Business

Opening Economy Key To Growth: Ramaphosa

The stranglehold of monopolies in the South African economy has to be broken to achieve a competitive market, President Cyril Ramaphosa said on Monday.

He said the dominance of the “Big Four” commercial banks did not help the economy, instead more banks were needed to create competition, which would have a positive impact on economic growth.

The country had also lost its competitive advantage because of the cost of electricity from Eskom, but other ways to regain the advantage must be found, he noted.

Ramaphosa was speaking about nation-building at the 25 Years of Democracy Conference hosted by the Mapungubwe Institute for Strategic Reflection (Mistra) and the University of Johannesburg (UJ).

The President referred to an International Monetary Fund official who had said the problem of this country’s economy was dominance by monopolies which prevented new players coming in.

“There are monopolies that continue to rule the roost,” he said, alluding to the big four banks. Although he did not name them, these are Standard Bank, First National Bank, Nedbank and Absa.

“Although there were new and smaller players in the sector now, the four continue to dominate the country’s banking landscape. We need to open the economy so more players come in,” he said.

The structure of South Africa’s economy was largely unchanged since 1994. But it could be altered.

Ramaphosa added: “We need to structure our economy by bringing in more investors. We want to stimulate our economy.”

The economic stimulus package he announced was based on reprioritisation, including putting more capital into agriculture and revamping township economies and local economic zones that would help people become economically active.

Responding to a concern raised by Mills Soko, professor of international business and strategy at Wits Business School, Ramaphosa said land expropriation must happen and it should be “during our lifetime”.

He told Soko the reason land that had already been redistributed was lying fallow was because often beneficiaries had not got support. But his government had crafted a programme to support them with the necessary funding and skills development.

Land would be redistributed via various formats, including expropriation, and there would be land shared between emergent and commercial farmers.

Ramaphosa explained the huge public service wage bill problem could not be resolved by the government alone and that a compact with public service unions was required.

He said 70% of the state budget went on salaries and this percentage would increase unless a change was effected.

“Through a collaboration with unions we will be able to address this problem. We have to sit down with the unions and work together to find durable solutions.”

He added that those who benefitted from government services must pay for them. People in Soweto could not avoid paying for the service they received from Eskom forever.

“We need to have trade-offs, we need to be willing to pay for services, we need to look at what is affordable and build a compact in how we can together move this country forward.”

Although the Fourth Industrial Revolution posed the risk of haemorrhaging the South African economy, including through loss of jobs due to artificial intelligence and robots, people had to be reskilled to meet the challenge.

“That is why we have to look at the skills revolution. As people lose jobs, we need to look to transition to the skills set that is going to happen,” Ramaphosa said. -Citizen