Tick, tock, time is running out
AMID the doom and gloom of lousy business confidence numbers and shocking manufacturing data, South African retailers continue to shine. Trading updates from Spar, Holdsport and the evergreen Mr Price this week showed that despite our close-to-zero growth rate, South Africans with jobs are spending and companies that serve their customers well continue to prosper.
The question is just how long it can continue. South Africa’s business community is getting increasingly concerned about the future of the country and its ability to grow in it.
Ironically, it is one of the biggest crises South Africa faces right now that could turn out to be a godsend. Eskom’s inability to generate the power we need could be a catalyst to breaking the ideological impasse between the state and formal business sector.
The ANC has regularly included the platitude “Together we can do more” in its electioneering, and the government has included the line in several major speeches by President Jacob Zuma in recent years. However, the words, once spoken, have simply evaporated into inaction.
The Eskom crisis and the ability of the private sector to deliver on renewable energy projects speedily and within budget shows just how useful greater co-operation could be.
There is one catch. Big business and the ANC simply don’t trust each other. It’s not hard to see why. Just this week, the Department of Trade and Industry snuck what it labelled a “clarification” into the new BEE codes that came into force on May 1. The amendment, which did not form part of the in- tensive 18 months of discussion leading up to the new codes, effectively entrenches the principle that empowerment of individuals should be given greater credence when it comes to BEE than the broad-based schemes that have evolved in recent years. The department says the change is because business has been fudging the rules to suit itself. Big business suspects something more sinister.
In the first round of BEE, politically connected individuals were massively enriched. The new codes were meant to be more equitable. It’s not clear what has changed.
The relationship between big business and the government has ebbed and waned since the advent of democracy in 1994.
Democracy enabled business hellbent on offshoring their earnings to do so. Democracy also meant South African business was no longer a pariah and local firms globalised with mixed success as they were able to access new markets.
Many in the government see this as unpatriotic.
Investors, inside and outside South Africa, have been the beneficiaries of this kind of free-market thinking.
Big business, though, has not always reciprocated when it comes to building goodwill. Bread price-fixing and collusion on 2010 World Cup projects were not industry’s finest hour.
At the same time, business is in business to make money and doesn’t care much where it is made. What it does need is certainty, so that when shareholders’ money is invested, it can calculate the probability of generating a decent return. The government is wont to move the goalposts.
New Naspers chairman Koos Bekker told Bloomberg on Thursday that South Africa lacked a coherent economic policy and the failure of the five economic cluster departments to work together was a significant failing. Bekker is simply voicing publicly what many whisper privately.
Sometimes you do have to be careful what you wish for. There is a raft of what business regards as potentially damaging legislation either worming its way through parliament or sitting on the president’s desk waiting to be written into law.
Emerging markets economist Peter Attard Montalto, of Nomura in London, argues that even bad policy would be better than none because it would provide the clarity business is looking for. Others are more circumspect.
Outgoing Sanlam CEO Johan van Zyl, speaking at the Asisa Tipping Point conference this week, warned that time was rapidly running out for a more cohesive approach between business and the government to tackle the multiple social and economic issues the country faces.
The government has tended to pay lip service to the National Development Plan, which, without former cabinet minister Trevor Manuel as its champion, seems to be floundering and is at risk of becoming yet another well-intentioned wad of paper used to fill an unvisited state archive.
“To jaw-jaw is always better than to war-war,” intoned Winston Churchill at a White House lunch in 1954. Britain’s wartime leader had learnt from bitter experience.
South Africa’s problem has become that it has got stuck at the talking bit. Business leaders tell me that there has been an unprecedented level of discussion between themselves and senior government officials in the past 12 months.
Both sides appreciate that they need one another to survive. A healthy corporate sector has a better chance of creating jobs, making profits and paying higher levels of tax, which the state can use to fund the work it is supposed to do. But still there is no action. Perhaps what South Africa needs is a dose of the unthinkable. A much-feared “brownout” for a couple of weeks if the power grid came unstuck could be just what the doctor ordered to get some high-level co-operation.
South Africans always tend to perform well in a crisis. It’s tiresome. But perhaps it’s the only way to put a common goal in perspective.
Bruce Whitfield is an awardwinning financial writer and broadcaster