Business Leadership South Africa (BLSA) chief executive Busi Mavuso has flagged concerns with the ANC’s plans to address unemployment in South Africa.
Writing in her weekly open letter, Mavuso cited the ruling party’s weekend lekgotla statement which calls for a ‘compact to decisively address unemployment and poverty’.
The compact, according to the statement, would see businesses make verifiable commitments to expand investment, and support localisation and black empowerment.
“Business is always happy to employ more people. Every business wants to grow. But we must be clear about the conditions under which businesses can employ more people – and I am afraid that the lekgotla statement displayed confusion about this,” Mavuso said.
“When we think about how we should be incentivising business to achieve certain public policy objectives, we must be realistic. We cannot treat business as if it’s some single entity we can negotiate with and appeal to their social consciences.”
She added that businesses do not invest because they have made commitments, and government must help set up the environment to get the best possible outcome for jobs.
“There are hundreds of thousands of informal and formal businesses in South Africa, many in fierce competition with each other. The only thing they can commit to – because it is implicit to being in business – is to try and survive and thrive as businesses.
“We should instead be asking the real question: why is it that businesses are not investing, growing and employing more people?”
Mavuso said the stark reality is that South African business is not nearly as profitable as it needs to be to grow.
Statistics South Africa figures show that company profits collapsed in 2020, largely because of the pandemic, she said. For the year, net profits were 86% lower than in 2019.
“This slump was somewhat understandable given the pandemic, but the longer-term trend is just as sobering – business profit margins have been falling since 2008.
“In 2019, after-tax profit margins across the economy were at 2%, reflecting a steady decline from 2008 when they were at 6%. 2020 will stand out in the record books – profit margins were only 0.3%”.
This weak profitability has many consequences, Mavuso said – without profits, there are no savings to finance investment. She added that a lack of profits means there are no returns on that investment, so businesses can’t borrow to fund investment either.
“This is the reality that I wished the ANC lekgotla had engaged with. If we are to address the unemployment crisis it has to be by changing the maths for business.
“They must see opportunities to generate returns that are commensurate with the risks they must take. It is only then that they will be willing to take on the risks of borrowing or investing their savings. It is only then that they will be able to grow and ultimately employ more people.”
This cannot be achieved by ‘compacting’ but can only be achieved by seriously looking at the challenges businesses face in trying to generate profits, Mavuso said.
This includes the:
- High costs and unreliability of energy;
- Inefficiencies and costs of our ports and transport networks;
- High cost of broadband and telecommunications;
- Lack of quality of skills that employees bring from the education system;
- Poor safety and security situation businesses must operate in;
- Unreliability of local government services.
“There is much that can be done to address each of these and many other important issues. Organised business is certainly willing and able to engage with all social partners to find ways to do so. But this cannot be done through a compact based on impossible expectations of how business works. That will get us nowhere,” Mavuso said.