We’ve had ups and downs but now business and govt must work together

Many have commented that our 30 years of freedom divide into two eras: a first half of remarkable transformation in which the economy and business leaped forward, benefitting from the end of apartheid and our reintegration into the global economic system; and then a second half of regression, with our state institutions hollowed out and declining economic fortunes.

By 2008, we were regularly recording economic growth of over 5%, we boasted an investment grade credit rating and had a sovereign debt:gdp ratio of 24% as well as an unemployment rate of just under 20%. Per capita GDP had leapt from $3,786 in 1994 to $6,356 and would go on to peak at $8,800 in 2011. This created a strong environment for business which rapidly evolved. Major investment took place including mobile phone networks built across the country, making us one of the most connected populations in the world, while our financial sector became a continental giant. Many SA firms became global titans.

Unfortunately, on just about every one of those indicators we have slid backward since. Debt:gdp is now about 75% and growing. We will not even manage economic growth of 1% this year and barely more than that next year. Unemployment is at 32% while GDP per capita has fallen to $6,130. The business environment has deteriorated sharply with energy availability deteriorating every year until this one, the logistics system severely underperforming and an alarming growth of extortion and corruption.

I found myself reflecting over the weekend on how the business and government relationship has evolved through these phases. The default position of business is to get on with it, leaving government and politics to their own devices. The post-Apartheid era was mixed.

Black economic empowerment was created to address the distortions of the economy. The unspoken agreement seemed to be that transformation was the price to pay for growth, and established business was willing to pay it. The Employment Equity Act in 1998 began the process of eliminating discrimination in the workforce and measures to redress past wrongs.

Transformation charters were embraced by mining, financial services and others. Business also benefitted from broadly market-friendly policies, the dismantling of Apartheid-era monopolies, and the opening of global markets. We had abundant and cheap electricity, ports and railways were reasonably efficient, and a global commodities boom drove demand for resources exports.

The global financial crisis of 2008/2009 and the coming into office of Jacob Zuma signalled the end. These two factors compounded to damage the business environment. Commodity prices slumped and a recession took hold. While the economy was suffering that setback, Zuma and his kleptocracy began the work of infiltrating state-owned enterprises as targets for rent seeking.

Institutions of accountability were the next to fall as the state capture machine sought to evade any consequences for the stripping of state resources. With accountability diminished, corruption flourished at every level of government. The few institutions that continued to stand as obstacles, including the Reserve Bank and National Treasury also came under attack.

The relationship between government and business fell to a low point during this period. Formal business itself came under attack from banking branches being occupied for closing the accounts that were being used in corruption to mining rights being stripped from legitimate businesses through outright corruption. The courts system, however, stood strong during this period, reversing irrational state decisions.

The media was superb in digging out and exposing corruption even while our criminal justice system was manifestly failing. Perhaps a low point was the sacking of finance minister Nhlanhla Nene and his replacement by little-known Gupta associate David van Rooyen. Inevitably, the market response was brutal, with the value of government bonds plummeting, threatening a devastating financial crisis. Van Rooyen only lasted barely a week in the position before Zuma relented to pressure from business and political colleagues to replace him with Pravin Gordhan.

When the Zuma government ended, business was ready to lean in to support government in the reconstruction. We responded strongly to President Cyril Ramaphosa’s “Thuma Mina” call, rallying resources to support the reconstruction. I think it is fair to say, though, that both business and the new administration underestimated just how big the task was going to be.

The extent of the devastation of our institutions, from state intelligence all the way down to municipal services, was underappreciated. The state had lost huge numbers of people who had been forced out simply for trying to do their jobs well and honestly. We are five years into the process of repair. Organised business has partnered government on many fronts, from the Tamdev initiative which brought engineers and other skilled professionals out of retirement to mentor public sector counterparts, to the Business for South Africa initiative which is actively working with government on the power and logistics crises and to deal with crime and corruption.

We have set up a memorandum of understanding with the National Prosecuting Authority to provide support for investigations and prosecutions. Perhaps the best example of our joint efforts was during Covid, when the Solidarity Fund mobilised incredible resources from across our society and business worked with government to source equipment and vaccines and distribute them across the country.

We have made progress in our efforts. This year we are finally seeing the fruits of extensive changes in the electricity sector that have enabled massive investment by the private sector in new renewable energy production. In the coming two years load shedding will gradually become a thing of the past.

We are working hard on the logistics crisis and already there has been an improvement in some key logistics corridors. We have a plan to fundamentally transform the system to serve a dynamic and growing economy. These successes give me hope for the next phase of our development as a country. The policy framework is everything – get it right, and over time you get the results.

The state capture era made clear what happens when you have bad leadership and bad policy. We are a country that learns from our mistakes. If you want a business environment that generates growth and employment, there is no mystery about what you have to do: regulate effectively, empower the private sector to invest, and ensure public services work. It doesn’t matter who is in government – those facts don’t change. I am confident that we will get it right in our next 30 years of freedom and will realise our potential as a country.

BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.