There are “some signs of progress” with regard to concerted efforts between government, business and labour to avoid a credit rating downgrade to junk status.
“The progress may be slower than all of us would like, but certainly there is progress,” Ralph Mupita, CEO of Old Mutual Emerging Markets, told delegates at an Old Mutual Investment Group conference at the JSE.
Following concerns about South Africa’s future in the wake of Nenegate in December last year, the CEO Initiative started off as an engagement process between business, government and labour to address the country’s tepid economic growth and other structural issues to avoid a downgrade, but the initiative has evolved beyond a focus on the rating to address a need for more structural long-term growth.
Mupita’s comments follow a tumultuous few weeks in political and economic circles. Futuregrowth announced in August that it would not extend any new loans to six state-owned enterprises due to concerns about governance. Its parent company, Old Mutual, distanced itself from the decision, but the move raised questions about whether the initiative was reaping rewards. An announcement by Mining Minister Mosebenzi Zwane about an inquiry into banks following the closure of Gupta-business bank accounts also raised eyebrows, although it later emerged that Cabinet did not support such an investigation.
While economic growth remains well below the levels envisaged in the National Development Plan, it has improved slightly, but fears remain that the country’s sovereign credit rating could be downgraded to junk later this year. State-owned enterprises such as Eskom and Denel have publicly been at loggerheads with National Treasury while demands on the fiscus are rising amid calls for free tertiary education.
At the same time South Africa is struggling to address poverty, inequality and unemployment.
Nicky Newton-King, CEO of the JSE, said this was not a time for South Africans to fear, but to understand that it was unsustainable to have a widening Gini coefficient (a measure of income inequality).
She said it was incorrect to argue that business had not been involved as there was a lot of “unbelievably constructive” business engagement in South Africa, although she said it was not enough.
“The reality is this country is not working well enough for the people that are economically marginalised.”
Newton-King said there was going to be a lot more tumult and business would have to think differently about how to balance returns to investors with the needs of society more broadly.
There was a realisation that 100 CEOs don’t just “fly to Cape Town for lunch”, but because they were concerned about the future of the country.
South Africans should realise that the current environment was “a space of business unusual”.
Newton-King said while she was convinced that people realised it, the jury was still out about the extent to which stakeholders grasped that they would have to change the way they balanced returns and long-termism.
“I don’t think we should be waiting for some magical thing to happen. We have to internalise the fact that the way we do things in this country needs to change.”
Dr Thandi Ndlovu, CEO of the Motheo Construction Group, said the partnership between business and government “could be better”.
She said business was not coming to the party as much as it should because there was a sense of suspicion when business approached government with a proposal.
Ndlovu, who is involved in low-cost housing, said if government could be a little bit more trusting of partnerships and co-investment in certain infrastructure projects, a lot of progress could be made.
She said in the recent past there had been public-private partnerships to roll out significant infrastructure projects. Over the past week, one such project in which significant funds had already been invested was cancelled after the minister who was previously involved was replaced. In creating the partnerships essential to the growth of the economy, business must be trusted to be doing the right things for the country.
But business must drive the process.
“I just have a sense that business sits back and expects that these things will come through government and it is not happening.”
The fragmented nature of business alignments such as Business Unity SA (Busa), Business Leadership SA and the Black Business Council also diluted efforts to create an environment where business could thrive and call government to account, she said.
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