Gigaba and the tourism sector – the visa regulations should be urgently revisited.

Nikki Forster, PwC Leader of Hospitality and Gaming:

Any regulations that reduce the ease of travelling to any country will impact tourism.

 

Conclusion:

In terms of job creation, you can’t do much better than to promote tourism. For the government to be acting against this is a sign of folly, arrogance and stupidity. We need to et rid of this damaging legislation, and at the same time to boot out the idiots behind it.

 

Tweets of the Day:

Steve Stifler (@SteveStfler): My doctor told me to watch my drinking, so now I drink in front of a mirror

The QI Elves (@qikipedia): Start every day off with a smile and get it over with. – W. C. FIELDS

 

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Given the small numbers of large firms which were affected, it was easy to understand the impact of the recent platinum strike. However, the engineering strike started by NUMSA today is less transparent, affecting a lot more smaller players, and with a knock-on impact.   It was therefore timely that steel trading, manufacturing and automotive group Argent briefed analysts today. The company has already suffered big losses through the recent platinum and automotive strikes, and says that from today about three quarters of its businesses are closed due to the latest strike. Meanwhile, there are indications are that there may be another automotive sector strike around September this year. The company says “strikes are by far our biggest risk.”   One response is a move to fewer workers and more machines “by pushing the automation button at each of our companies – that will reduce the head count.”

 

Conclusion:

Strikes have a short term effect on the economy – ZA may already be in a recession. They also affect exports, and in the longer term a seemingly successful strike leads to high pay and a smaller workforce. And we should not forget the violence which tends to overshadow ZA strikes, including loss of life.

 

ZA Confidential is a subscription newsletter.   For subscription details or any other communication, please contact:   zaconfidential@gmail.com     Follow us on twitter: @zaconfidential