Goldman Sachs report sparks debate

The report provides a breakdown of the country’s economic progress since 1994.

Colin Coleman, head of Goldman Sachs South Africa, in the Talk Radio 702 studio on 4 November 2013. Picture: Sebabatso Mosamo/EWN

On Monday, leading global investment banking, securities and investment management firm, Goldman Sachs released a report titled 'Two decades of freedom: A 20-year review of South Africa', which highlights social challenges slowing down economic growth.

Finance Minister Pravin Gordhan has subsequently said many of these challenges are addressed in the NDP.

But doctoral fellow at the Public Affairs Research Institute Tracy Ledger says the report does not necessarily favour the poor.

"It is a business-friendly report. The question is whether or not it's a poverty-friendly report. These two things are not the same thing, but are often conflated in people's minds."

Ledger said she doesn't think there is anything new in the analysis in terms of what drives the economy and the structural factors that underpin poverty, as well as the reasons South Africa has a persistently high unemployment rate.

One of the NDP's chief architects Minister in the Presidency Trevor Manuel has once again defended the plan as well as its Employment Tax Incentive Bill, saying the bill is important for change.

"The National Council of Provinces (NCOP) is going to pass this piece of legislation before Parliament this year so we can start implementation in earnest in January. It's fundamentally important," says Manuel.

Goldman Sachs South Africa head Colin Coleman said the report, which took six months to compile, is aimed at balancing South Africans' views on the country's economic status.

"We are concerned at the level of emotion and negative sentiment around South Africa in the short term, so we thought that looking back over a longer term perspective would give some balance to the debate."

Coleman said while major gains have been achieved in the two decades, the economy could do better.

"We had a golden period of growth - 3.6 percent from 1994 to 2007. Up to the global financial crisis, inflation fell to six percent and we managed to bring about 10 million people into the middle class."

The report also warns that a number of challenges remain, such as a stagnant unemployment rate, high debt and inequality, as well as the effect of tense labour relations on some industries.

Goldman Sachs says if South Africa aims to lift its growth rate to five percent, it will need to attract between R50 billion and R100 billion a year in foreign direct investment over the next two decades, from the current level of R19 billion.

Coleman said government and business need to work together to overcome the remaining challenges, adding, "This is not a time for finger pointing".

To view the full report, click here.

To listen to The Money Show's full interview with Coleman on 567 CapeTalk/Talk Radio 702, click here.