South Africa has the potential to achieve a 3% economic growth rate, and 5% in the medium term, if the constitutionalists in the African National Congress (ANC) are elected to lead the country, says Goldman Sachs Southern Africa MD Colin Coleman.

“With the right leaders in the right circumstances, we will get to 3%, while 5% is within our grasp in the more medium term,” he told delegates attending the Thomson Reuters Africa summit, in Cape Town, on Thursday.

He anticipated a resurgence of investment and confidence in the economy if constitutionalists were elected and if “patronage politics” were to fall into decline.

“This would see a huge renaissance of optimism, of market confidence and sentiment.”

Coleman said there was likely to be greater interest from offshore institutional investors, fixed investors, local institutions and companies.

“Getting the basics of policy right will see a resurgence of investment into the economy and quick revision to the norm of a 3% growth rate in South Africa.”

Coleman said the next two months to two years would be pivotal. There is some speculation that the ANC elective conference scheduled for December may be delayed, but, ultimately, a decision will have to be made.

“Either way . . . the outcome of that leadership election is critical for the next decade and beyond.

“South Africa is at a crossroads. Choosing our political leadership is like choosing a future. Are we choosing a patronage future – an elitist system – or a constitutional future that gets the spirit of [Nelson] Mandela to drive reforms and opportunities,” asked Coleman.

He said the past few years under Jacob Zuma’s leadership had brought civil society, business and labour closer together. This stood the country in very good stead. 

“Post 1994, the ANC alliance had operated as a strong, tight alliance, with business and civil society outside of the core. But in the recent past, the Zuma administration has seen business, trade unions, the Communist party, and civil society on the side of the Constitution in South Africa. A renaissance of these relationships and potential for social compacting between these parties is a very promising opportunity.”

Ongoing tension as a result of political developments was untenable going forward.

“A vacuum of real political leadership has seen rising tensions in almost every sphere, from health, education, justice and welfare. We cannot continue in that way,” said Coleman.

South Africa’s 27% unemployment rate was also massive cause for concern.

“This level of unemployment, together with inequality and failing political leadership, creates conditions for huge social tension, if not revolution on the ground.”

Coleman said one of the biggest systemic failures in South Africa was that of State-owned enterprises, particularly Eskom.

“Eskom is poorly governed and needs to be cleaned out from a management and board perspective.” 

New technology and the opportunities for a new energy mix could spark big changes, with the revolution in technology potentially doing to electricity what the mobile phone did to the fixed-line phone services, said Coleman.

The government and Eskom would need to become a lot smarter in exploiting new technologies.

Despite current challenges, Coleman said the societal backbone of South Africa was very strong.

“This is a very difficult country to break,” he said, adding that South Africa had a deep and liquid capital market, a very strong media and judiciary that were holding the country together, as well as a highly resilient business environment.