‘South Africa would roar — if we had stability’
Common Cents | Investec CEO lauds ties between business and the government — but pleads for policy certainty
INVESTEC boss Stephen Koseff says the relationship between the government and business is closer than ever, but admits that business is as much in the dark about the future of Minister of Finance Pravin Gordhan as anyone.
“We don’t know what’s going on,” says Koseff, who is part of the CEO Initiative that has been working with the National Treasury to save South Africa from being downgraded to junk.
They have been reporting back to President Jacob Zuma every quarter, he says, and waxes lyrical about the “open nature” of their relationship with government.
He told a workshop at the Gordon Institute of Business Science last week that it had never been closer, in his experience. That goes back to 1986 when Koseff, now 65, became CEO of Investec.
But he admits that perhaps the single most important issue facing the country — Gordhan’s job security — is something business leaders dare not discuss with the government, let alone Zuma.
“We don’t talk about that,” says Koseff. “Because we’re not politicians. We don’t know what’s going on in the heads of the politicians. So we’re not going to know when the president decides to remove a minister or reshuffle the cabinet.”
The lack of certainty is doing the economy no favours, he says.
“We want policy certainty at the end of the day.”
He suspects the government has no illusions about what will happen if Gordhan is removed.
If the financial meltdown following Zuma’s axing of former finance minister Nhlanhla Nene in December 2015 “is not enough of a message to government then I don’t know”, he says.
“If you take out a person like Minister Gordhan, like they did when they took out Minister Nene, you saw what happened to the currency and to bank shares in particular.
“These things are not good for our society. If you want to uplift the poor you need an environment of stability. Most people you talk to understand that.”
He says he doesn’t think Gordhan will be removed, “but I may be wrong”.
“I understand from people out there that they all understand what would happen. They all got a fright when Nene was fired. They saw what happened.”
He says the Treasury, along with the Constitutional Court, the Reserve Bank and the public protector, is a “very key institution” that needs to be protected at all costs if the government hopes to build the confidence necessary for economic growth. Uncertainty around the minister of finance and the Treasury does nothing to build this crucial confidence.
He says business leaders constantly emphasise the need for certainty in their meetings with the government.
So how close can the relationship be if the government won’t take business into its confidence regarding such a critical issue — and business leaders are too afraid to ask?
“There’s a proper dialogue,” says Koseff. “It’s the first time we’ve had proper dialogue with government at a CEO level. We haven’t had that kind of dialogue since I can remember.” Where are the results? “We defended two ratings reviews so far. Obviously we have the big one ahead in June or December that we have to defend. This comes from closer collaboration between business, labour and government. If we can sustain that, we can make a hell of a difference.”
How much harder will it be to defend the upcoming ratings reviews if Gordhan is fired?
“The rating agencies are not going to like any form of instability. They’ll want to know that the minister of finance is going to continue on his present path and that the discipline is going to be there. Otherwise we’ll get a rating downgrade.”
He says the message to the government from business leaders has been consistent.
“We are telling government we need certainty, we need policy stability, we need a growth economy. If you start fiddling with that, you’re not going to have a growth economy and you’re never going to deliver on the needs and aspirations of our society.”
He disagrees that current levels of uncertainty and policy instability mean the government is not listening.
“There has been a big shift in the attitude of government towards business over the last year. But there are clearly people who this doesn’t suit,” he says.
Minister of Trade and Industry Rob Davies told investors in London last month that South Africa was open for business.
“If you want to be open for business you must have a stable policy environment,” says Koseff. “If we get clarity and stability, there will be a lot of money coming into South Africa.
“In our dialogue with government we keep saying we need clarity and policy stability.” But uncertainty reigns? “Uncertainty goes with the territory. They have their own battles that they’re fighting about who is going to lead the country from 2017, or who’s going to be the ruling party in 2019. I can’t get involved in that stuff.”
He points out that Deputy President Cyril Ramaphosa told investors at Davos last month that they would “see a lot more policy stability this year”.
Instead there’s been ongoing uncertainty around mining regulations, the once-empowered-always-empowered rule, the still unsigned Fica bill, and now Gupta friend Brian Molefe being sworn into parliament as a likely precursor to replacing Gordhan or becoming his deputy.
Koseff is reluctant to comment on Molefe.
“We’re hearing a lot of ru- mours, but we don’t know what the president is going to do.”
Koseff could be right about the relationship between the government and business, but which government is he talking about? The one centred on Zuma or the one centred on Gordhan and the Treasury?
“It must be remembered that the president is involved in the CEO Initiative,” he says.
“We give him feedback every quarter. He’s one of the sponsors of the CEO Initiative. We present to him. What he does with it I can’t comment.
“There are many people in government who are receiving our advice well. Not only in the Treasury. In other departments.”
Does he see the Treasury being under threat?
“We hope not. It is a very key institution.”
How badly would it be undermined by the appointment of someone perceived to be in the pocket of the Guptas?
“We don’t know what is going on. There are lots of rumours. We know that there are different factions in government and they don’t all agree with each other.
“We hope that whoever it is will continue on the path of fiscal discipline and managing the fiscus effectively . . . we’re just saying from a business point of view that if you want the economy to grow then you need policy stability, you need private sector investment. And, to get private sector investment, you need confidence.”
Investec is one of 18 banks that the Competition Commission has referred to the Competition Tribunal over collusion in foreign currency trading.
He says that he does not believe South Africa’s banking system is under threat following the furore around forex trade collusion: “People understand we have a very strong banking sector and that it’s one of the assets of our society. There are many emerging markets that have higher growth rates than us but don’t have anywhere near the capability of our financial markets or our banking sector.”
He feels the populist outrage is largely contrived for political reasons, but unwarranted by the facts. He says in any organisation you get a handful of people who cross the line. “The financial crisis demonstrated that people push boundaries.”
He acknowledges that “bankers are hated around the world. They’re seen as fat cats. But they provide a vital role for society. They’re important components of society because they mobilise money.”
He says although there “are some segments of our society that would want to believe we manipulated the rand, there’s no way we could, there is so much volume being traded”.
“So our banking system is something to treasure rather than interfere with.”
Although the relationship with the government could be better, “you don’t get anywhere in life by keeping quiet. You get somewhere by having dialogue.
“South Africa would roar — if we had stability. That’s all we’re trying to say to government. Create stability and policy certainty and the money will come pouring in.”
He “can’t be accountable” for the government’s response.
“But if they keep on leaving things to uncertainty they are going to suffer at the ballot box. At a certain point they’re going to have to wake up to this.”
These things are not good for society. You need a stable environment to uplift the poor The ratings agencies will want to know the minister of finance is going to continue