The state ignores business’s help for economic recovery at the people’s peril
Eskom may yet prove the downfall of the country unless something is done and done quickly — but despite the meetings and proposals and input, the government seems incapable of taking action
The latest PwC Global CEO Survey, in which CEOs from SA participated, paints a grim picture: as many as 40% of them plan further job cuts. This figure, which PwC says is unprecedented since it included SA in the survey in 2010, compares with just 21% globally. Even more worrying is that at least 51% of local CEOs shed jobs in the past 12 months compared to 37% globally.
This shows the damage Covid-19 has caused to what was already a fragile and limping economy. It also shows that investor and business confidence, which was at a record low even before Covid-19 hit SA, is not expected to recover significantly in the near to medium term. Against the backdrop of record unemployment of over 32% — more than 46% using the expanded definition of unemployment — the PwC survey findings on employment trends constitute a perfect storm for government.
Finance minister Tito Mboweni has made optimistic predictions of GDP growth of as much as 3.2% this year, after a record fall of about 7% last year, the worst since 1946 according to Stats SA. But given the crippling power cuts by Eskom and the prospect of more lockdowns, this prediction could turn out to be overly optimistic at best and uninformed at worst.
The impact of Covid-19 aside, what is clear is that the government is running out of time to revive Africa’s most advanced economy. On numerous occasions, business leaders have complained about regulatory uncertainty and policy inconsistency. What baffles CEOs is why the government, which seemingly has improved its listening skills when engaging with organised business, always falls short when it comes to implementation.
President Cyril Ramaphosa frequently makes encouraging and welcoming promises about the need for public-private partnerships, and numerous meetings, conferences and summits have been held during the past two years to drum up investment. But things are not happening. Without ignoring its impact on the economy and livelihoods, one cannot lay the blame for the economic malaise the country finds itself at the feet of Covid-19. The pandemic merely exposed the fracture lines in the economy, as well as the depth of social and economic inequality.
Had the economy been on a better footing, and had the government been more proactive in dealing with these structural weaknesses, the Covid-19 storm would have been far easier to handle.
If the current economic crisis, compounded by persistent load-shedding, does not prove a wake-up call then nothing will
At the core of SA’s problems is the government’s slow decision-making processes and, importantly, a lack of implementation capacity and credibility. Some government departments continue to operate as if nothing has changed. Talking to business leaders, you can’t but help empathise with their frustration at what they perceive to be a lack of policy urgency in government. Numerous proposals are sent, meetings are held, but decisions are in short supply. And when decisions are made, they are either contrary to what the private sector expected or the complete opposite of what was agreed or proposed.
The recent load-shedding, coming barely two months before winter, has raised the spectre of a winter of significant economic disruption. Eskom is not giving the country any confidence that it has solutions to the electricity crisis. Ageing power plants and equipment and a maintenance backlog are undoubtedly real issues, but the frequency of the power cuts seems to point to a deeper problem than the public is being told about. You get the eerie sense that one day the national grid will simply collapse, plunging the country into its worst power crisis ever.
This is where government lethargy is being exposed. The power ships proposed in terms of the department of mineral resources and energy’s risk mitigation programme could provide temporary respite, though at great cost. Yet independent power producers (IPPs) have repeatedly said they can supplement Eskom power generation; the government has been slow to respond. Only now is there some movement to invite bidders from IPPs. With a predicted a shortfall in the supply of electricity of about 4,000MW over the next five years, one would have thought it was a no-brainer to accelerate the process.
That Eskom is now the single biggest threat to economic recovery and growth in SA is self-evident. And with it goes any hope of attracting big ticket investments, because no investor wants to commit significant amounts of money without an assurance of reliable power supply. The fact that energy demand is coming down as more companies and individuals reduce their dependence on the national power grid is clear evidence of the loss of confidence in the ability of the government and Eskom to solve the electricity crisis. Slowly but surely, Eskom could become another SAA, technically insolvent and kept going on life support.
While Eskom is still too big to be allowed to fail, one wonders whether the government has the urgency and business-minded focus to prevent this. If the current economic crisis, compounded by persistent load-shedding, does not prove a wake-up call then nothing will. We are almost three months into the year, with the economy slowly starting to recover from intermittent lockdowns imposed since March 2020. But this nascent recovery could be still born if the government fails to accelerate policy implementation to take advantage of the “green shoots” of recovery.
Most companies in SA are either in a holding position or considering further cost-cutting through retrenchments and closing non-core operations. Household incomes remain under pressure, with many families choking on piling debt. Retail spending has not yet recovered from last year’s hard lockdowns, while tourism is only now starting to benefit from eased restrictions on movement of people.
But the spectre of more lockdowns remains. Warnings of a third Covid-19 wave and its potential knock-on effects on the economy if the government re-introduces tougher measures, cannot be ignored.
SA does not have the luxury of time. What it has is a business sector willing to collaborate for common good and eventual economic recovery. But the government seems to lack the will to take the hand offered by business to walk it through this tough road. Ramaphosa’s leadership legacy will be built on how the government restores economic dignity to the more than 30-million people living in poverty, and 10-million young unemployed people in SA. That legacy is under threat unless the government acts now and talks less.
Perhaps Ramaphosa needs new blood in his cabinet to give impetus to the recovery process. Only time will tell if he has the guts to take bolder decisions to push the country forward. Right now a sense of national fatigue is weighing down the country and its people.
• Kamhunga is a former financial journalist now working in corporate communications.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.