South Africa’s regulatory and policy environment means President Cyril Ramaphosa has no chance of getting the R3.2-trillion he says the country needs from the private sector over the next five years to fix infrastructure, says Jannie Durand, CEO of investment holding company Remgro.
“The private sector needs security of tenureship,” Durand says.
“You don’t want expropriation without compensation. You can’t risk a new government or new coalition government that comes into play and terminates your lease. You must have security of capital where government can’t just take it away from you.”
The government needs to make it easier for businesses to employ people by making it easier to fire them if they don’t perform, he says.
And there can’t be procurement legislation that forces businesses “to buy from certain people at inflated prices, because then you’re stuffed”, Durand says.
“You need a competition environment that doesn’t demand obligations from you that make no sense at all, that make intended projects unfeasible and seem to do everything to make sure they never happen.”
A proposed R14bn fibreoptic deal between Remgro’s fibre business Maziv and Vodacom, which was submitted to the competition authorities for approval four years ago, has still not been finalised.
“We would have spent at least R4bn over the last two years on capital expansion into the townships and rural areas by now,” says Durand. Maziv has committed to spend R10bn over five years getting fibre to at least 1-million homes. The proposed tie-up with Vodacom would add R15bn to this and make 10-million homes achievable.
The competition tribunal prohibited the deal in October last year, but Remgro and Vodacom had to wait six months for the tribunal to give its reasons before they could lodge an appeal, which will be heard in July.
“It’s a travesty that the competition authorities are taking so long,” says Durand. It’s “mind-boggling” that the government and the department of trade, industry & competition do not seem to care what a “game changer” the deal could be for economic growth, education and jobs.
The government talks about transformation, he says, but rejects a deal that would give millions of people access to educational and economic opportunities they do not presently have.
Durand says the minister of trade, industry & competition, Parks Tau, who has filed an appeal against the Competition Tribunal’s ruling, is “very supportive” of the deal.
"[The ruling] unfortunately happened before he came, it was out of his hands. When he took over it was already in the process.”
I can tell you that if you’re in business with government, government doesn’t pay its bills, they don’t pay suppliers. You absolutely don’t want to be beholden to them
Tau has given competition exemptions to the sugar industry. Why not in this case? “Because it’s already in court, his hands are tied. He can’t be blamed,” says Durand.
Ramaphosa says he wants R3.2-trillion from the private sector to fix infrastructure, but when it steps up “then this kind of thing happens”.
“It takes an inordinate amount of time in South Africa to get deals passed by the regulatory authorities. And then they put additional demands on you as well which have nothing to do with competition issues,” Durand says.
In trying to get deals approved which would be of obvious benefit to a country with 43% unemployment, businesses are confronted at every turn by obstructive bureaucracy and red tape.
Just to register a company can still take ages despite the appointment of special task groups to address the problem, he says.
It is for all these reasons that Durand told a Remgro capital markets day in April that he prefers not to be in business with the government.
“I can tell you that if you’re in business with government, government doesn’t pay its bills, they don’t pay suppliers. You absolutely don’t want to be beholden to them,” he says.
“Unfortunately, as business we operate under a framework that government provides that is not conducive to be flexible or agile. It’s a stifling regulatory environment policed by government that makes things extremely difficult for anyone wanting to do business in this country.”
Along with the regulatory strictures goes a policy environment that is unfriendly or even hostile to business, he says.
Durand cites the Employment Equity Amendment Act, which gives the labour minister power to impose race quotas on companies.
“Companies coming here need to have a BEE shareholding, which they don’t understand. It needs to be explained to them how they do that. I can tell you they’re flabbergasted by it. They say, ‘You asked us to come and invest, and you’ve got this type of environment?’
“Instead of spending money growing the business, you have to spend it on complying with all these rules and regulations. Some you need, but most are overkill.”
He says he has no idea if the president and his ministers understand the impact of the regulatory and policy environment on the private sector’s willingness to come up with the money to fix essential infrastructure.
“We tell government all of these things, we’ve been quite transparent about it. Hopefully some of them hear what we say, but I don’t see it so much in their actions, to be quite frank.”
Government decision-making seems to be divorced from the immediacy and scale of the jobs and growth crisis, says Durand.
“The numbers are clear enough. We can’t grow at one or two or three percent because then we’re going backwards ... Growing at less than the population growth. To even make a dent on unemployment we need to grow at 5%. If you grow at 1% and your population grows at 2.4% then your GDP is going one way, and that’s not up. We need pro-growth policies. They’re out there, we must just implement them.”
Instead of producing a more pro-growth environment, however, government legislation seems to be doubling down on business and investor unfriendly regulations and policies.
Durand, a member of the business-government partnership formed two years ago, says business is getting “quite transactional” in its engagements with the president and the government.
“It’s probably too early for the impact of this to be seen, but I think it’s going to be critical in the next six-12 months to see how successful these engagements are.”
Why have the results so far not been more evident in the regulatory and policy environment?
“Things move at a different pace in government and in the private sector. We’re quite impatient at the time it takes government to do some of these things. I wish they could be more urgent.”
Entrenched ideological differences between the private sector and parts of the government make fundamental improvements unlikely any time soon, which he says will be disastrous for economic growth and employment.
“Unfortunately, it’s voters that must decide what they want at the end of the day.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.