CEO’s Weekly Newsletter – 12 February 2024

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I don’t think it is properly appreciated how hard it is to run a business in South Africa. Electricity disruptions are the most obvious challenge for small and big companies, but there are so many other obstacles, from navigating employment regulations to getting suppliers, including the government, to pay you promptly. And if you rely on trading goods across borders and are therefore at the mercy of the logistics system, business has become considerably harder over the last year.

At the State of the Nation address five years ago, the first the president made of the sixth democratic administration, the importance of improving the business environment was a priority. Back then, the president pledged to reduce the regulatory barriers for small business and to work with social partners to build an ecosystem that supports and nourishes entrepreneurs. But at last week’s State of the Nation, there was very little on the importance of improving the business environment. It has sadly disappeared from the agenda.

We’ve seen little from the president’s red tape unit. Even though it was established years ago with the intention of smoothing the experience of businesses but it did not get a mention in the speech, even though two years ago the president prominently said the unit was set to “improve the business environment for companies of all sizes”.

While some regulatory reforms have eased the burden on business, particularly the ability to install solar electricity with tax incentives, and for larger companies to build their own generating capacity, it has overall been getting harder to run companies. Skills have been harder to find, thanks to the weak performance of the education system and the loss of skills overseas. On the day of the speech, new draft regulations were published on scarce skills visa regulations and a proposed digital nomad visa scheme. These are welcome, but they are still months away from coming into force, despite a new visa regime having been a priority for years. Meanwhile, any business trying to hire skilled foreigners faces many months of delays. There are backlogs of thousands of applications sitting at the Department of Home Affairs that are simply accumulating. You can just imagine what it does to your business when a critical person required for a new production line or engineering project simply can’t arrive for work because of delays in getting a visa processed.

Crime and corruption are another worsening challenge for business, with construction mafias and business forums extorting businesses across the country. These are a serious cancer spreading through the business environment that requires concerted attention between business and government. Tackling crime and corruption is a key workstream in the partnership between business and government to deal with our most urgent challenges. While the president positioned tackling crime and security as a key priority, the focus was on boosting the numbers in the ranks of the police. However, what we urgently need is a substantial improvement in the performance of crime intelligence, investigations and ultimately prosecutions.

Business has taken a very pragmatic approach to dealing with the challenges to the business environment. We have pulled together resources to support various interventions in partnership with the government, from focused efforts to improve the performance of key rail lines to fixing Eskom’s plants. We will work with those who want to work with us to deliver change.

The difficulty for the President is that many in his government do not in fact want to deliver the changes necessary. Whether out of ideological resistance or vested interests in the status quo, resistance to implementing the necessary reforms is a problem all over government. The presidency’s Operation Vulindlela is an effective intervention to push forward reforms and make sure they actually happen, but the President’s speech is often strong on imagination but then strong on stagnation when it comes to translating vision into reality. Ultimately the President needs a cabinet that shares his reform vision and is committed to its swift implementation. When reforms hit delays, it is often simply because decisions aren’t being made and bureaucratic processes are not being pushed forward. There can be many reasons for that, but a lack of political will at the top of departments often seems to play a role.

If we are to deal with our many problems, we must focus on improving the business environment. It is key to enabling companies to establish and grow. Growing companies create employment and taxable revenue that can drive real change across the country. We at BLSA are committed to driving that 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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