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A week or so ago, big business and government got together to pledge that the economy would average a growth rate of 3% by 2030. That was itself a climbdown from the 5.4% figure the two institutions had pledged in 2012, when they jointly signed off on the National Development Plan. But is the newer, more modest figure even viable? The Common Sense ran the numbers to find out.

South Africa’s rate of economic growth is easy to forecast. The reason is that the growth rate is determined by two other numbers, the business confidence index and the investment rate, and by reading those two numbers an analyst can get a lead on where the rate of economic growth is headed.

The business confidence index measures the degree of confidence that investors have to commit capital to South Africa’s economy. That confidence is determined by things such as whether enough electricity is on hand, the cost of having to surrender equity in your investment to an empowerment partner, the availability of skilled labour, the health of the domestic economy if your product is to be consumed domestically, the state of rail and port logistics if your product is to be exported, and the threat of expropriation. The long-term trendline for the figure is set out on the chart below.

The figure is an index, so the numbers themselves mean little, but what is important is the trendline and whether it is rising or falling. What the 30-odd-year chart shows is that confidence lifted after 1994, was knocked back by the Asian financial crisis in 1998, lifted strongly until around 2007, was then knocked flat and has since remained roughly half of it was in 2007. Note especially that it remained flat after government and business adopted their reform plan in 2012 and it has remained so since President Cyril Ramaphosa succeeded Jacob Zuma in 2017.

The confidence index, in turn, informs the fixed investment rate, which is gross fixed capital formation as a share of GDP. As its name suggests, it measures how much fixed capital is committed to South Africa’s economy, “fixed” meaning capital invested in hard assets such as factories and machines, as a share of the size of the economy. That is set out on the chart below.

What that chart shows is exactly what is seen in the confidence index, and the reason for this is simple. Confidence informs investment. The figure rose to 2008, fell sharply thereafter, continued down to flat after 2012, continued down to flat after Ramaphosa, and now sits at a lower level than in both 2012 (when the NDP was signed off) and around 2017 (when Ramaphosa replaced Zuma).

From there, go to the economic growth rate, which is set out on the chart below.

The pattern here follows the investment rate, as it must. And the investment rate, of course, follows from the confidence index.

What do these figures mean in a global sense? They are clearly low relative to their 2008 peaks, but how does South Africa compare with the rest of the world? To answer that, South Africa’s fixed investment rate is compared with that of other top emerging markets since 1994. That is shown on the chart below.

It is pretty stark. South Africa is way below its peers.

This, ironically, is something that big business and government themselves understood in 2012, when they set a 30% fixed investment rate target for 2030 in order to get the growth rate to that 5.4% target. That is dead in line with The Common Sense’s maths.

Go back to big business and government’s latest pledge that growth will average 3% by 2030. That is not viable at the current investment rate, and investment is not going to lift at the current confidence rate. So it all seems a stretch.

What must happen to change that? A few simple things.

The first is to refit defunct power stations to get energy production up. There is enough now to keep the lights on as long as South Africa continues growing at around 1%. But lift that to 2%, let alone 3%, and load-shedding will be back. Any investor looking at South Africa figures that out really quickly.

The second is to stop taxing capital via black economic empowerment (BEE). That just adds a cost to investment that makes South Africa unviable for so many firms and projects. Politicians like to point to a firm here or there that says it does not bother them. But that does not alter the fact that if your overall fixed investment rate is half that of your emerging-market peers, then it is bothering a lot of firms (before considering that those already invested here have either set up BEE deals in the hope of keeping competitors out of the economy or just want to stay on the right side of the African National Congress by saying what it wants to hear, even as they invest more aggressively elsewhere, or, as in the case of the auto industry, just to stay on the right side of the government to milk the vast subsidies they receive from citizens).

Third is to put all port and rail infrastructure fully under private management, not the long-drawn-out, half-hearted negotiations on that, which have been dragging on for years.

Fourth is to cull the Expropriation Act. Any firm doing its due diligence on South Africa quickly realises that much of the media and government are lying and that, far from being a land reform measure, the Act allows the seizure of any fixed or movable property for less than market value, and that the government has already expropriated things ranging from mineral rights to water rights and now wants to do the same with medical aid schemes and then pension funds more broadly.

Fifth is “drill, baby, drill”. South Africa could be a top-20 global oil and gas producer, but foreign climate activists and the government’s and business’s own green agendas have put paid to that.

Are those reforms on the card? At this time, no. These are positions that neither big business nor South Africa’s new unity government stand firmly behind. And they’re not a buffet from which you get to pick the parts you like. To get South Africa growing, you need to do them all, wholeheartedly, at the same time.