investment

BLSA CEO Newsletter – 30 October 2023


POSTED ON: October 29, 2023 IN by Admin
investment investment

By Busisiwe Mavuso

The MTBPS therefore is an opportunity to build confidence on several fronts. It can demonstrate fiscal discipline by reining in spending and limiting tax increases or greater debt issuance.


Sport has the remarkable ability to show us who we can be. The Springboks’ nail-biting win was the result of dedication, hard work, an excellent plan and unrelenting delivery on the field. My congratulations to the team on their brilliant performance.

Another performance this week is going to be as critical to our plans to turn our economy into a winner. The medium-term budget policy statement is critical for business confidence. I hope we will see a clear commitment to fiscal discipline, spending decisions that support growth and backing for the structural reforms we need to get the economy growing.

Finance minister Enoch Godongwana is faced with tax collection shortfalls because companies have not been profitable enough, mining royalties have slumped and overall economic growth has been weak. But, with an election year on the horizon, he faces considerable demands on spending – to allow the public sector wage bill to grow, extend the social relief from distress grant, bail out state-owned enterprises and fund many government departments to extend services.

I expect the minister to hold the line, while also maintaining balance between spending and investing – consumption expenditure does not grow the economy. We need to see investment, particularly in the infrastructure needed to drive economic growth. The minister has signalled that some infrastructure spending will be delayed as the government seeks to shore up cash to manage its way through the shortfall. The fiscal discipline that implies is good for business confidence though infrastructure is key to resolving constraints on the economy.

These competing demands make the minister’s job very difficult. I wrote in yesterday’s Sunday Times that there is a straightforward way to help relieve the pressure – embrace the private sector. Partnerships can enable extensive investment in infrastructure, but by the private sector instead of the state, as we’re seeing in electricity. Business has also been a partner in supporting the state’s capacity. Through the Resource Mobilisation Fund and our memorandum of understanding with the National Prosecuting Authority, for example, we are funding important interventions to support the state with specialist skills. These have a specific purpose – to unlock serious constraints that are worsening the business environment. Technical skills are sorely needed to support the fight against corruption, and to get our electricity and logistics systems working. The private sector has the skills and the resources so it makes sense that we support the government in this way.

But I want to make it clear that this is not a blank cheque, nor an invitation to dependency. The objective is to support the development of state capacity for it to manage the economy and provide services. This support must be properly regulated. Where partnerships underpin investment, the roles and responsibilities of each partner must be clearly defined with the policy decisions clearly in the domain of government. I am pleased we have made good progress in optimising the role of the private and public sectors in electricity as an example. We are working towards a competitive electricity market with an independent grid operator that can buy from the lowest-cost producer, an outcome that is very good for the business environment and a much-improved long-term structure for the sector. It provides important lessons for other sectors, most obviously logistics. But where support entails capacity and skills, it must be focused on transferring those skills and building the public sector. Such interventions must be temporary.

It is important to make this clear – our focus is on improving the environment for business. I am very pleased we have been able to partner with government to support it with key interventions, and I believe that this is leading to positive outcomes for the business environment, but the premise of our engagement is about fixing what has gone wrong. We have been a willing partner to help overcome the damage of state capture, and then to confront the Covid crisis, but our goal remains to put these behind us and resume a “normal” functional relationship between the public and private sectors, in which a capable state regulates and provides public services and business can grow the economy and employment. Our partnership, therefore, has an end point.

The MTBPS should help the journey towards that end point. Choices must be made on how to allocate scarce resources – supporting the professionalisation of the civil service is more important than simply supporting the headcount. The budget also needs wider cabinet support while several departments must work in harmony to deliver the structural reforms needed. We need key institutions to have the financial resources to stand on their own two feet, with Transnet and Eskom being the most obvious examples. The minister could take us into his confidence on how the financial stresses of these SOEs are going to be managed. Of course, it is not Treasury’s job alone – the operational and governance issues need to be addressed by other cabinet members, but business confidence will be built if we see coordinated action happening between departments.

The MTBPS therefore is an opportunity to build confidence on several fronts. It can demonstrate fiscal discipline by reining in spending and limiting tax increases or greater debt issuance. It can show that the budget decisions are driven by growth considerations, spending on upskilling and improving the public sector, while also supporting investment. It can support private sector investment by endorsing the state’s commitment to partner with private investors to drive infrastructure investment (including through reforms to public-private partnership regulations). And it can demonstrate a whole-of-government approach to our challenges, by showing how spending decisions will enable other departments and state institutions to reform and become capable.

The Springboks showed us how to win under huge pressure. Working as a team we can win in the wider field of our economy. This week, the minister must drive forward.

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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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