Keynote

REBUILD, REINVENT AND REJUVENATE

Former finance minister Nhlanhla Nene urged finance and government to work together.

BY CAYLYNNE FOURIE

Forty of South Africa’s leading CFOs gathered at Summer Place in Hyde Park in October, to launch the first-ever Finance Indaba Conversations. While enjoying a scrumptious breakfast, the finance professionals were captivated by a keynote address from former finance minister

Nhlanhla Nene.

“There are three things that keep me awake at night: economy, economy and economy,” said Nene, who is now running a family business in Greytown, KwaZulu-Natal, chairs the boards of Thebe Investment Corporation and the Pan African Arise Bank, and is a non-executive director of Grobank.

“As a nation, we need to knuckle down and do some hard work to pull our economy up, raise the economic growth rate to higher than three percent growth over a sustainable period. And finance has a big role to play in achieving that.”

He explained that for any system to work, however well it is designed, it requires human capital, and finance professionals are those people. “Finance institutions and markets provide a framework for carrying out economic transactions and monetary policy, they help to channel the nation’s savings into investment and, by doing so, they support and drive economic growth.”

Nene added that, for central banks, the financial system is the key transmission mechanism for monetary policy decisions that are made on a regular basis. Therefore problems in financial systems not only disrupt financial intermediation,

“As a nation, we need to knuckle down and do some hard work to pull our economy up.”

they can also undermine the effectiveness of monetary policy, exacerbate economic downturns, trigger capital flight and exchange rate pressures. This, he explained, can result in large costs for governments when it has to step in to bail out troubled financial institutions.

The fuel that propels economic activity

Nene explained that one of the key roles of the finance profession is around credit provision. “Credit extension is the fuel that propels economic activity. It does so by enabling businesses to invest beyond their own cash resources.”

He said that the latest monetary policy review that was published by the South African Reserve Bank, paints a worrisome picture regarding credit extension, specifically relating to corporates.

“No business activity can take place without finance,” he said. “And since a country’s economic activity and growth is the sum total of what its businesses and households, along with its governments, do – without finance, no economic activity is possible.”

It is for this reason, he explained, that it is important that voices like the ones present at the Finance Indaba Conversations should be heard in the corridors of power.

Business and government need each other

Nene said that, in order for business and government to work together effectively, there needs to be a strong relationship, for the flow and exchange of accurate information, reciprocity and close consultation and coordination between state and business.

“This is important because business people have specific and deeper insights about specific sectors in the economy that the government doesn’t have,” he added. “A government, on the other hand, can share with business its view of the political economy, including the reasons for some of the proposed policies.”

In closing, Nene explained that South Africa is at a crossroads. “We can stay on the current low growth path and reap the whirlwind of poverty and unemployment with all the socio-political risk that come with it, or we can embark on rebuilding, reinventing and rejuvenating our economy to place it on a higher growth path. A path that ensures that all South Africans benefit.” 

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