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The former Goldman Sachs boss who coined the idea of the Brics group of countries, which South Africa is now part, this week identified three possible things to get economic growth going in the country.
James O’Neill is former chairperson of Goldman Sachs Asset Management and former Conservative UK government minister.
He is a British economist best known for in 2001 coining Bric, the acronym that stands for Brazil, Russia, India, and China – the four rapidly developing countries that have come to symbolise the shift in global economic power away from the developed G7 economies.
The bloc held its first major first formal summit in 2009 and South Africa joined in 2010 to make Brics.
During an interview with O’Neill on the sidelines of the Discovery Leadership Summit, he identified three things to get economic growth going in the country.
Credibility
First, the country needed to restore the monetary and fiscal credibility that it had in the first decade after the end of apartheid.
“Appointing Tito [Mboweni] – in my view – as finance minister is a good step. Not least because he had proven success as central bank governor and was part of that whole framework.
“I had the pleasure of getting to know Tito as central bank governor ... He understands the way the world economic system works. He has a lot of credibility and contacts in many parts of the world.
“If that is what the new president wants to promote and support and of course he has got a successful background as a business person. I think it is quite hopeful.”
O’Neill said he met Mboweni before his term as South African Reserve Bank governor and again when he joined the private sector, including becoming a Goldman Sachs adviser.
“During the early years post apartheid – as someone in the heart of the global investment community – I became extremely interested in inflation targeting in South Africa [which Mboweni introduced in February 2000].
"From a fixed income point of view – a very positive opportunity. That is when I first met Tito.”
“When there was the international legal inquiry into the rand’s weakness I was hired as the expert international witness. I told that inquiry that I didn’t think it was sensible to even have it.
"Because if you are going to pursue inflation targeting you shouldn’t be so obsessed with the value of the rand.”
Education and skills
The second point that O’Neill identified as being important to driving growth was that South Africa focused on boosting education and skills.
“South Africa will never achieve the potential its needs to raise the incomes and aspirations of all its people until it boosts the education and skills together with the broader productivity challenges.”
Think differently
“Third ... occasionally in the past decade South Africa … often feels very sorry for itself, which is understandable the turbulent past. Somehow it has got to find a way to think a bit differently and look to other countries including some that have had equally turbulent pasts,” he said.
He used the example of South Korea – 40 years ago it had less wealth than South Africa today and had wealth associated with sub-Saharan countries. Today it is wealthy as Spain.
“South Korea went through a vicious civil war and somehow managed to get over that and do economically very well. [South Korea] now is one of the most equally shared societies in modern life …
“The notion that you guys just copy South Korea is of course crazy – because there are difficult political histories; different cultural issues. I think South Africa should look and see what are they doing – that you could do.
"Take technology for example. From a range of indicators that I have followed – South Korea is one of the best in the world – comparable to the United States – at many levels when it comes to the applicable of technology.
“South Africa must try and learn from the better places around the world – particularly those that have gone from low income status.”
He said that the independence of South Africa’s constitutional organisations such as the judiciary, the finance ministry, the central bank and the courts was a good sign.
“Usually the strongest performing countries in terms of shared wealth in the world are really good on all these things – take Scandinavian countries,” he said.
