Nedbank CEO Mike Brown has added his voice to calls by senior business leaders for less talk and more action on the structural reforms needed to kick-start economic growth.
Echoing the sentiments of FirstRand CEO Alan Pullinger, who last week bemoaned the “glacial pace” of reform efforts, Brown said SA needed to act “yesterday” to cut red tape dramatically to boost investment, particularly in power and energy. Brown said red tape was undermining President Cyril Ramaphosa’s surprise decision in 2021 to lift the threshold for embedded power generation to 100MW.
“People look at their choices and broadly they say: ‘developed markets — low risk, low growth; emerging markets — higher risk, higher growth’,” Brown told Business Day in an interview on Wednesday after Nedbank posted annual results showing profit rose 178% to R12.39bn in the year to end-December 2021.
“Unfortunately, if you don’t have the higher growth, you’re only left with the higher risk and therefore you don’t attract any investment,” he said. “So it’s absolutely vital that we structurally lift our growth rates.”
Brown’s plea for more proactive efforts to open the power and energy market to greater investment comes just a day after Stats SA announced that SA’s economy grew 4.9% in 2021. While that showed the economy is gradually clawing its way back from the Covid-19 devastation, it still leaves GDP smaller than it was before the pandemic, given that it shrank 6.4% in 2020.
Forecasts for economic growth for the next three years do not bode well for reducing SA’s record unemployment rate, which has surged to almost 35%, meaning swathes of people have no hope of finding a job.
While the Treasury expects GDP to expand 2.1% in 2022, Nedbank is forecasting a more sedate 1.7%. Growth for 2023 and 2024 is expected to remain well below 2%, according to the Treasury’s Budget Review.
“If you look at our forecasts for the next three years they’re all sub-2%,” said Brown.
“Exactly like the minister of finance said in his budget speech, we cannot aspire to be an emerging-market economy with sub-2% growth rates.”
Brown said that while Ramaphosa’s decision to allow private companies to generate their own power without a licence up to a threshold of 100MW was a positive step, the red tape involved in implementing that investment renders the decision meaningless.
The National Energy Regulator of SA’s “processes associated with getting that approved are still unchanged, so people have got a thousand hoops they need to jump through in order to do it”, said Brown. “Instead of getting the energy into the system yesterday, we keep waiting and waiting for various approvals.”
Brown was speaking shortly after Eskom announced on Wednesday morning that it would move to level 4 load-shedding due to unexpected breakdowns at some of its units.
The state-owned power utility said the level 4 blackouts are expected to last until the end of the week, and it plans to move to stage 2 from March 14.
“Existing companies have learnt to live with load-shedding, but anybody contemplating a new investment that requires security of electricity supply is extremely unlikely to do so in the current environment. That means we don’t get new growth and jobs as a consequence.”
Brown also bemoaned bureaucratic inefficiency in other areas of SA’s economy, which he said is deterring investment. “Just look at the absolute inefficiency of most departments responsible for infrastructure and administration ... be that motor vehicle licences, the freight and rail network ... These things need to be reformed yesterday to attract investment, lift growth and get more people jobs. If we don’t do that we will continue to have an unemployment crisis in our country. If you look at things like ports and rail at the moment, it’s definitely more talk than action.”
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