SURE KAMHUNGA: Worsening conditions could reignite civil unrest

As SA remembers the orgy of looting, violence and civil unrest that occurred in parts of Gauteng and KwaZulu-Natal a year ago, triggered by the arrest and jailing of former president Jacob Zuma, one cannot ignore the feeling that the underlying conditions that inflamed people’s anger have actually worsened.

High unemployment in SA, one of the worst rates globally, rising food prices and worsening household poverty are potentially creating a deadly incendiary that could easily result in a repeat of what happened in July last year.

Dented investor confidence, particularly in KwaZulu-Natal, which is only beginning to recover following the recent worst floods in six decades, has not helped government efforts to revive an economy that was already hurting from intermittent lockdowns to contain Covid-19.

While many of the businesses affected by the rioting and looting have been reinvesting to replace damaged infrastructure and premises, others are not spending to the extent they would want to due to concerns about a possible recurrence of the looting.

Even organisations such as Business Unity SA have warned of the risk of a repeat because the conditions that gave rise to the insurrection have become even more prevalent. Unfortunately, the war in Ukraine has not helped SA either; inflation, food prices and higher fuel prices are threatening to slow economic growth and worsen household poverty even further, which can only worsen the simmering social discontent.

Frustration and hopelessness

There is an increasing sense of frustration and hopelessness, not only among the unemployed and poor but in the general populace. Rising inflation, higher food and fuel prices and rolling blackouts, the worst so far this year, have added to the sense of national gloom that is dampening hopes of a better year than was experienced in 2021.

On top of this are the startling revelations at the just-ended Zondo state capture inquiry, whose findings and recommendations will only be as good as to the extent to which the government is prepared to act on them. As it is, many people are counting the opportunity cost of this malfeasance and its destructive impact on the economy.

The irony of the situation SA faces is that the country still has potential to grow its economy, which remains the most advanced in Africa but has not grown fast enough in recent years to create jobs and reduce poverty. Evidence of this potential is the somewhat positive investor confidence, where international companies still see SA as the best investment destination in sub-Sahara Africa.

Recent rating reviews by agencies S&P and Fitch have been cautiously optimistic about government efforts to revive the economy, though they still have SA’s investment grade in junk territory. The success of the recent fourth investor conference, where about 80 investment pledges totalling R332bn were made, bringing to R1.14-trillion pledges made at the combined four conferences, shows there is still an appetite for SA.

The pledges included normal investments to upgrade plant and equipment and also new direct investment. But what is important is that these investments translate into real job creating projects.

Investment appetite

One can argue that the investment appetite would be even higher had the government been accelerating fundamental structural reforms that business leaders and organised business have long complained about. Even the World Bank and IMF have mentioned the slow progress in reforming the economy.

In the same vein, central bank governor Lesetja Kganyago has often said monetary policy alone cannot address these structural weaknesses. Businesses have also been persistently complaining about what they say are policy and regulatory inconsistencies. And they continue to fret about the trust deficit, where it seems as if the government is either unwilling or unable to trust and include business in solving economic problems.

The joke in the executive suite is that the government is good at convening conferences and talk-shops, but woefully fails when it comes to implementing or simply just making or taking decisions. Businesses are also complaining about frustrations with tardy bureaucracy, slow decision and approval processes and the frustrations of dealing with government departments that appear to be working in silos with little or nonexistent co-ordination.

That President Cyril Ramaphosa had to appoint a retired business executive to focus on untangling the bureaucratic red tape faced by businesses is the clearest evidence of the regulatory logjam in the government. It shouldn’t be so given the economic crisis the country faces.

Another example of slow government action is the crisis facing Eskom. The government has known for decades that the utility has been limping from crisis to crisis, as shown by nearly 15 years of intermittent load-shedding, which show no signs of improving, at least in the medium term. The cost of load- shedding is colossal to the economy, with some economists estimating that the prolonged period of stages four to six load-shedding could result in a reduction in GDP of up to R6bn, which is irrecoverable at this pace of economic growth.

Regulatory interventions such as speeding up the licensing of independent power producers could have been made long ago, but it appears that the energy department has fiddled while the power crisis worsened. Proposals to allow independent power producers were either ignored or not speedily acted upon until it became clear the economy was grinding to a halt because of unreliable electricity supply.

Some economists believe Eskom is now the single largest threat to growing the economy and a deterrent to both domestic and foreign investment. And the power crisis is crippling particularly small and medium sized businesses, many of which don’t have the financial capacity to invest in backup power supplies. More drastic interventions are therefore needed because the risk of a national grid collapse — which Eskom has for now ruled out — cannot be ignored either.

Commodity boom

Another case in point is the capacity challenges at Transnet, coming at a time when SA should be fully capitalising on the commodity boom and increasing exports of minerals to earn much-needed foreign currency. At least there has been action to improve operations at the ports, with private sector involvement. But again these were challenges that were known and should have been dealt with far sooner. Then you have crumbling infrastructure, particularly in municipal-run areas, where some companies have either relocated to better run municipalities or are exploring their options.

The country is not short of plans, but there seems to be a lack of political willingness to urgently address these issues. Structural reforms should be accelerated to create conditions to grow an inclusive economy that gives hope to the poor and unemployed, while reversing the deep-seated economic historical inequalities that are still evident.

The government’s role is to create conductive conditions for business, and businesses will respond by investing and creating jobs, in turn boosting the coffers of the tax collector to fund basic services for the poor and marginalised. Had these structural reforms been made sooner and put the economy on a stronger footing notwithstanding the impact of Covid-19, perhaps those lives in KwaZulu-Natal and parts of Gauteng would not have been lost. These were needless and preventable deaths, as was the destruction and looting of infrastructure and businesses.

If last year’s riots were not a wake-up call to the government, nothing can redeem it at this stage. A collective and collaborative approach between the government and other social partners such as business and labour is imperative if the hopes for a better life of the millions of unemployed and those living in poverty are to be fulfilled. SA no longer has the luxury of time.

• Kamhunga is a former financial journalist now working in corporate communications.