Africa-Press – South-Africa. FirstRand CEO Alan Pullinger has slammed government’s decision to side with Russia and China amid geopolitical tensions, warning that SA’s indifference to the war in Ukraine is detrimental to the country’s banking sector.
“Our government’s left-leaning and enthusiasm for China and Russia is being noticed by countries vehemently opposed to this war. Ironically, our country benefits far more from trade with and investment from the bloc comprising the US, the UK and Europe than these two countries combined,” he said during the presentation of the banking group’s latest financial results on Thursday.
Pullinger said SA’s major trading partners’ tolerance on this issue is wearing thin, and consequences are now likely to follow.
He said SA’s banking sector is crucially dependent on access to global markets and its access to the US dollar, and the US can revoke that access.
According to Pullinger:
Running out of fiscal bandwidth
He also said government needed to deal decisively with the constraints throttling the country’s productive capacity and growth.
At Thursday’s presentation, which took place amid alternating Stage 4 and Stage 5 load shedding and after SA’s recent greylisting, Pullinger said SA is running out of time.
“With the ever-decreasing growth rates in productivity, capital stock and employment, it is not possible for South Africa to meet its socioeconomic commitments without eventually running out of fiscal bandwidth,” said Pullinger.
He said everyone knows what the solutions are. They have been discussed at great length, but there has yet to be any movement forward to that would instil confidence in businesses and investors.
“The pace of execution and progress has been disappointing, and we are all living with the consequences daily of deteriorating supply and productivity slippage,” he said.
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Pullinger said that while Finance Minister Enoch Godongwana’s Budget speech in February may have started moving the wheels towards addressing the challenge of load shedding to deal with productivity constraints, the big risk to his plan remains, specifically, the underperformance of the energy sector.
He added that it was time the public sector got more involved in rebuilding SA’s productive capacity. Transnet has opened its rail network to private operators, launching the biggest privatisation in SA since 1997.
Some progress
Pullinger said there’s already evidence that President Cyril Ramaphosa’s structural reform plan, Operation Vulindlela, is working, and the private sector is eagerly responding to it.
Still, it hasn’t helped improve SA’s business confidence much. Pullinger said that the debilitating institutional strength and governance, declining rule of law, high levels of crime and corruption, and failing state-owned companies don’t foster an environment where businesses want to commit long-term capital.
“It’s important that business is able to commit to the long-term future of the country. After all, investment requires a belief that the future will be better than the present,” he said.
The greylisting of SA by the Financial Action Task Force (FATF) made things worse, he said.
Although Pullinger said National Treasury, the Financial Intelligence Centre and the SA Reserve Bank deserve “a shout-out” for their efforts to try to avoid it, he thinks it was not unexpected.
Pullinger believes that the reputational damage it has caused could lead to lower capital flows into the country. The financial sector will suffer higher compliance and transactional costs.
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