BLSA CEO’s letter -13 September 2021


POSTED ON: September 13, 2021 IN , , by Admin

By Busi Mavuso

Following the July unrest, many business leaders want to rebuild, but they cannot do it without a sense that government and the rest of the country has their back.


Last night the president did well to make it abundantly clear that vaccination is very important. People who are vaccinated have a far lower probability of serious consequences from the disease. Ultimately this is the route back to a fully functioning economy and freedom for us to get back to normal life.

The progress so far has made it feasible to relax more lockdown conditions. It is important for us to get all parts of the economy back into gear. I was also pleased that the president announced the introduction of vaccine passports. Of course, we must still determine how and when these should be used but having a simple way of verifying you’ve been vaccinated is going to be important. He could have gone further in returning alcohol sales rules to normal and doing away with curfews altogether, but we are taking a step closer to normality.

Last week was a stark reminder of the work we need to do. The first data showing what the violence of two months ago in KwaZulu Natal and Gauteng did to the economy. StatsSA data showed manufacturing fell 4% in July compared to the year before. The year before, remember, faced heavy lockdown restrictions. The fact that we manufactured even less is serious. In June manufacturing had been up 12% compared to the previous year while July was 8% lower than June. We also had business confidence figures last week that showed a fall in the third quarter compared to the second.

This reflects not just the factories that were directly affected by the violence and destruction, but also the ripple effects of supply chain disruptions as those who were manufacturing couldn’t get goods to customers while ports and other key transport nodes were frozen.

Immediately after the violence there were positive messages from key voices in both government and business. Public enterprises minister Pravin Gordhan, spoke alongside trade and industry minister Ebrahim Patel and (now) human settlements minister Mmamoloko Kubayi spoke from the side of the N3 when the road was reopened to encourage the recovery. That was the right kind of symbolism. Government has announced various measures to support those affected, including a R3.75bn support package and rapid access to the Unemployment Insurance Fund for those who cannot work. There has also been good work done to ensure that businesses that were insured can submit claims efficiently to Sasria, the state-owned insurer that covers risks related to unrest, which in turn has promised quick payouts.

These will help those most affected, but the problem is that they don’t on their own change the prospects for businesses who are now having to decide whether to put their money at risk again and rebuild.

Businesses that receive a payout have to then decide whether they will use the proceeds to reconstruct and restart. To do that they need a high level of confidence about the future. Rebuilding is an investment decision – there needs to be high confidence that the returns will justify the risks. There is no longer a sunk cost and businesses can instead decide to use insurance proceeds for other purposes, including building elsewhere in the world, or giving the money to shareholders rather than putting it at risk.

There are businesses large and small, locally owned and foreign owned, that must make these decisions now. For all of us invested in the South African economy, we must all hope that they choose to reinvest. That is how jobs will be protected, tax revenue will be generated and the supply chains that the rest of the economy depend on will be maintained. This is something both business and politicians should be singularly focused on supporting.

We have a window of opportunity to rebuild that confidence. Immediately after the unrest there were strong political statements. Organised business rallied to support the security services and then to assess what would be needed to drive the reconstruction and reinvestment process. We remain ready to assist government in many ways but the momentum has slackened.

There are many distractions – the pandemic, and now an election, among others. But the time is now – if we miss the opportunity to give companies that were affected a positive shot of sentiment, the destruction of July will be locked in and a component of our economy gone forever. We need to be directly supporting businesses, both to rebuild  by offering the right services, but also with a positive political message that demonstrates how the violence was a once off, and that government wants to see them rebuild and will do what it takes to create the right environment for businesses to thrive.

I am ready and able to work with government to support confidence. We know what it will take – engaging with business owners, hearing out their concerns about the future, demonstrating how the environment is going to be positive for them and their businesses. Many business leaders want to rebuild – they are emotionally invested in their businesses and the people that they employ. But they cannot do it without a sense that government, and the rest of the country has their back. That the unrest they faced was an aberration that all of us across the country are determined to put behind us and never see again. Let us focus on doing it – the time is now.

In my Business Day column, I write that Eskom’s annual results failed to ease frustration from investors seeking clarity on reaching sustainability of Eskom’s balance sheet, considering the bill facing the company in its just energy transition. Further, there’s no way of attaining healthier growth rates without dealing with the elephant in the room – our lack of electricity capacity to meet the demands of this economy.  Only that way can we become richer as a nation.

Electricity

South Africa’s economy remains smaller than it was before the pandemic hit and is facing a grave unemployment crisis. Whatever catalysts the government can introduce to boost growth, it needs to do so with haste, I wrote in fin24.

This is a weekly newsletter from BLSA CEO Busi Mavuso.

BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. In 2017, BLSA signed a contract with South Africa, committing business 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.

 


Have your say.
Share your opinion