‘Frustrated and anxious’ business leaders step up to help SA fix energy, transport and corruption crises
Organised business has put forward the names of various business leaders to fix problems with SA’s energy and transport sectors, and to tackle festering crime and corruption.
Eskom rolling blackouts, which have surpassed those of 2022, and South Africa’s questionable stance on the Russia-Ukraine war were the final straws that jolted executives of prominent companies to lend a hand to President Cyril Ramaphosa.
Daily rolling blackouts are hitting the pockets of big businesses hard, and SA’s largest retailers have spent R2.6-billion in the past nine months on diesel purchases to run generators so they can trade. The retailers could have invested this money into the economy to expand their operations and create new jobs, but they are begrudgingly spending it on keeping the lights on.
Morale among CEOs dipped even further in May after the US accused SA of covertly sending arms to Russia, which agitated currency markets, making the rand hit a record low. The rand has recovered but the effects of its sharp volatility are yet to come: worsening consumer inflation (through imports), probably pushing the SA Reserve Bank to increase interest rates again, and worsening the cost-of-living crisis for already struggling consumers.
Martin Kingston, the chair of Business for SA (B4SA), a pan-industry body, says executives have been “frustrated and anxious” in recent weeks about the “untenable” socioeconomic crisis gripping the country. “By almost all metrics, the country has deteriorated,” he told Daily Maverick.
It emerged last week that SA’s economy grew by a paltry 0.4% in the first quarter of 2023, narrowly escaping recession territory. But the outlook remains grim, as in the second quarter the economy is staggering under the weight of intense blackouts. Confidence among business owners about the state of the economy, their finances and prevailing trading conditions fell in the first quarter to its lowest level since the height of the Covid-19 pandemic.
The International Monetary Fund has warned that the economy could contract by 1.8% in 2023, and unemployment will rise to 37% if the government does not stabilise public finances and move with speed to reform the economy in areas of energy and transport.
‘A duty to step up to the plate’
Kingston says organised businesses could no longer afford to sit back and do nothing.
“CEOs of large and small businesses are feeling frustrated and believe they need to step in directly to address the problems, which are not new but are increasing. If we are frustrated, we have a duty to step up to the plate and work alongside the government to fix the problems and build back confidence,” he says.
And so the CEOs of leading companies and business lobby organisations that have been vocal about SA’s increasing risk of being a failed state approached Ramaphosa to offer help to his administration to turn the country’s fortunes around.
It emerged from a meeting on 6 June between big business and government that Ramaphosa accepted the help, suggesting that his administration is weak and cannot tackle the problems.
Prominent captains of industry will be brought in to offer their skills, capacity and financial resources in workstreams that will focus on three priority areas: ending rolling blackouts; improving the efficiency of the rail and ports network (operated by Transnet); and keeping crime and corruption in check.
Organised business has put forward the names of Sasol boss Fleetwood Grobler and Anglo American chair Nolitha Fakude (the pair to focus on the energy crisis); former Exxaro boss Mxolisi Mgojo and Toyota CEO Andrew Kirby (to focus on the rail and ports network); and Sibanye-Stillwater CEO Neal Froneman and Remgro CEO Jannie Durand (to focus on reducing crime, speeding up prosecutions and protecting economic infrastructure from criminal syndicates).
The big question is how the workstreams will function and how they will coexist with existing state processes in Ramaphosa’s presidential office, and broader Cabinet.
“In all these interventions, we must be mindful that we are not going to undermine or encroach upon the role of the state. But we want to partner with the state to bring in our skills and capacity,” says Cas Coovadia, the CEO of Business Unity South Africa, the country’s largest business organisation, which is also involved in the workstreams. In other words, the workstreams will complement other initiatives already in place within the Presidency and supported by officials in other government departments.
Not the smoothest of relationships
Organised business and the government have previously forged similar partnerships, which have not led to the demonstrable implementation of proposals, or overall progress. The relationship between the government and business has not been smooth in recent years, with both parties deeply sceptical of each other. Since Ramaphosa first became President in 2018, business has proposed solutions to SA’s pressing economic and social problems and pledged support. But its offer of help has been largely ignored by the government. So, what is different this time?
B4SA’s Kingston says the partnership with the government would build on the success of previous collaborations such as the Covid-19 pandemic response, when the state and industry worked in unison to implement a nationwide vaccine roll-out. He says the workstreams have set clear deadlines for achievements.
The targets on energy include ending blackouts by December 2024, according to a presentation made by business leaders at the meeting with Ramaphosa on 6 June. Achieving this, the business leaders have argued, requires:
- Increasing the maintenance of Eskom power stations – including Matla, Kriel, Majuba and Kendal – to prevent further breakdowns;
- Supporting Eskom’s national campaign to reduce demand over winter;
- Urgently clarifying the leadership and accountability structure of Eskom’s CEO and executive team; and
- Implementing Ramaphosa’s July 2021 plan of procuring six gigawatts of energy from independent power producers.
On the transport and logistics side, the targets include:
- Fine-tuning the policy on allowing private sector operators to independently run the heavy-haul trains that are supposed to pull the coal and iron ore wagons via Transnet;
- Finalising a policy on the private sector’s involvement in the rail network;
- Unblocking engagements at Transnet executive level to allow substantive interaction with the private sector; and
- Developing interventions to prevent cable theft, which results in the efficiency of Transnet trains being compromised.
Lastly, on crime and corruption, big business wants to implement measures that help to speed up the successful prosecution of crime and State Capture cases. Big business wants to capacitate the National Prosecuting Authority with private sector skills, passing legislation to grant the Investigating Directorate permanency, with government recommendations on key intelligence, policing and security reforms to be implemented expeditiously.
There must be demonstrable implementation and progress of all of these targets between June 2023 and July 2024. Big business, through the workstreams, wants to meet every two weeks to track the progress, and to brief Ramaphosa on its findings every six weeks. The public is set to be briefed regularly on implementation progress.
Big business is willing to pledge capital to make the reforms happen. Over the next 12 months, it is prepared to mobilise funding worth at least R70-million to help the government. These funds are set to be contributed to an independent fund called the Resource Mobilisation Fund, and the spending of funds will be audited regularly. The money will be spent on communicating to the public the progress made by the workstreams.
An individual who works closely with Ramaphosa’s Presidency and will soon work with the workstreams proposed by business has poked holes in their ability to be successful.
“The problem with business is their thinking that everyone in government will buy into their proposals. They think directors-general, managers and other implementing agencies have their support. In most cases, they are deeply suspicious of big business, often resisting policy proposals from big business,” said the individual, who didn’t want to be named.
“Regularly communicating implementation progress with the government … it is like business is being co-opted by the government ahead of the general elections in 2024 to push a more positive narrative about SA.”
Dr Iraj Abedian, the chief economist at Pan-African Investment & Research Services, is also deeply suspicious of the vocalness of big business and its need to be involved in fixing the problems.
“They should have been outspoken five years ago [when Ramaphosa was elected]. Instead, Ramaphosa charmed big business by making commitments to business leaders that he would not be able to fulfil. SA’s decline didn’t start yesterday, but years ago,” Abedian told Daily Maverick. He said business leaders were becoming more vocal because problems in SA, mainly the energy crisis, were increasingly affecting their pockets.
“Their financial performance and bonuses are going down because of the need to spend additional money on generators. The problems are now hitting where it hurts the most: their bottom line.” DM
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.