FIFI PETERS: South Africa will host the fourth annual SA Investment Conference (on 24 March). It all started back in 2018 as part of President Cyril Ramaphosa’s drive to raise R1.2 trillion in investments over the next five years that was aimed at growing the economy and creating jobs. So far, according to numbers from government, South Africa has been able to attract R774 billion in commitments, and is hoping to attract a whole lot more.
Business Leadership South Africa (BLSA) CEO, Busi Mavuso, says that in order for the country to stand a better chance of attracting more, President Cyril Ramaphosa will have to turn the conference on its head. She joins the Market Update.
Busi, always a pleasure to speak with you, ma’am. Just exactly how does the president go about doing that, turning the investment conference on its head?
BUSISIWE MAVUSO: Fifi, good evening, and thank you very much for inviting me. If you think [about it], the president is really going to have to utilise the opportunity tomorrow to rather talk about what they have to deliver as the state, and what they’re actually going to deliver to make investment or to make South Africa investible, as it was. I think he’s really going to have to focus on what it is going to take and what government is willing to do to deliver investment in this country by improving our competitiveness, by improving our productivity and cost of doing business, thereby enhancing max returns for capital providers that are investing here.
The compounding cost of regulatory overage/overreach, the barriers on skills, the labour rigidity, the relative cost of levies and taxes, the inefficiencies of our SOEs (state-owned enterprises) and municipalities, the high-cost public sector…., not to mention the human cost of corruption, crime and waste have meant that we have an environment where returns on capital in South Africa have sharply declined, hurting corporate margins, and South Africa’s attractiveness to investors….
So I think we should be spared the theatrics of making people stand on podiums and say ‘this is how much I’m actually going to invest’…
Because, when people stand on podiums and make those commitments, Fifi, those commitments come with implicit conditions precedent, and the most basic of those conditions precedent is that the system has to work, that the network industry at the very least have to be functioning.
So if you’re going to be sitting with energy security issues, if you are going to be sitting with ports that are dysfunctional, where companies are subjected to have to take their consignment to the Maputo Port, and have to spend more money to bring that consignment back into South Africa, it makes it difficult to try and lure investors into the country. …and hopefully with timelines, Fifi, because we’ve been talking about these things for the past – I’ve stopped counting. I don’t know if you’re still counting. We’ve been talking about these things forever.
These critical reforms that are going to make South Africa regain this position as the investment destination in the African continent as a gateway to the African continent, we really are going to have to put timelines to it, and put further plans in place in terms of what we are going to do, [and] by when.
So my view would be that it’ll be more useful for us to sit and listen to that, rather than to sit and listen to people talk about investment commitments that have already been priced in, or tax investment as it were.
FIFI PETERS: I agree with you. Less pomp and ceremony would be great because I’ve attended the conferences in which you have these companies pledging these millions and billions of rands. Even before the pandemic, when this conference started in 2018, a lot of those pledges didn’t necessarily translate into higher growth for the economy, because we didn’t get that – or even more jobs for the economy because, again, we didn’t get that.
But Busi, not to be the president’s spokesperson, but rather just to acknowledge what has been done so far, we have had positive steps being made in the renewable energy space, particularly when it come[s] to self-generation or private generation.
We have had a bit of respite when it comes to the corporate income tax that has been reduced a bit. We have seen a finance cluster or a Treasury that is really serious around towing the line and making sure that we stay in budget as much as possible. I think that generally most people are saying that we are doing quite well on that front. We’ve also had quite a number of efforts and steps made to try and rein in corruption.
So on a score between one and five, how do you think business is likely to rate those interventions as having improved the business environment to invest?
BUSISIWE MAVUSO: This is not all doom and gloom tomorrow. I think it’s going to have to be important, and I think I’ve actually said as much in one of my articles. But I think we are going into this investment conference under a different climate where, to a point, Fifi, the self-generation for 100MW – that lifting of the licence [requirement] happened. We are going to be announcing bid window six soon. Two reform measures from the ports front … have been announced around the opening up of the port for increased private sector participation, and the second one being the establishment of the Transnet National Ports Authority operating as an independent company.
We have just seen spectrum being auctioned last week, raking in R14.4 billion. The red tape [team] has actually been announced and … appointed. We had a brilliant conversation with [the head?] last week as big business.
We also had the efforts on the SOE reform front, where you’ve got the feedback …… that is actually looking at what SOE reform is going to look like. So we are actually going into this with some form of a positive spin, as it were.
So, from a reform perspective, we are moving along, Fifi, and I must say that it was also very encouraging to see a positive pro-business ideological shift, if I may call it that, from both the president during the Sona, as well as the finance minister during the budget speech.
So I think it is … definitely a different climate.
But if I were to be sceptical, I would say that everything that the president has been saying we have had before. I think now it’s time to say how we actually accelerate the implementation… The economy’s at the edge of the precipice. We cannot be moving on this low pace when we’re sitting with 70% unemployment in terms of young people that are unemployed, [with a] 45.6% unemployment in terms of the standard definition, where you have more people that are unemployed than those that are employed in all the provinces except Gauteng and the Western Cape.
So we cannot continue doing what we have done and think that were going to get a different result, because we’ve been saying these things under different bad economic conditions. Our economic conditions have worsened.
We have just come from the July riots… It is, how do I even put it, really a dire and difficult environment that we find ourselves in as South Africa. So the announcements and the shift in ideology and all of that is absolutely crazy.
But I just wish for a certain degree of urgency, and I think as much as government has got all the will in the world to do this thing, maybe it is also going to have to address the serious skills exodus and the state incapacitation, because maybe that is where the rubber hits the road. Maybe he’s got the greatest of will in terms of implementing all of these things, but where it needs to be implemented it is not happening.
An important determinant of a functioning state is the administration, and without proper administration, Fifi, you cannot have a capable state.
Time is a serious problem, so we are announcing these things, but who’s supposed to do it? If you agree that we’ve got a serious capacity gap, how are you planning therefore to intentionally bring in the private sector skills and capacity to be able to deal with some of those things? So maybe the shift in conversation, if the president was actually going to take us into his confidence in terms of what he is doing to address this incapable state that we currently sitting with as a country.
FIFI PETERS: Sure. Busi, I think that we’re going to have a lot to talk about following what does happen over the conference tomorrow, and I look forward to further engaging you and further reading some of the commentary that you write in your opinion pieces, following what is said and announced tomorrow.
But ma’am, we’ll leave it there for now. That’s Busi Mavuso, the CEO of Business Leadership South Africa.
I will tell you, early on today there was a statement that was released out of PPC. They are the biggest cement company in South Africa. It was quite concerning to read from PPC that the infrastructure spending that had been promised from national government, according to PPC, they’re not really seeing that coming through in their books.
You’d imagine that building a whole lot of the bridges and all the various infrastructure that is needed would require quite [an amount] of cement. They did report in their trading update today that the increased cement sales that they thought they’d experience as a result of government pushing forward on infrastructure spending at an accelerated pace was not necessarily happening. So quite concerning things there. But yeah, let’s wait to hear what is announced at the investment conference.