Opinionista Busisiwe Mavuso 2 November 2020

SA’s business environment: Good mechanisms will mean nothing unless there is a laser focus on implementation

I know I speak for all of business when I say we are ready to take advantage of opportunities, to invest to increase production, as soon as we see the business environment improving.

Busisiwe Mavuso

Busisiwe Mavuso is CEO of Business Leadership South Africa.

We’ve now had the Medium-Term Budget Policy Statement (MTBPS), one that Finance Minister Tito Mboweni needed to convince us that state finances are not on the path to collapse. In some ways, he gave a credible pitch.

The spending cuts are not as dramatic and unlikely as he said they would be during the emergency budget in June – but a lot depends on being able to rein in the public service wage bill. That is high risk – politics and legal challenges through the courts could get in the way. It is also a difficult pill for public servants to swallow when cuts are being forced to revenue lines such as policing to raise R10.5-billion for SAA.

The risks on the expenditure side mean there is even less room for slippage on the revenue side, and it is here that business has been working with the government and social partners to forge a clear agenda. We have to deliver economic growth and with it the tax revenue that the government needs to start filling the hole. There is now broad agreement between everyone on what needs to be done – from getting spectrum auctions completed to resolving energy insecurity. The time has come to implement.

Mboweni referred to the Vulindlela programme that will see the Treasury work with the Presidency to drive the needed changes. This fits in with the president’s wider economic recovery plan. These are all good mechanisms, but we will have to stay laser-focused on what matters: implementation. Everything else is talk.

I know I speak for all of business when I say we are ready to take advantage of opportunities, to invest to increase production, as soon as we see the business environment improving. But that is the order in which things must work: we cannot invest until there is a credible outlook for an improved business environment and that requires real changes in the regulations and access to services that business works with.

In advance of the MTBPS, Business Leadership South Africa wrote an open letter to the minister and his team suggesting three straightforward ways to improve the environment for business. We had some positive signs from the minister related to these topics in his speech, but quick implementation would immediately deliver an improved business environment.

  1. Government’s infrastructure push. This is the right move from the state and has the potential to make a huge impact on the future economic wellbeing of the country. But it cannot be fully directed from the centre at every stage. We must see a greater degree of private-led provisioning and financing of bankable projects. Our member firms, including banks and asset managers, stand ready to fund bankable and economically positive infrastructure in significant size in the coming years. Simple changes could open the way, particularly concessions: allowing the private sector to use land, railways or ports for a set period, investing in them and profiting from the returns.
  2. To rapidly solve our energy crisis, the government simply needs to make small amendments to the regulations, then stand out of the way and allow others to solve the problem. The private sector has the capacity to solve the energy crisis, and quickly. It can finance and deliver energy generation projects rapidly and on budget. Companies can develop generation plants for their own use or to supply the national grid, managed by an independent transmission system market operator. This will enable the government to focus on its pro-jobs and pro-local content industrialisation policy that helps effectively manage a “just energy transition” – the inevitable process of shifting energy production from fossil fuels to renewable sources.
  3. Businesses must be free to find the right technical mix of skills to make the maximum impact that will allow them to hire the largest number of South Africans. This means a liberalisation of the key skills visa list and far more efficient administration of it.

None of these requires investment by the state and illustrates how the tight fiscal situation can be managed while still ensuring the economy grows. Wherever there is growth available “for free”, only at the cost of regulatory changes, the government needs to grab it. I think that recognition is clear, at least at the level of saying the right things.

When we get to the point of actual delivery – closed deals with independent power producers through the fifth round of the renewable energy programme or concluding agreements with the successful bidders for spectrum – business confidence will gradually build. But every misstep, such as the confusing treatment of key tourist source markets in the run-up to the peak holiday season (why can Namibia allow in any tourist with a recent negative Covid test, but South Africa has a confusing and shifting list of who can enter?), leaves business unsure and reticent. Business is ready and willing to work with the government to ensure we take the right steps forward. DM/BM

 

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