Improved sentiment is rooted in real economic progress

Dear Fellow South African, 

Just over 100 days have passed since the members of the Government of National Unity were sworn into office. In that time, we have witnessed a marked increase in confidence in the direction of our country.

South Africans across society are increasingly rallying around the programme and work of the Government of National Unity. This is reflected in recent opinion polls. 

In one of these polls, conducted by Ipsos, it is said that the proportion of participants who believe that the country is heading in the right direction has doubled since the last surveys were conducted in April and June this year. 

There is also rising confidence in our country’s economic growth prospects by business and local and international investors. This was evident in the engagements I recently had with business leaders in Beijing and New York and that Deputy President Paul Mashatile had with business leaders in London. 

In September, the Bureau of Economic Research and Rand Merchant Bank published their first Business Confidence Index since the formation of the new administration. It points to “cautious optimism” about improving business conditions in key economic sectors. It says that improved electricity supply and political certainty following the elections has likely contributed to this improved business confidence.

So how important is this improved ‘sentiment’ for our economy and country?

Sentiment is more than a ‘warm and fuzzy’ feeling. It is made possible by real developments in the economy and the country. Business confidence goes beyond discussion in boardrooms and conference halls. It is about the interest that is shown in our economy by all investors, both local and offshore. Sentiment has a direct impact on people’s lives as it can manifest itself in increased investments that can result in job creation.

Improved investment sentiment will benefit our country’s fiscus. A stronger economic outlook will improve South Africa’s credit rating, which in turn will facilitate greater access to global capital markets and lower our borrowing costs. 

When we spend less money on debt servicing costs, government has more space to increase its expenditure on building public infrastructure and providing education, healthcare, basic services and social support.

Improved sentiment has boosted the value of our currency. This reduces the cost of imports such as oil, which reduces the cost of fuel. This in turn reduces the cost of living for all South Africans.

Increased business confidence attracts higher levels of private investment in the economy. When investors are more optimistic about their business prospects they are more likely to invest more capital and expand their existing operations. Improved confidence also encourages the start-up of new businesses. 

More business activity creates more jobs and opportunities for our people. As businesses grow, they need to hire more employees and are able to increase wages. 

When people are more secure about their jobs and income, they spend more on goods and services, which further stimulates economic activity. Government revenues are further boosted as revenue collection increases.

The improvement in sentiment is informed by the effective transition to a new administration with wide support across society and the continuation of the reform agenda started during the sixth democratic administration.

On the other hand, the sentiment is supported by actual progress in addressing some of the country’s most pressing economic and social challenges.

Nowhere has this been more evident than in the work done to resolve the energy crisis. The country has had more than 200 days without load shedding. This has made a considerable difference to the lives of citizens and the operations of businesses. This work has also unlocked unprecedented levels of investment in the energy sector.

The ongoing reforms in the logistics sector are improving the operational performance of our port and rail networks. This will have a positive effect not only on export industries and broader economic activity, but also on the lives of citizens. 

It is still early days for the Government of National Unity. The growth of our economy is still to pick up pace. However, a firm foundation is being laid, our growth prospects are being revised upwards and we are heading in the right direction. 

It is clear that the improved confidence of the South African people and the positive sentiment among investors are well-founded. Our task now is to work together to further encourage hope and optimism by making a real and substantial difference in the lives of all South Africans.

With best regards,