There is agreement in South Africa that the government’s failure to provide a reliable energy supply, maintain an efficient national ports and rail network, and arrest crime and corruption are the three main drags on economic growth.
The view among private sector economists is that if the country could eliminate all three constraints, it could grow by 3% a year. A new Stellenbosch University study puts the total cost to the economy of just port and rail disruptions at almost R400bn last year — equivalent to the loss of about 670,000 jobs.
Yet there’s been much criticism of organised business — under the rubric of Business for South Africa (B4SA) — for joining forces with the government to tackle these problem areas through joint task teams.
It’s not hard to see why some would balk at the patriotic CEO Pledge, which accompanies the initiative and has been signed by 125 CEOs so far, given that the failures are all the government’s. Where, they ask, is the reciprocal pledge that will reverse the government’s deep disregard for business interests?
Afrikaans business rights watchdog Sakeliga says that if organised business groups want to offer pledges, “they should consider pledging to one another, to shareholders and to society to oppose [the] government when necessary and to resist ... damaging state actions and policies that have destroyed shareholder value”.
Centre for Development & Enterprise CEO Ann Bernstein is also sceptical. While welcoming anything that will help fix the issues, she questions the wisdom of business rushing to provide short-term technical expertise to solve perpetual crises that aren’t just about inefficiency.
“South Africa is today in such deep trouble because of a failure of leadership, bad policies, [of having] no real priorities and a flawed obsession with ANC unity to the point that the national interest barely features beyond empty rhetoric,” says Bernstein.
“The consequences are devastating. As it faces accelerating crises, the country is led by a government without credibility that has no leadership, little capacity and no plausible ideas on how to get out of the mess.”
“As South African business leaders we firmly believe in the immense potential of our country. We are committed to building it and have come together to address the current challenges to achieve sustainable, inclusive economic growth. Through strategic partnerships and focused interventions, we have the power to make a significant and positive impact on our nation, creating hope for all South Africans. We are resolutely committed to being a force for good.”
— The CEO Pledge
But organised business feels this is precisely why it has to put its shoulder to the wheel. Business Leadership South Africa (BLSA) CEO Busi Mavuso goes so far as to say that it would be “negligent” of business not to act, given that it is the only constituency with the expertise to assist.
The alternative is capital destruction as firms stop investing, growth slows further and unemployment grinds higher. The situation is urgent, and business believes it cannot delay until after the 2024 election.
Business has already started donating R100m worth of capacity to the presidency to ensure it has the technical expertise to back the National Energy Crisis Committee, whose role is to expedite the deregulation of the energy sector and end load-shedding. It is seeking to recover 5.4GW of energy over the next 12 months.
Mavuso told journalists at a press briefing last week that more funds will be raised to back the two new task teams: the joint National Logistics Crisis Committee and another against crime and corruption.
All three committees are championed by leading CEOs who have drawn in technical private sector experts to assist government officials across numerous workstreams.
Asked whether this support isn’t tantamount to giving “a free pass” to the government, Standard Bank South Africa CEO Lungisa Fuzile replied: “I am unashamedly working with [the] government because I want a South Africa that works and delivers prosperity for everyone. I’m not doing this for the governing party. I’m doing it for South Africa.”
While accepting that business has little choice but to step up given the severity of the crisis, many commentators have asked why it hasn’t insisted on reciprocal concessions from President Cyril Ramaphosa — such as finding Joburg a real mayor or taking a stronger position against Russia’s invasion of Ukraine, or censuring Julius Malema for his incendiary “kill the Boer” remarks.
But Business Unity SA (Busa) CEO Cas Coovadia says B4SA’s narrow focus on spurring the implementation of legislation, achieving agreed targets and improving performance in just three areas is deliberate.
“This initiative is about the practical issues that need to be implemented,” he told journalists. “If the policy issues are dealt with it enables us to effect the practical issues in a far more efficient way, and quicker. But I don’t expect B4SA and this initiative to get involved in serious policy debates because then we start spinning our wheels.”
He stressed that Busa and BLSA will continue to engage the government robustly on policy issues. But the initiative is backed by a joint communication strategy “to disseminate a positive narrative to society and investors” — and that’s set alarm bells ringing.
For many it’s a reminder of how, in 2015, the Presidential CEOs Initiative added private sector conviction to the message coming from Jacob Zuma’s administration that the country was reforming and growth would soon pick up. Then, as now, several business-government working groups were established.
Only, while business was preoccupied with the sideshow of developing technical plans and projects, state capture continued unabated, eroding the very institutions on which a market economy depends.
“Business failed to grasp that South Africa’s problems are political and require a political strategy,” the late Anglo American executive Michael Spicer told the FM at the time. “They are never going to be solved only by the generation of technical projects and plans.”
It’s a view echoed by the Brenthurst Foundation’s Greg Mills and Ray Hartley. Writing in Daily Maverick, they predict that business will help the ANC shore up public enterprises and then, after the election, “watch aghast when the next government (likely to be formed by the ANC or an ANC coalition) brings out a raft of new, populist policies”.
They agree that the heart of the problem is not technical, but political.
“Solving the South African failure to reform thus does not require more institutions, or more institutions working in harness with one another,” they write. “It demands answering the question: why does the government not reform when the problems are clear?”
They suggest this is because even when clear policy decisions are made, there is a reluctance within the bureaucracy and state-owned enterprises to execute decisions to bring in private partners, because this dilutes the rents that accrue to the politically connected.
Private players close to the process agree. They say progress continues to be “actively stymied” by the maze of bureaucracy and “old monopoly mindsets” that prevail, especially deep within Transnet.
As it faces accelerating crises, the country is led by a government without credibility, that has no leadership, little capacity and no plausible ideas on how to get out of the mess
— Ann Bernstein
Even so, things are different this time in that business has willing hands on the opposite side of the table in Operation Vulindlela (a joint initiative of the National Treasury and the presidency). It is also dealing with an ANC and a government that knows it has run out of options.
Still, it will take years for many of these reforms to feed through into growth, simply because infrastructure builds in energy and logistics take considerable time. So there is little evidence to support the contention by the likes of B4SA’s Adrian Gore and Martin Kingston that the initiative will help “reset the economy” and achieve “profound” change. Well, certainly not any time soon.
More likely, say economists, is that it will help the country to just keep its head above water. In other words, a resurgence in growth to about 2% is probably all South Africa can hope for in the medium term — better than 0% now, but not enough to stem the rise in unemployment.
Of course, the new initiative isn’t the only game in town. Sakeliga CEO Piet le Roux wishes the new initiative well but is sceptical, given the poor track record of such interventions.
“Without any meaningful signs of state reform, the partnership risks getting bogged down in funding and project bureaucracy or cosmetic bursts of activity with little of lasting structural substance,” he warns.
Sakeliga’s preferred approach is to build community-based alternative solutions and structures to circumvent failing state services and to litigate against unjust laws, “because then you get formal, final commitments that bind government”.
North West University economics professor Raymond Parsons sums it up well when he says: “The scale of what has to be addressed in South Africa now requires business to walk that extra mile — but with its eyes open.”
Perhaps it really is different this time and business will manage to tread the line between helping to create a slipstream of reform momentum that carries through after the elections, and becoming cheerleaders for a defunct state. If it succeeds, business will have earned the country’s undying gratitude.
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