Busisiwe Mavuso takes a look at what the year ahead could hold for South Africa from the perspective of Business Leadership South Africa
I found three news items in early February particularly depressing, but they highlight that it is going to take a combined effort—by government, business, and civil society organisations—to resolve the country’s problems and put it on a sustained growth path. They show how important it is for all social partners to continue working together to solve our problems.
The first is a story warning that by 2026 South Africa will run out of industrial gas—a situation that should have been averted. However, government never heeded the warnings that the Industrial Gas Users Association of Southern Africa has been issuing for the past six years.
The second article, which came out on the same day, explained how local insurers, despite holding AA+ or better credit ratings, were losing out to international competitors in renewable energy projects because of the country’s low sovereign credit ratings. These lost opportunities are often overlooked and difficult to measure, but act as a severe handbrake on our economic recovery efforts. Insurance advisory group Crawford Dougall said the domestic sector was set to lose about R1 billion in premiums this year on the construction of renewable energy projects and this was likely to rise to more than R6 billion over the next five years. This illustrates the wider, consequential damages that our sub-investment grade ratings bring and how important it is to repair the government balance sheet to recover our credit standing.
The third story is about the problems SA is having in getting off the FATF grey list, with the Financial Intelligence Centre reporting that only about half of legal practitioner offices and 42% of estate agent offices have submitted risk and compliance returns. This is a strong reminder that the business sector itself also needs to ensure its house is in order. This is not as simple as some may think. The business sector is disparate and organisations such as BLSA, BUSA, and B4SA have no authority over individual businesses. We do encourage sectoral umbrella organisations and others with influence in the relevant areas to push for compliance among their members. Indeed, already the Institute of Estate Agents has stated it is engaging the sector to help its members to comply.
The industrial gas story reflects yet another self-inflicted crisis where government fails to act in time despite being warned well in advance. There are countless examples but the most prominent is the energy crisis itself, with government ignoring repeated warnings from the late 1990s that electricity generation capacity had to be dramatically increased or the country would be forced to institute power cuts. The damage has been crippling, with power cuts beginning in 2007. We are still paying the cost of the lack of decisive action back then.
There are countless stories with similar themes—South Africa has become excellent at inflicting damage on itself. My fervent hope is that post the elections, whatever administration is elected engages with business so we can work together on fixing our urgent priorities.
There has been a core within government working hard on getting things right, in partnership with the business sector. Here there has been solid progress, and this is what fuels my optimism that we can turn around the negative trajectory we’ve been on for the last 15 years.
This is the reason that organised business remains committed to working with government to resolve the country’s core problems.
We have proven that by working together towards common goals, much can be achieved. Business has been deeply involved with assisting government for many years, but the partnership was given renewed vigour in June last year with the establishment of formal structures and specific workstreams to tackle the country’s most urgent priorities, with the three immediate priorities being energy, transport and logistics, and crime and corruption.
In the eight months since, the partnership, which included the pledges of more than 130 CEOs to rebuild the country, has brought significant progress.
Energy
Much of the work in this space is ensuring that the measures already announced, driven by the Energy Action Plan, are implemented. The publication in September of the Electricity Regulation Amendment Bill and formation of the National Transmission Company of South Africa are major breakthroughs (again, though, both should have happened much earlier). There has been a dramatic increase in both private investment in large-scale electricity generation and rooftop solar, helped by the tax incentives announced in the 2023 budget.
As a result of these and other measures, our analysis shows that this year we will turn the corner on loadshedding, which we expect will reduce in intensity over the next two years.
For that to happen, the scheduled connections of new power to the grid must take place successfully. That includes 1.1GW of new wind power this year and 2GW next year, as well as 2.6GW of solar this year and 5.6GW next year.
Ensuring that happens, as well as completion of the restructuring of Eskom to set up an independent grid operator to allow for an open electricity market, will continue to be focal areas for the government-business partnership.
Of course, the risks to this outlook are numerous and real—including breakdowns in Eskom’s ageing fleet of power stations and recalcitrance about reforms from within the Department of Mineral Resources and Energy.
Logistics
Progress here has been meaningful since the new business-government partnership began in June last year. The National Logistics Crisis Committee was formed, and it has already produced a logistics roadmap, approved by cabinet, that represents the best thinking on how to improve our logistics performance.
Now we need to focus on implementation, ensuring all parties, particularly Transnet, are aligned in doing so. The President can add the political momentum necessary to accelerate progress.
Priority actions include publishing the Freight Logistics Roadmap, gaining parliamentary concurrence on the Economic Regulation of Transport Bill following National Council of Provinces NCOP recommendations, publishing the National Rail Bill, and delivering on Transnet’s recovery plan for the performance of its ports and rails. The latter includes appointing full-time executives, restructuring, and building internal capacity.
Ease of doing business
This is an area where the pace of change is excruciatingly slow. I wrote in a recent newsletter to BLSA members that doing business in SA is fraught with difficulties which are not made easier by the fact there is seeming resistance in some parts of government to implementing the necessary reforms.
Bureaucratic processes need streamlining from the top to the bottom levels of government. At municipalities, red tape affecting small businesses needs to be slashed to enable them to run more efficiently while at higher levels of government, we need the reforms of the skills visa process to be pushed through. New draft regulations were published on scarce skills visa regulations on the day of the President’s state of the nation address, which propose a digital nomad visa scheme. These are welcome but until implemented, businesses trying to hire skilled foreigners face many months of delays, with backlogs of thousands of applications sitting at the Department of Home Affairs.
Crime and corruption
Business Against Crime South Africa (BACSA) was appointed in February as the primary point of contact for business’ interaction with government on crime and corruption through government structures, including the National Priority Crime Operational Committee.
Established in 1996 in response to a request from then President Nelson Mandela for business to join government in the fight against crime, BACSA operated as a division of BLSA since 1 June 2020 but has now been re-established as a separate legal entity to position it for its new role as a key plank in business’ efforts to support government.
The primary goals of the new BACSA are to strengthen collaboration and partnerships between the business sector and government agencies in addressing priority crimes; optimise existing business anti-crime efforts; scale the extensive work already under way across sectors; and mobilise the broader support and involvement in anti-crime efforts across society.
Another area of progress is with the NPA Amendment Bill, which is undergoing parliamentary review. The legislation will allow the Investigating Directorate to investigate and prosecute major criminal syndicates and corruption cases. Once passed, the Digital Forensics Unit will be established.
The business sector is also involved in piloting the modernisation of the SAPS’s 10111 service along with additional interventions focused on priority crimes.
Election risk
The end of loadshedding within six months has already been promised by one political party and there will be many more politicians, with hands on hearts, earnestly pledging other unimplementable interventions for our economy and society. This always brings the threat of populist promises that are impossible to meet and this is not confined to our elections—populist sentiment is rising globally and Time magazine calculates that elections scheduled in 64 countries mean that nearly half the world’s population will be able to vote this year.
It is a year that will shape geopolitical issues deep into the future and that brings many risks—to South Africa individually and to wider geopolitical stability.
Locally, I hope electioneering campaigns are dominated by pledges to see through the implementation of reforms—which is in the national interest—supplemented by solid plans on how to grow the economy and address the unemployment crisis.
Unfortunately, the governing party has already pushed through the NHI Bill, which is firmly in the “populist” bracket and I believe was done purely to gain votes. It lacks detail in crucial areas and has the potential to cause significant damage to the healthcare sector and to the wider economy should tax hikes be instituted to fund it. BLSA believes the bill is unworkable because there is no capacity or funding to implement it, and as soon as it is signed it will be embroiled in litigation on several fronts, including its constitutionality.
The country cannot afford for the political campaigns that are to come to distract from the business of running the country and pushing through the reforms. A reliable power supply and an efficient transport and logistics system would have a huge impact on the economy, boosting productivity across sectors and expanding our exports dramatically. That is the kind of economic growth we need—with businesses expanding and hiring more people and paying more taxes. That will help to improve our sovereign credit ratings and allow our insurers to compete with global players, and that our miners and farmers can export as much cargo as they can profitably sell. Let’s not forget the multitude of small and micro enterprises that simply cannot afford a power supply independent of Eskom and whose operations continue to be disrupted by the power cuts.
That is the one path that will ensure we create a significant number of jobs and turn the tide on the unemployment crisis.
In a recent letter to our member companies, I stated that BLSA is committed to driving forward the reforms we need. We expect the same commitment from government, particularly in an election year. The country cannot afford for leaders to be distracted by electioneering at the expense of the national interest. To put it bluntly, all the progress made so far could have and should have been achieved much earlier but for the government’s slow pace of doing things, often caused by ideologically based opposition from within government itself.
Whatever administration is voted in at the polls, it is important that this business-government initiative can smoothly continue its work, for there is still much to be done.
Busisiwe Mavuso is CEO of Business Leadership South Africa.
