Inclusive economic growth key to social cohesion Theo Vorster | Chief Executive Officer of Galileo Capital

THEO VORSTER | CHIEF EXECUTIVE OFFICER OF GALILEO CAPITAL

INCLUSIVE ECONOMIC GROWTH KEY TO SOCIAL COHESION

Theo Vorster, the CEO of Galileo Capital and economic market commentator, served as a keynote speaker for the Pretoria roundtable discussion.

Vorster began his address by stating the following: “I think the key point of departure is that for any complicated problem, there's a simple solution that doesn’t work. Our problems are complicated, then so are the solutions.”

Vorster presented on the current lack of economic growth in South Africa and eluded to factors such as the departure of critical skills and the loss of influential private sector business, which further exacerbates the stunted economic growth in the country.

In the early 1990s there was a close correlation between South Africa’s GDP growth rate and that of the rest of the world. In fact, the GDP per capita tracked the rest of the world. In 2012/2013, that correlation broke. Currently, the GDP per capita in the rest of the world is nearly 50% higher than that of South Africa and, consequently, South Africa is now 12 years behind.

For several years, economic growth was at 5%, which means that the economy doubles every 15 years. If the growth is at 1%, the economy will double every 72 years. Therefore, at a growth of 0.5%, the economy will take 150 years to double.

If South Africa had kept track with the rest of the world, the economy would have been at a 15% growth rate and the unemployment rate would have been closer to 20%, instead of 30%.

Reconciliation, social cohesion and keeping skills in South Africa is easy if the economy is growing. But if it is a struggling economy, we have the unfortunate situation whereby the people who can afford to – those with capital, and the talented – leave the country. Therefore, due to the current context we find ourselves in, the GDP growth will need to come from the private sector. Koos Bekker is known for saying that there are only a few people that grow the economy: engineers and entrepreneurs; and in our case, these are the people that are leaving.

Additionally, Vorster also noted that the Afrikaans business community is a major contributor to economic growth and could help to create employment opportunities and encourage much-needed inclusive growth through private sector business.

Vorster cited the example of Naspers, which in the late 1990s was a company with a market capital of roughly R6-billion. Today, Naspers is worth R1.2-trillion and constitutes 10% of the national GDP. Approximately R1 in R10, of every government employee’s pension is invested in Naspers, the biggest company on the JSE.

The Afrikaans business community can contribute immensely to economic growth, business development, creating employment and opportunities. In conclusion Vorster indicated that inclusive growth must be a focal point of government towards addressing the current economic climate, combatting unemployment and the eroding effects this has on the national GDP.

KEY TAKEOUTS

• Economic growth and stability are necessary for reconciliation, social cohesion, and the retention of skills and investment to be successful in South Africa. • Due to the current context we find ourselves in, the GDP growth will need to come from the private sector. • The Afrikaans business community is a major contributor to economic growth and can help to create employment opportunities and encourage much-needed inclusive growth through private sector business. • Inclusive growth must be a focal point of government towards addressing the current economic climate, combatting unemployment and the eroding effects this has on the national GDP.