TIME FOR STATE TO STEP UP
Business is trying to provide economic leadership but without a credible government to partner it, its efforts may be drowned by SA’S growing economic and fiscal crisis
SA’s business leadership is trying hard to do the right thing. It has reengaged with government; formally pledged to create jobs, and support transformation, entrepreneurship and skills development; and it is rallying a national consensus that will make it part of the solution to SA’S mounting crisis.
The decision to attempt rapprochement with government comes after much soulsearching by the CEO Initiative, a body of 80 CEOS formed to salvage SA’S reputation after President Jacob Zuma’s axing of former finance minister Nhlanhla Nene almost two years ago.
The initiative worked hard with his successor, Pravin Gordhan, to stave off SA’S sovereign downgrade to junk status, but its efforts were scuppered when Zuma fired Gordhan in March this year.
The body beat a retreat, further bruised by the Zuma faction’s attacks on “white monopoly capital” and a resurgence in populist rhetoric.
But with the country facing a growing crisis on several fronts — a fiscal shock due to failing state-owned enterprises (SOES); a macroeconomic shock due to slowing growth and mounting unemployment; and the white-anting of state institutions due to widespread corruption — the CEO Initiative has come back into the game.
Last week it met finance minister Malusi Gigaba for the first time, suggesting a softening of its stance towards government.
“I wouldn’t describe it as going ‘soft’ on government,” says Goldman Sachs MD Colin Coleman. “We have to engage with the realities, use the strength of the financial sector to stop the bleeding in SA and use the expertise and thought leadership in business to help government take the most constructive road forward. Without that engagement we’d be leaving government to its own devices and we would suffer.”
Business Leadership SA (BLSA) has also staged a comeback. On August 23 it signed a contract with the country, pledging to harness the capabilities of business in partnership with government and civil society to make SA a prosperous nation.
“After being [pilloried] and shown up as the enemy, we are putting our shoulder to the wheel and have enlisted the support of civil society and all social partners to say: ‘Let’s pull ourselves out of this recession’,” BLSA CEO Bonang Mohale said on radio.
BLSA’S message is that “business can do so much more” in skills development and in partnering with government, but for business to fulfil its contract to SA, government has to create the right conditions for the country to succeed.
This is where the logic begins to unravel. For how can business promise to create jobs and invest when the investment climate is in the hands of a government that offers no credible economic leadership and whose economic model of state-led development has failed?
The jury is still out on Gigaba’s performance as finance minister, but confidence is beginning to wane.
Counting in his favour have been his moves to appoint a credible director-general, suspend Eskom CFO Anoj Singh and instruct Denel to terminate its deal with the Guptalinked VR Laser, among other things.
On the other hand, he removed Singh only under pressure from the Development Bank of Southern Africa, he hasn’t resolved the situation at Eskom, and is allowing disgraced SA Airways chair Dudu Myeni to remain on board longer than necessary. Last week, Gigaba allowed Schalk Human to be removed as acting chief procurement officer — for many the ultimate barometer as to whether he has the will to act against corruption.
The emerging consensus in business is that Gigaba is smart and understands the gravity of the challenges he’s facing, but the perception is growing that he is a deeply political animal who will shrink away from making the tough political trade-offs required to restore confidence and growth.
Meanwhile, SA’S economic crisis is getting worse. “There are pressures on growth, tax collection and the budget. It’s been loaded with a R10bn hole [from SAA], and then there are the looming public sector wage negotiations and the higher-education fees issue, plus a governance crisis at Eskom,” says Coleman. “If Eskom were to implode it would cause a national fiscal crisis.”
The worst outcome, he feels, will be if Gigaba doesn’t manage to use the political capital he possesses to get things done.
For business, having promised growth and job creation, the danger is that as job losses continue to mount, business and free enterprise will become the scapegoat, and populist policies the solution.
“Yes, the climate is very poor for stimulating growth and creating jobs,” concedes Business Unity SA CEO Tanya Cohen, “We have no illusions in that regard, but that doesn’t mean business mustn’t do what it can. All we can do is look forward and, as constructively as possible, resolve the problems facing us.”
To its credit, there are growing signs that business is embracing the idea of responsible capitalism — from SA Breweries’ new
What it means: Responsible capitalism is on the rise; Gigaba’s shine is wearing thin