BLSA CEO’s letter 14 December
POSTED ON: December 14, 2020 IN BLSA CEO's Weekly, Covid-19, Economic policy, Employment, Political economy by BLSA
By Busi Mavuso
To say this year has been tumultuous is an understatement. We had to deal with the pandemic, the downgrading of our credit rating and the Zondo Commission.
I doubt there’s ever been as great a need for a holiday. South Africans have faced several epoch defining issues in one year. The pandemic. The downgrading to junk of our credit rating. The Zondo Commission. It would have been a stressful year had we had only one of them, but we have instead had to contend with all three and much else.
That we have managed through it is testament to our resilience as a nation. When the virus first took hold and government took the decisive step to lock the country down, we pulled together.
Government, business and civil society jointly established the Solidarity Fund, to which many people from all walks of life contributed. Business came together and created Business For South Africa as a voluntary effort to pool our resources to support the nation in the battle against the pandemic. We have all worked to fight the virus while limiting the damage to our economy.
However, the war is not yet over. The spike in infection rates clearly shows we are in a second wave. Despite the festive season being a time to relax, we cannot let our guard down. We must be completely committed to observing protocols on social distancing and wearing masks.
We are likely to face additional measures to restrict activities in hotspots with which we all must observe. Compliance with the rules is a bear minimum. We all have a responsibility to avoid situations that unnecessarily risk exposure.
There will also be no rest in our battle against corruption, in which the Zondo Commission has been our ground zero. Last week McKinsey agreed to pay R650m to Transnet and SAA (adding to the R1bn it paid back to Eskom two years ago) and senior executives testified to at the
Commission about how it was ensnared in corruption linked to the Gupta family. Also, engineering group ABB agreed to pay back R1.56bn to Eskom for unlawful payments linked to the construction of the Kusile Power Plant.
Accounting firm Deloitte also agreed to pay Eskom back R150m. These are important acts of restitution, though the recovery of reputations is going to be a long process.
Showing how some among us will not be getting much of a break, the Constitutional Court has agreed to hear an urgent application from Deputy Chief Justice Raymond Zondo on 29 December to compel former president Jacob Zuma to testify before the Commission. The former president is, of course, an important source of information in piecing together how the years of state capture undermined our institutions and who was responsible. On this front, again, the war must still be fought.
The other major challenge is our economy. While last week we had positive news on the pace of the economic recovery, the third quarter GDP was still 6% below the same quarter a year earlier. President Cyril Ramaphosa has delivered an economic recovery plan that envisages the structural reforms we have long needed in our economy to put it on a higher growth path.
While next year we can look forward to the end of the virus as vaccines come on stream worldwide, the economic battle will be far longer. The pandemic has left us with 1.8-million fewer jobs, consigning many of our people to poverty. We were already in a recession before it hit and our people have now faced five years of declining average income.
It will take as many years just to get back to where we were. Part of the economic battle is repairing the state’s financial position which has resulted in the downgrades of our credit rating deep into junk territory. This can only be done by reducing government’s consumption expenditure, of which the largest part is civil service salaries. The government has proposed smaller increases than originally budgeted.
With the private sector having taken a major beating through the pandemic resulting in plummeting tax collections, it is inevitable that the public sector will have to cut spending to arrest our rising debt. Failure would trigger a fiscal crisis that would massively reverse our economic progress to date and see us lose our sovereignty to lenders.
We need to rest. It is important to recharge so that we can come back ready to confront these challenges. I wish you a safe and happy festive season with those you love. Thank you for the spirit of collaboration you have engaged with and I look forward working as hard next year with organised business and other social partners to steer our country onto the right economic path.
As difficult as this year has been, next year we have to tackle our challenges with renewed vigour. As a country, we have our last chance to halt the deterioration of our economy and reorganise it for long-term growth. The economic recovery over the next couple of years is going to rely on the ability of the state to move much faster in implementing reforms, I wrote in Business Day.
One thing we have to get right in 2021 is to ensure that we are among the countries first in line for a global vaccine rollout, I wrote in my Business Report column. Only then can we begin what will be a hard climb to rebuilding confidence among everyday South Africans and businesses.
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.
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