BLSA CEO’s letter 15 March
POSTED ON: March 15, 2021 IN BLSA CEO's Weekly, Covid-19, Economic growth, Economic policy, Employment, Infrastructure, Political economy by BLSA
By Busi Mavuso
Not too long ago our economy was growing at over 5% a year and any dip below that was considered a national failure.
Not too long ago the South African economy was growing at over 5% a year. From 2004 to 2007 it became the new normal, with GDP regularly reported around that rate. Any dip below it was considered a national failure.
It is interesting how our perceptions of what is acceptable have changed. When figures for 2020 GDP were announced last week at “only” a fall of 7%, there was relief in some quarters. Indeed, the figures did show a stronger than expected fourth quarter last year, leaving the overall figure better than most forecasts. But we must be clear about this: the figure remains a disaster for the economy and very far from what we should consider “normal”.
Of course, we can debate about potential growth and how figures should be seen in a global context, much of which is outside our control. But we must also resist the pull of gravity towards seeing mediocre and poor performances as acceptable. We must be shocked by such outcomes and use them to redouble our efforts to get the economy growing vigorously.
The shift in perception on what is acceptable has been happening over the past decade, during which growth has gradually been drifting downward. We have barely managed to exceed 1% since 2015, meaning that in per capita terms the economy has been shrinking.
In the face of these outcomes, organised business and others have been calling for structural reforms to fix the potential of the economy to grow. But those calls were increasingly met not with the urgency and shock that the predicament called for, but with a kind of resignation. Particularly under the previous president, there was frustration and loss of hope about our ability to change the trajectory.
Fundamentally we are in a different position now. We can change the trajectory – we have a leadership that is committed to doing so. But we must be careful that the habits formed in a lowgrowth environment don’t constrain our energy and views on what we should deliver. We must get back to our previous peak growth rates if we are to sustainably change the fortunes of all South Africans. That must be our goal and we should not rest until we achieve that.
There are moves in the right direction. Operation Vulindlela is making strides in supporting government departments to implement already agreed policies in areas that can make a big difference. The Economic Reconstruction and Recovery Plan agreed by social partners as the way to overcome the pandemic sets out a clear path to fix the business environment to enable greater growth. The efforts at boosting infrastructure investment can also add positive momentum.
These are the kinds of initiatives we should all be rallying around, across business and the public sector, as well as other social partners.
But there are also steps backwards. Last week another court decision delayed the auction of spectrum by Icasa. The auction is one of those key structural reforms the economy needs, opening up the airwaves for data services by network providers.
It needs to dovetail the migration of analogue TV signals to digital, but that sequencing has not been reliably delivered and the courts are highlighting deficiencies in Icasa’s process.
This is just not acceptable. Icasa must reach out for support to get the process fixed up. It is an independent regulator, and that independence is important, but it must ultimately serve the public interest, which is getting the auction done. Citizens need to be able to trust their regulators to act in their best interests.
Energy remains another front where it is hard to see tangible progress consistently being delivered. We are waiting for the results of the “urgent” round of bids that were delivered to the IPP Office in mid-December as part of the expedited energy procurement round. In the first round of the IPP programme, winners were announced only a month after bid submissions, so it is not clear why we are still waiting in a round that is officially “urgent”. We are also meant to be getting the request for proposals for round 5 of the programme. Why has that not gone out?
Such delays hold up the economy. A return to the growth rates we should be able to expect is deferred. Is our tolerance for these kinds of delays because we have become resigned to poor economic outcomes? As business, we are committed to providing the support necessary to change the outlook. Let us work together to fix the economy with the urgency that South Africans deserve.
Business Leadership South Africa, at its council meeting on March 4, was presented with an action plan for the country’s infrastructure drive followed by a presentation from the Presidency on Operation Vulindlela (OV) – its aims, how it works and progress made so far. The team from the Operation Vulindlela in the Presidency told council members that the President is serious about driving the reform agenda and that he will intervene where there are challenges and obstacles. Read our report on the engagement here.
We need to work together to accelerate vaccination rollout and ensure its success, I wrote in Business Report. The rollout poses the greatest risk to the improved sentiment towards the country, which is stemming from growth of 6.3% in the fourth quarter of last year and rising commodity prices. This is an important project: let’s get it done efficiently.
To ensure that government delivers on its goal to unlock long-term and sustainable growth, it must make sure that its ministers and other senior leaders are held accountable, I wrote in Business Report. In the past 17 years, 60% of the 400 applications to have mineral rights transferred have not been granted and there are an astonishing 238 applications awaiting ministerial approval. The surest way to overcome the challenge of execution is for us to hold ministers and senior public servants to account.
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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