The frustration of business leaders with the crisis facing the SA economy was palpable on Tuesday as industry figures red-flagged glaring energy problems and lack of clear policy direction among the country’s ills.
There was little expectation that finance minister Tito Mboweni’s February budget would deviate from the depressing message of his October speech without a clear political decision to shift economic policy, said the president of Business Unity SA (Busa) Sipho Pityana.
Pityana was speaking on the sidelines of Busa’s Business Economic indaba, held in Sandton, where he called for decisive action to address the "unprecedented economic crisis" facing the country.
The conference came with SA beginning the new year on a depressing note as load-shedding by embattled power utility Eskom continued, business confidence levels hit historic lows and expectations of economic growth waned.
State spending, largely to support flagging state-owned enterprises (SOEs) such as Eskom, is expected to push government debt to 71.3% by 2022/2023, while the budget deficit is expected to average 6.2% of GDP over the next
three years.
The government’s tenuous finances, along with poor growth prospects, are the main risks to a cut in SA’s final investment grade credit rating by Moody’s Investors Service.
The policy proposals from the Treasury required unambiguous support from the government, said Pityana.
Ratings agencies have stressed the need to deal with the crisis facing Eskom, and address fiscal policy.
S&P Global Ratings MD and regional manager for Africa Konrad Reuss said that Eskom’s operational challenges needed to be fixed "as quickly as possible", while greater momentum on structural reforms needed
to be seen in the budget in February, according to a Bloomberg report.
S&P already rates SA government debt at junk status, with a negative outlook.
The return of load-shedding, together with weak economic data and prospects of a downgrade by Moody’s, has seen the rand reverse its 2019 gains against the dollar. It was also hit by emerging-market volatility amid mounting tension in the Middle East.
The rand has lost 2.8% against the dollar so far in 2020, the second-biggest drop among 24 emerging markets tracked by Bloomberg. It was flat at R14.4022/$ by 5.47pm on Tuesday, having traded at R14.4991, the weakest level since December 16.
The currency is one of the critical factors that the SA Reserve Bank, which is due to decide on interest rates on Thursday, looks at when assessing the outlook for inflation, which it aims to keep between 3% and 6%.
Addressing delegates at the gathering, Mxolisi Mgojo, the president of the Minerals Council and CEO of Exxaro, pleaded for "the political will to just implement" the reforms needed to move the needle on growth.
"The plans are there, it’s been well articulated, a lot of conversations have happened with government," he said.
The industry had identified the Eskom crisis, continued uncertainty about the mining charter and state capacity particularly at local municipal level as key challenges, he said.
Business despaired in the face of policy paralysis and in the absence of policy certainty, said Mark Barnes, former CEO of the SA Post Office.
"A lot of these issues have been issues on the table for a long time and … it takes a long time to get to a resolution or the resolution is partial, and I think that is where some of the frustration lies," said Jacko Maree, chair of Liberty Holdings and one of President Cyril Ramaphosa’s investment ambassadors charged with attracting direct investment to SA.
But Ramaphosa moved to address the undercurrent of despondency, reiterating the government’s efforts to deal with policy challenges and overhaul the capacity of the state.
He acknowledged the threat posed by Eskom, saying the government was paying "continuous attention to it". Leadership at board level had to be streamlined, he said, and the utility now had a new CEO who was working to address challenges.
Other interventions by the state included efforts to step up visa reform, release broad-band spectrum and address the leadership challenges at the SA Revenue Service and the National Prosecuting Authority.
He would soon pronounce on the long-awaited SOE council aimed at overhauling moribund parastatals and improving the alignment of their mandates, he said. "Government is moving ahead addressing all those issues which you have raised." Though it may be slow, he called on business to keep raising the issues with his administration to get it to "up the tempo".
But the state would be moving ahead with policies such as land reform, said Ramaphosa, despite private investors’ misgivings with some aspects, such as the ANC’s plan to amend the constitution to make explicit conditions under which the expropriation of land without compensation can take place.
"This year we are going to have to finalise the legislation and the constitutional construct on the land question," he said.
Ramaphosa called on the business community to participate in a "much more proactive manner, including through proposals to donate unused or surplus land". The business community should also "be part of the solution when it comes to this most important issue".
donnellyl@businesslive.co.za
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