BLSA CEO Letter – 23 May 2022

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One of the frustrations I have when engaging with counterparts in the public sector, labour and some civil society organisations is the perception they often have of business as a single entity that they can negotiate with. I understand the temptation to do this – we often think of role players like “labour” and “capital” acting in some coherent way in our societies. It makes us think that we can somehow engage with these entities to change how they behave.

But when it comes to business, this just isn’t true. All of us are in business to some extent because we exchange our time or assets with others. Sometimes we organise ourselves into companies to do that. There are tens of thousands of companies, many of them in competition with each other. They have many different objectives – some consist only of their owners, others are largescale employers, some are start-ups and others are mature multinationals.

Sometimes some of those businesses organise themselves into associations that can represent them in certain forums. BLSA is one of those – our members work together through BLSA to engage with others on how to improve the business environment and deliver on the economic potential of the country. Together our members signed a contract with South Africa to increase prosperity for all. Our members make up a large part of the economy and employ millions. But while we are aligned in a vision of the country we want to see, we are not a single entity that can be called “business”. There is no such thing.

This is important because there is often a view expressed that business should “come to the table” or deliver some sort of sacrifice to achieve some or other policy objective, like investing or to employing `more people. But this kind of thinking is incoherent – “business” cannot bind itself to any of these kinds of objectives. Only individual agents can enter a contract. Government can and does enter into contracts with companies all the time for all kinds of goods and services. But it cannot hope to enter such a contract with the whole of business in the same way – there is no such agent out there.

That is why policy makers need to focus on the kind of environment their policies create – the playing field – in which businesses operate. That is the way you get what you want from business. Social sciences like economics research how different rules of the game lead to different outcomes. If you want businesses to expand, employ more people and invest, it has to be profitable for them. Not all business is about profits but no business can survive for long while losing money. And no one, in business or outside of it, puts their money at risk without a reasonable prospect of generating a return.

So, government should always ask itself, how does this environment look to entrepreneurs who are considering putting their money at risk? What factors make that entrepreneur uncertain about whether investing is a good risk to take? How does the cost of things, from getting goods to ports to accessing the internet, affect their prospect of generating a return? How do the costs of hiring employees, not just the wages but the related costs like setting up tax payments, filing returns to the department of labour and other parts of the bureaucracy, affect their willingness to hire?

The answers to these kinds of questions can help government see what must be done to get what it wants. To get more, better quality jobs and faster poverty-reducing economic growth, you have to make it easier for businesses to invest and hire people. You need to do research to understand the impact of different policy decisions and listen and learn from those operating at the coal face about how they perceive the environment.

BLSA is committed to supporting government. We can draw on our members’ perspectives as major investors and employers to help other role players understand how conditions are affecting them. We also work through various programmes like Business Against Crime and Tamdev to provide direct support to the public sector by sharing our capacity. I know that we have good relationships with many in government and share similar objectives for what we want to see happen in our country. To realise that vision we must stay focused on what matters: the business environment that we create.

According to the Small Enterprise Development Agency’s SMME Quarterly Update, SMMEs employed 9.8-million people in January to March 2021. That’s 64% of total employment across the economy. This is why this sector is referred to as the engine of employment creation, I write in Fin24. The report states that there are 2.33-million SMMEs in South Africa. Imagine if just of those were able to hire just one extra person – 1.3-million jobs would be created.

The Mining Indaba made one thing clear: mineral resources & energy minister Gwede Mantashe has an urgent “to do” list, I write in Business Day. We need to sort out long-running policy uncertainty and address red tape blockages. According to the Minerals Council, there are 4,500 outstanding mining and prospecting licences. Without exploration mining is a sunset industry that will exhaust its current reserves, leaving the economy and employment worse off.

 

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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