South Africa: What Will It Take to Improve SA's Private Sector Investment Climate?

analysis

South Africa is long way off from having a private sector that is confident enough to invest in the country's future without the government's support. COVID-19 has made that economic ideal of vibrant private sector driving strong economic growth seems even further away. But it is now that the government needs to be working through these challenges and putting the required elements in place.

The dust is settling on the past few weeks of hard-to-hear economic and fiscal news. The sense of gloom was somewhat lifted by the promise of a private sector-backed, government-led infrastructure programme that could help nudge the South African economy out of recession and closer to its 2% long-term potential growth rate.

However, without a pick-up in private sector investment into the private sector itself, the domestic economy is unlikely to achieve its still limited potential, let alone move beyond it, and thus the government cannot afford to see the infrastructure programme as a silver bullet.

But what conditions will need to prevail before the private sector, historically the engine of economic growth, begins to reinvest in South Africa's economic future?

For years the government has been crowding out the private sector, absorbing...

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