CEOs of South Africa’s biggest companies are fed up and no longer pulling their punches when it comes to the crisis the nation is in.
This week the CEOs of two major banks and the largest retailer in the country added their voices to the chorus of dismay, highlighting business’s frustration with intense load-shedding, crumbling infrastructure, corruption and crime.
Cas Coovadia, CEO of Business Unity SA, said President Cyril Ramaphosa was running out of goodwill with business leaders after he asked them at last month’s Mining Indaba to “get out of their armchairs and work with the government” — but business had been doing that for years.
“We have been busting our butts to work with the government. If he hadn’t said that, there wouldn’t be all this activity around this. We don’t want to shout from the rooftop about what we do. If the president says we need to get out of our armchairs when all we have been doing is helping, then we must raise these issues,” said Coovadia.
He said the government’s state of disaster mechanism was for unforeseen circumstances and there was nothing unforeseen about the energy crisis. The government needed to show a clear commitment to creating an environment to grow the economy “and there can be no buts to that”.
“We have known about the risk of greylisting for the last three or four years. That is what we have been pushing the government to rise up to. It’s sad to say, we knew that greylisting was coming. We warned the government to take action and they didn’t,” he said.
Intensive load-shedding that is crippling businesses has contributed to the outcry.
I want to say we have our finger on the pulse, we are on the ground, we see every day the hardship people face ... In the end the consumer pays for it.
— Shoprite CEO Pieter Engelbrecht
Sim Tshabalala, the CEO of Standard Bank, said: “You can imagine, if there’s no power, people aren’t able to run their hospitals. If the roads and rail do not work, we can’t get our goods from the farms and the places where food is processed, and we are not able to get it to the retail stores. We’re not able to get our goods from the manufacturer to the ports.
“All of that puts pressure on the country’s finances and therefore on the social fabric, so that’s the consequence. You’ve got high evidence of violence and crime and high evidence of corruption everywhere you turn in our society, which is not a good thing,” he said.
In the event of a grid collapse, “Armageddon will be at our door”, Tshabalala told Business Day, adding that: “I would say with a great level of confidence that on the data and information that we’ve got, grid collapse is possible, but the probability is not high.”
He said while he believed his colleagues should keep their annoyance with government to themselves, there was no overstating how dire the consequences would be if South Africa failed at fiscal consolidation and long-promised structural reforms.
Adding to the despair was the decision this week by S&P Global Ratings to downgrade the outlook on South Africa’s credit rating from positive to stable and the release of GDP figures for the fourth quarter of 2022 that showed the economy contracted 1.3%, which Tshabalala said was disappointing but not surprising.
He said the jury was out on how much longer Eskom would continue to be a drag on the economy, but it was evident the utility’s power fleet would probably not improve significantly this year.
Tshabalala said while Standard Bank and the finance sector had already prepared for South Africa’s greylisting before it was announced last month, the deterioration of South African assets has been under way for quite some time.
He warned that South Africa’s fraught position made it harder for institutions to preserve and build wealth in the economy.
“Importantly, in that context, we worry about our ability to do that, given the fact that we are regulated and the fact that we are part of international networks of payment systems. And we worry intensely that policies or political positions that get taken will prevent us from our ability to access those capital and money markets, in a way that is materially negative for our clients. We, as Standard Bank, will speak out when that happens,” he said.
Mike Brown, CEO of Nedbank, said infrastructure — provided largely by state-owned monopolies that should be enabling higher levels of GDP growth and job creation — “has been deteriorating over many years, including, in particular, the crises being experienced in electricity supply and distribution, transport and logistics, and water infrastructure”.
Brown, whose comments were published in the group’s annual results released this week, added that: “Municipal service delivery is poor and levels of crime and corruption are unacceptably high. Progress on structural reforms to address these matters has been far too slow and the will of the political and public sector to make meaningful changes is uneven and actual delivery is poor.
“This cannot continue, and more urgent and decisive leadership and action are required.”
Last month Discovery CEO Adrian Gore said load-shedding was a “tremendous concern” and “an unacceptable situation given the scale and sophistication of our economy”.
The food sector has also been vocal over the crushing consequences of load-shedding, including the cost of diesel to run generators at stores.
Zinhle Tyikwe, CEO of the Consumer Goods Council of South Africa, which represents the biggest food retailers in the country, said council members had “always complied with every new government regulation, tax and levy”.
“They’ve adapted and adjusted to meet every challenge resulting from government failures,” she said.
“So, government tends to say this sector is going to adjust and adapt to this situation as well. But load-shedding has created a situation our members are not able to simply adjust to … It’s reached a point where it is now unbearable for them.
“We’ve taken all the punches and tried to continue with business as usual. What we’re trying to say right now to government is that we can no longer continue with business as usual.”
Shoprite CEO Pieter Engelbrecht said: “We, as Shoprite, are in a consumer-facing business, we have our finger on the pulse, we are on the ground, we see every day the hardship people face ... In the end the consumer pays for it.”
He said the effect of load-shedding, beyond the cost of diesel, meant the whole food value chain had been hit.
“If the farmer does not have income, there is a risk for unemployment. Then we have abattoirs that cannot slaughter at the right time, which has a knock-on effect on the fast-food industry, as an example,” Engelbrecht said.
He said the high crime rate, which made people feel unsafe, and the way load-shedding created opportunities for criminals to strike, all added to the financial burden on consumers.
Tyikwe said: “We’re saying to the government, take us seriously. We cannot continue to guarantee the availability of food when there is no security of electricity. At some point, retailers are going to have to pass on the costs of having to cope with this load-shedding, and we know that already people are going to bed hungry.”
The food sector had been trying to arrange a meeting with the government to raise these issues, without success.
She says it’s “a scary thought” that at a moment of such crisis in the country, the government can’t seem to find the time to meet council members.
— Additional reporting from Chris Barron
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