Goldman Urges South Africa Action on ‘Self-Inflicted’ WoundsRenee Bonorchis
Goldman Sachs Group Inc. sees slowing growth in South Africa as a partly “self-inflicted” wound, which could be arrested through swift government action, said Colin Coleman, a partner at the bank.
Labor conflicts, energy supply disruptions and poor governance in the public sector are the “key” wounds that could be remedied, Coleman, head of sub-Saharan Africa for New York-based Goldman Sachs, said in a speech in Cape Town today.
Unemployment in the country, as assessed by the broadest measure, has worsened to 35.8 percent in the third quarter from 34.9 percent a year earlier, he said. State-owned companies, including Eskom SOC Holdings Ltd. and South African Airways require “radical surgery” to overcome their consistent failure to deliver, according to Coleman.
“The lower middle class has suffered a credit crunch, the unemployed have less hope and opportunities, and the labor unions are at war with each other,” he said at the Africa Private Equity and Venture Capital Conference.
South Africa’s economy is forecast to grow this year at the slowest pace since 2009 because of disruptions caused by worker strikes and frequent power shortages. The trade deficit widened to the most in at least four years in October.
Coleman’s comments in South Africa’s second-largest city echo remarks by Johann Rupert, the billionaire chairman of Cie. Financiere Richemont SA and Remgro Ltd., who berated the government for failing to address corruption and electricity blackouts in a speech on Nov. 25.
While companies in Africa’s biggest economy after Nigeria remain resilient, the government needs to be “putting the right people with the right plan and the skills needed to execute well, based on merit alone” in the appropriate jobs, Coleman, 52, said.
An inspection of 450 state entities by the nation’s auditor-general uncovered 30.8 billion rand ($2.8 billion) in irregular, unauthorized or wasteful spending in the 12 months through March last year from 30 billion rand the year before. The economy is projected to expand 1.45 percent this year and 2.5 percent in 2015, according to analysts surveyed by Bloomberg.
The rand weakened 0.6 percent to 11.1866 per dollar by 1:06 p.m. in Johannesburg, extending its decline this year to 6.6 percent.
Change “will take a ‘Team South Africa’ approach with the co-operation and engagement of a national effort to put the country to work, to collaborate for growth and development and setting aside narrow interest for the greater national interest,” Coleman said.