Senior officials at Investec have joined the call to reduce regulatory requirements in South Africa, warning that government will risk losing further investments if rules are not relaxed.
Speaking to BusinessDay, Investec chief executive Fani Titi and local banking operations boss Richard Wainwright said that if the government does not implement structural reforms, the overall macro economy will not grow to a significant degree in the long term.
Wainwright cited an ‘avalanche’ of regulations, particularly for small and medium-sized businesses, which he said was strangling the economy. The two also raised concerns about the precarious state of Eskom and the continued delays to procure additional power from independent power producers.
Titi further called for the breakup of the monopolies currently held by many state-owned companies, such as Transnet.
“We are not competitive — and its basic things, as opposed to rocket science,” he said. “We’re not trying to land men on the moon or go to Mars. Just get electricity that works that isn’t a constraint on the economy.
“Just get goods from one point to another so the economy can function properly. Just allow businesses to do what they need to do without overburdening them. It’s simple things.”
This follows similar comments by Nedbank chief executive Mike Brown who said it was now particularly important for the government and private sector leaders to step up and make decisions that are right for the country.
Brown said South Africa has historically been given a lot of leeway, but since the March 2020 downgrade to junk status, it has run out of runway and now needs to develop an environment that is more conducive to doing business.
“The recently-released World Economic Forum Risk report highlights the severe impact that the pandemic has had on inequality, particularly in the developing markets,” he said.
“For South Africa, this increasing gap between the rich and the poor has been exacerbated by the loss in local tourism, whilst the relatively low vaccination levels compared to developed markets has also resulted in more stringent lockdown regulations – this also having a negative economic impact.”
Sibanye-Stillwater Neal Froneman has also been heavily critical of the current state of South Africa’s economy and government – citing a key lack of leadership.
“My view is now that we are practically a failed state. It starts with inequality and poverty.” He added that this was not an issue limited to the mining sector, but was broadly applicable to South Africa as a whole.
“This is a lack of people at the highest levels taking proper action against lawlessness, against crime, and it filters all the way down through the system. But, ultimately, because there is no economic growth, people are poor, people are angry, and, of course, there is a lack of capacity to deliver services.”
Froneman said that crime in the country has also escalated out of control, with ‘mafia-style shakedowns’ for procurement contracts becoming a frequent occurrence.
He said that this was becoming increasingly common as the law is not enforced and there are no repercussions.
“And because mining companies are seen as prosperous, and they do have services, they get targeted because everyone wants a part of it.”
“Government leadership has created this problem and they are doing nothing. The government can’t deal with it because it goes against their ideology. There is neither the capacity nor the competence to deal with it.”
Stop treating ‘business’ as a single entity
Business Leadership South Africa lead Busi Mavuso said that the government needs to shift the way it sees businesses in South Africa, and to change its approach in dealing with them.
She said that ‘business’ isn’t a single entity – with thousands of individual companies having divergent goals and often competing with each other – and the government can’t just say that ‘business’ needs to come to the table and make changes, and that ‘business’ needs to create jobs.
“This kind of thinking is incoherent – ‘business’ cannot bind itself to any of these kinds of objectives. Only individual agents can enter a contract,” she said.
Instead, the government needs to realise that it is the one that sets the rules – the playing field – in which these businesses operate.
“Government can and does enter into contracts with companies all the time for all kinds of goods and services. But it cannot hope to enter such a contract with the whole of business in the same way – there is no such agent out there.
“That is why policymakers need to focus on the kind of environment their policies create – the playing field – in which businesses operate. That is the way you get what you want from business,” she said.
“If you want businesses to expand, employ more people and invest, it has to be profitable for them.”
She said that the government needs to look at the environment it has created for businesses to operate and ask whether it has done enough to make it appealing for companies to take the risks of supporting its goals.
“What factors make [businesses] uncertain about whether investing is a good risk to take? How does the cost of things – from getting goods to ports or accessing the internet – affect their prospect of generating a return? How do the costs of hiring employees – not just the wages but the related costs like setting up tax payments, filing returns to the department of labour and other parts of the bureaucracy – affect their willingness to hire?”
“The answers to these kinds of questions can help government see what must be done to get what it wants,” Mavuso said.