BUSISIWE MAVUSO: Private sector is ‘in the ring’ and wants to do more

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President Cyril Ramaphosa’s words at last week’s Mining Indaba were music to my ears. “We want the private sector not to feel shy, not to stand back,” he said. “But also not to stand on the rooftops and just criticise. We want them to get into the ring, so that we work together to solve our problems.”

He reinforced that message in his state-of-the-nation address on Thursday night and he knows that organised business is fully committed to resolving the country’s problems and we believe we’re assisting government pretty much everywhere we can in that challenging endeavour. We also believe business can do far more if government allowed it to, particularly by opening up more areas of our network industries to private sector participation, which is the best way to accelerate their resuscitation.

Transnet Freight Rail has been struggling to attract much interest in leasing out parts of its rail network because the terms are so startingly unattractive. The most jarring restriction is that private sector operators are being offered two-year slots only, so the heavy investment in rolling stock that would be required is not viable. Another problem is that few of the routes where more capacity is most needed have been put up for lease. These include the iron-ore and coal routes and the lines used by mining, steel and forestry.

With more attractive terms there would be far more interest. Similarly in the distressed energy sector, despite the massive liberalisation of the electricity generation market with licences no longer being required to build a power plant of any size, transmission remains closed to private players. This has become more urgent given that there is no more transmission capacity left in the high-demand areas of the Northern and Eastern Cape, which resulted in only 860MW being approved in bid window 6 of the renewable energy programme procurement programme instead of the planned 4,200MW – a severe blow in the quest to end loadshedding as soon as possible.

Open those ports, rail and transmission sectors to the private sector without onerous restrictions and business will enthusiastically “get into the ring”, as the President wants.

Business is fully committed to reforming the economy and building a truly inclusive economy that creates jobs. It is a moral imperative to reduce social inequalities. Social friction undermines all elements of society including business and we’re extremely concerned about the risks that social inequalities bring.

That commitment to SA’s future is strong because business is so heavily invested in the country. It’s not only through investing in previously monopolistic entities that the private sector is supporting government. Organised business provides support in numerous areas by providing resources and expertise, or even funding. Major areas of support include Operation Vulindlela, the unit in the Presidency that works with National Treasury to overcome obstacles to reforms, the National Prosecuting Authority and the distressed municipal sector.

But outside of these direct measures aimed at reforming the areas of the economy that are dysfunctional, business’ contribution to the country is massive. The obvious concept of business being a national asset is not accepted in all quarters in this country.

BLSA commissioned financial and economics consultancy Quantec to quantify the national economic footprint of BLSA member companies. In the latest research it studied the financial data of 62 companies (this included some non-BLSA members) and also assessed their contribution to economic resilience in the context of the Covid pandemic.

Two of the findings jumped out at me because they highlight how important it is for the economy to escape the low-growth trap. The first is that every R1m of output generated by the 62 companies generated an additional R3m of GDP, supported 6.15 jobs and translated to R3m taxes collected. The second is that for every person employed by the companies, at least three jobs were supported elsewhere in the economy.

Quantec states that the 62 companies’ direct contribution to output was about R3.4bn (or 30.82% of the national economy) and R1.5bn (27.52%) to GDP, supporting about 2.5-million jobs. “The impact is even more extensive when the economic impact of the suppliers’ suppliers is also included,” the report states. “This is the indirect impact. When adding the businesses’ indirect impact, the total direct and indirect impact on output was R4.2bn (37.83%).”

These kinds of multiplier effects throughout the economy will be even further magnified in a healthy, fast-growing economy. This emphasises the importance of getting our energy supply stabilised, our transport and logistics sector functioning efficiently and turning around the distressed state of municipalities, among other reforms. That will provide the foundation for accelerated economic growth where the multiplier effects will be more pronounced, directly addressing the country’s triple challenge of poverty, inequality and unemployment.

• Mavuso (@BusiMavuso2) is CEO of Business Leadership SA. This article first appeared in Business Day.

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