BLSA CEO's weekly - 1 Ju

BLSA CEO Newsletter – 16 October 2023

POSTED ON: October 15, 2023 IN by Admin
BLSA CEO's weekly - 1 Ju BLSA CEO's weekly - 1 Ju

By Busisiwe Mavuso

Despite our many challenges, there are positives for the outlook. Good things come from partnerships, particularly between government and business.

The results of last year’s census show good progress in extending basic services to ordinary South Africans. Some 89% now live in formal housing compared to 65% in 1996. Access to water at home is now at 82% of households compared to 61% in 1996. Access to electricity as the main source of energy for lighting is at 95% compared to 58%.

These are good indicators of how far we’ve come as a country in improving the lives of our people. But I take this good news with a level of caution. We are now at what could be an inflection point and complacency is certainly not an option. The economy is struggling, and average per capita output has been shrinking for nearly a decade. Unemployment, particularly among the youth, has been worsening. The performance of our state-owned enterprises has been a catastrophe, leading to the twin crises of electricity insecurity and latterly the deterioration of our logistics system. Government revenue is lagging budgets leading to serious constraints on spending, increasing risks to the financial stability of the state.

We are, though, seized with the challenges and every now and then I see signs of success. Last week we saw news of a major blow to the organised crime syndicates that currently extract resources from Eskom after the SA Revenue Service led raids of coal smugglers and related entities across five provinces. Sars says these syndicates have robbed the state of over R500m in lost revenue, but I think the cost to Eskom of the fraud and theft undertaken by these syndicates will have been multiples more. Organised crime has been a disease at Eskom, driving sabotage, violence, and widespread theft of Eskom resources. Sars’s actions, while principally focused on recovering lost taxes, will have the effect of putting out of business the criminals who currently do so much harm to the utility. Indeed, our concern
over the effect of criminal activity at the utility is what led us to provide financial support for the intelligence gathering efforts of the previous CEO. It also shows how far the restoration of Sars has gone – such actions were unimaginable five years ago. It is good to see Sars taking action, though much more can be done by the police to directly tackle the criminals. Through Business Against Crime, we are working with government to enable this.

One of Eskom’s intractable problems is the debt owed to it by municipalities. It is fiendishly difficult to manage this – do you cut off the municipalities, with the obvious consequences for people’s lives and the political blowback? Do you hope that government will turn around the municipalities so they can meet their financial obligations? One of the interventions to find a way through the mess is the Eskom Municipal Debt Relief Support Programme. This scheme is operated by National Treasury and enables debt relief, provided municipalities meet 14 conditions including minimum collections and a ringfencing of the Eskom account which must be paid first. However, as of the deadline last week, municipalities representing less than half of the outstanding R58.5bn debt had applied. The deadline has since been extended to the end of October and I would like to see many more municipalities apply. However, it is only then that the hard work must begin – the scheme must not result in more damage to Eskom’s balance sheet – the write-offs must be balanced with funding from government. To be sustainable, though, the national culture of non-payment must be turned around. Municipalities must step up collections, ensuring that they collect the revenue and then pay Eskom, and their residents need to pay. This will require a national effort.

Another source of optimism is the Roadmap for the Freight Logistics System, a draft of which was circulated to key role players last week for comment. This is a big step toward confronting the serious problems in our rail and ports infrastructure that are constraining economic output across the economy. The document has been drawn up by experts from industry and government and envisages a reformed logistics system that will serve South Africa much better, with both public and private operators functioning in a well-regulated market. It sets out a promising set of actions to restore the logistics system. I am excited to work together with partners through the National Logistics Crisis Committee to turn around our logistics and the draft roadmap is a good step forward.

So, despite our many challenges, there are positives for the outlook. Good things come from partnerships, particularly between government and business,. There has been major progress on the electricity crisis, with the private sector now building almost 6GW of new generation and more projects in development. Together with important regulatory reforms that are in parliament, I can see the light at the end of the tunnel for the electricity crisis. The logistics roadmap is an important guide that can enable similar progress in our logistics system. Fasttracking the NPA Amendment Bill is equally importantThe fruits of this work will enable the economy to turn its trajectory, generating jobs and the financial resources for government to give people better lives. That will enable progress, ensuring that the next census shows further improvements, rather than confirming an inflection point now.

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.

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