I was struck by Reserve Bank governor Lesetja Kganyago’s comment last week in the Monetary Policy Committee statement that “a faster growth rate depends on implementing prudent macroeconomic policies and structural reforms”.
He was saying that the monetary authorities can only do so much. In holding the repo rate at its record low of 3.5%, the cost of borrowing is not constraining SA from growing; the lack of reform is.
Organised business has been saying this for years. If you want investment, change the policies that currently choke it off. There is a long list of specific issues. Allow network infrastructure providers access to spectrum so they can then invest in towers and other connectivity. Give mining exploration companies certainty about the regulatory environment and they will start prospecting for minerals.
Let companies have simple access to skilled people they can bring in to run complex operations with an appropriate visa regime. Allow companies to generate electricity for their own operations with minimal hassle. Even better, allow them to sell excess production to the grid.
Those are a few of the concrete reforms that would immediately improve investment prospects. It would change the bleak outlook that business decision makers now face: years of energy disruptions, a slow recovery from the pandemic, uncertainty over mining and other property rights and low consumer confidence.
The macroeconomic reforms needed include fixing the precarious state of the government’s finances. It is difficult for companies to invest to grow this economy while there is uncertainty about whether the government will be able to meet its obligations. That requires prudent management of state resources but also interventions to help the economy grow. Ultimately, the state’s financial position can be restored only by an economy that is growing and generating taxable revenue.
These reforms are widely agreed. It doesn’t matter how you analyse the country’s predicament – you inevitably conclude that these reforms are necessary. We need to seriously tackle long-term growth constraints and make deliberate interventions to change how we do things. President Cyril Ramaphosa has committed to delivering them. There is also a commitment to drive infrastructure investment in the economy.
Yet these commitments have not yet turned into reality. Energy procurement and spectrum auctions have been delayed several times and missed many deadlines. There is no lack of agreement – the failure simply seems to be one of implementation.
Last year organised business, together with labour and civil society, engaged with government through Nedlac to develop an economic recovery plan. After a cabinet process the president released it publicly as the Economic Reconstruction and Recovery Plan. That was an achievement – it showed how everyone is aligned on what needs to be done.
It committed to reforms that are needed, such as the way infrastructure is procured in the public sector to enable greater private investment. But it was all pointless if we are not now following through on the required changes.
Everyone, from the Reserve Bank to organised labour, can see what must be done. We say it repeatedly but little seems to change. As organised business, we remain ready and willing to help to bring reform across the finish line. Now that we are well into 2021, it is time for us to all put our shoulders to the wheel to make these changes happen. We are here and ready to do our part, but we need willing partners to engage with.
Dealing with Covid-19 is a three-pronged approach: an immediate health response to limit infections and deaths; the successful dissemination of a vaccination programme as soon as possible; and oiling the wheels of the real economy. For the latter, I wrote in Business Report, the only way to ensure long-term economic growth – which itself will help us address the effects of the pandemic as well as future crises we may face – is through the structural reforms already agreed upon by government.
The return of stage loadshedding comes at a most inconvenient time. It comes as we fret over the surge in Covid-19 cases and deaths that already have a significant impact on our economic recovery hopes. I wrote in Business Day that we do have options as a country to deal with our energy challenges. This year, the government has to show its commitment by acting on its own policies and unlocking additional generation capacity.
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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