The South African Economy Has the Potential to Prosper

Savings and investment; demography; policy and institutions; education; health and openness are the six common ingredients which can catapult an economy to prosperity, Chief Executive of Cannon Asset Managers, Adrian Saville, has outlined in an address to Moore Stephens partners and clients in Cape Town.
 
Saville said a study of 150 countries over 60 years had shown that these six common ingredients correlated with social and economic prosperity.
 
He said South Africa, with Cyril Ramaphosa at the helm, looked set to focus on policy stability and institutional capability – one of the key ingredients in the ‘six-pack’. This could help to lift South Africa out of the economic mire, although it still had some way to go.
 
“South Africa has a plan to grow at 5.4 percent. You can remove Zuma from the equation and take the Guptas away, but we still haven’t built sufficient six-pack ingredients to generate the promised 5.4 percent. Our modelling tells us the South African six-pack is more like a wobbly three-pack.”
 
Saville, who was speaking at a seminar following the Finance Minister’s annual budget speech to Parliament, said investment was one of the ‘missing links’ that was sorely needed to boost economic growth, together with a high level of savings. “Investment is the miracle ingredient funded by saving.” 
 
“Although fast growth is part of the cocktail, we need to do things differently to ensure that growth also translates into economic inclusion and socio-economic mobility,” suggested Saville.
 
Despite challenges, some people and organisations are leading the way and showing what can be possible.  
 
Saville used the example of SPARK Schools, a growing network of independent, affordable schools in South Africa, which were getting world-class results at much less cost than private school education.  
 
He said poverty and inequality in South Africa remained a challenge and a threat.
 
“South Africa is the most unequal society in the world. If you are born poor in South Africa, the prospect is you will die poor. We have to change this socio-economic mobility trap. Unless South Africa fixes this social architecture, all we are doing is rearranging the furniture.”
 
The huge unemployment problem is also untenable.  
 
“South Africa has six million people not in employment, education or training. This is a political accident waiting to happen.”
 
"Along with a raised investment rate, a second key element that South Africa needs to work on is connectiveness," said Saville, who teaches in the fields of macroeconomics, investment finance and strategy at the Gordon Institute of Business Science (GIBS), where he has held a professorship since 2003.
 
“It is connecting to others that builds powerful partnerships, collaborations and produces social and economic success.”
 
In an engaging address to a packed audience of clients and partners, Saville outlined how some of the leading economies of the world had emerged from immense struggle and crisis. France, for one, was devastated after World War II, but by 1975 had industrialised, launched the bullet train and boasted one of the highest living standards in Europe.
 
South Korea was the birthplace of LG, Samsung, Hyundai and Kia, while the developing country, Costa Rica, has recently gone from poor to prosperous.   
 
“If Costa Rica can go from broken to brilliant in 15 years, why can’t we?” questioned Saville.
 
Countries like Chile, Poland, Taiwan and Singapore have also grown fast and strong over the past few years. In Africa, Rwanda has been growing at a rate of seven percent a year for 24 years, while Ethiopia had grown at double-digit rates for most of the past 15 years, meaning that the economy had grown from $8bn in 2001 to $72bn by 2016.
 
Saville said the state of the economy impacted on everyone and had cascading effects on every level of society, from communities to companies.
 
“As income per person goes up, this corresponds with communities inside of countries getting happier and healthier. Similarly, as countires grow over time, companies prosper. Put simply, the economy matters to companies, communities and countries. 
 
 
Saville has experience in managing all the major asset classes and has successfully combined teaching and business. In 2012 he was nominated for the Economist Intelligence Unit’s Business Professor of the Year Award, and in 2014 he received the Central and East European Management Development Association award in teaching excellence.