DELPHINE GOVENDER: All rather tired of surprises
Corporate SA has not asked Tito Mboweni or other finance ministers for all that much — just no bombshells, please
On Wednesday, Tito Mboweni became the fourth finance minister in five years to deliver SA’s national budget. That kind of dynamic just doesn’t sit well in any country, developed or developing. Not only does it reflect a possible flip-flopping of policy, but it is also symptomatic of a broader environment of uncertainty in which the finances of the country are managed.
In SA, this uncertainty has indeed transmitted itself to the economy at large. Or, perhaps, it is an exact transmission of the state of the country.
As investors in companies, we are in the business of dealing in uncertainties, which is why we pursue a portfolio management approach. In contrast, leaders of operating businesses mostly hitch their wagons to a specific sector or industry. Those sectors, in turn, function within broader macroeconomic, regulatory, geopolitical and practical environments — any of which can work as a tailwind or headwind.
For the past few years, SA corporates have experienced these factors as a series of unrelenting headwinds.
Of course, no company or CEO will run a business solely in smooth, business-friendly times. But the difficulties are pronounced when dealing with a multitude of antagonistic factors, many outside their control. No wonder so many SA corporates have externalised excess capital in investments in developed markets — in Europe, Australia and the UK, for example — rather than investing in increasing domestic capacity or expansion at home, where SA most needs it.
Ironically, many of these experiments in global expansion have been met with awful to poor results — often self-inflicted. And even the proverbial "one-way bet" on currency has not always been a sure-fire contributor.
If the grass is not greener on the other side, how can we hope our policymakers won’t continue to scorch the beautiful earth here?
The attraction of simplicity
Given the clear constraints of SA’s overall income and expenditure, I think local companies would be willing to settle every year for a budget speech that simply contains no negative surprises; that sets the country on a path to predictability; and that contains a commitment to establishing stability and transparency in government spending, and for taxes and incentives. They’d settle, every time, for a budget that commits to "simple" undertakings, such as keeping the lights on so factories can run, shops can trade and banks can bank.
This budget feels more like a tipping point than ever before
If the budget can help in achieving that for the private sector, then I am almost certain the private sector will do what it needs to do for SA’s long-term prospects. I say this with relative confidence: we saw how "Nenegate" marked a seminal shift in the minds of many local business leaders; we saw CEOs as active corporate citizens, unified in applying pressure for the right thing to be done.
Whether you are a politician, a regulator, a CEO, a factory line manager, an investor or a pensioner, this budget feels more like a tipping point than ever before.
The past year brought with it staggering revelations of the extent of gross misspending; it showed the real impact of poorly informed policy, and the devastation that the corruptive practices of a relative few has wrought on the very many.
The lost decade for our economy has brought us to exactly where we are today.
If "tips for Tito" had any sway at all, I am sure corporates’ wish lists would have included: a commitment by the minister to not hike corporate taxes (which are already higher in SA than in most countries); clear transparency around consumer taxes and levies; structural reforms over parts of the public sector wage bill; achievable plans on sustainable, job-creating infrastructure spending; improved efficiency at the SA Revenue Service and similar agencies; reduced bureaucratic burden on, and more incentives for, SMMEs; well-directed spending on education; and the staving off of any further credit ratings downgrades.
There is only so much one minister can do in any one budget speech. This is particularly true for Mboweni, given SA’s current realities. For now, I have no doubt SA companies would have been more than content to simply not get any more nasty surprises.
• Govender is chief investment officer at investment management firm Perpetua