South Africa’s list of problems just keeps growing – but there is a glimmer of hope

Key South African industries that are predominately government-owned are a massive drag on business confidence in South Africa.

In a new episode of BusinessTech Business Talk, Busi Mavuso, the CEO of Business Leadership South Africa (BLSA), said that the list of challenges facing businesses in the country has no end.

Significant issues include but are not limited to a weak rand, load shedding, dilapidated logistics infrastructure, social instability, crime, policy and more.

“The list goes on,” said Mavuso.

These challenges have led to many business owners losing confidence in the country’s operating environment.

RMB/BER’s latest Business Confidence Index (BCI) declined further to 27 in the second quarter of 2023 from 36 in the first quarter of 2023. According to the index, this is the lowest confidence level since 2020 – roughly only a quarter of all respondents were content with the current situation.

The survey was conducted between 10 and 30 May, covering 1,050 senior executives in the building, manufacturing, retail, wholesale, and motor trade sectors.

Several other indices – covering other sectors, such as agriculture – are exhibiting the same sentiment, with business owners bleak about the state of the country and its prospects going forward.

Having that many CEOs not believing in the system is not good, said Mavuso.

To better this sorry state of affairs, Mavuso called for a direct and precise focus on major ‘network industries’ (key industries) that, if not fixed, make South Africa’s business case very weak.

The four key industries she refers to are:

• Energy
• Transporting and logistics
• Water infrastructure
• Telecommunications

Out of these industries, three are not functioning, said Mavuso. The telecommunications sector is the only one that is operating and that is because “someone had the sense to privatise Telkom”, said the CEO.

“All the other three that are state-owned are dysfunctional, and these are the three we are trying to bring in significant private sector investment,” said Mavuso. “I really think that is where we should start.”

Glimmer of hope

Despite the doom and gloom of failing state-owned companies, Mavuso said that there is still hope in South Africa – not only because companies have been forced to become resilient, but also due to a willing, long-awaited change by the government to partner with the private sector.

The CEO said that there had been a shift in government sentiment willing to work with businesses.

She said that allowing private participation in the electricity generation space speaks volumes. Moreover, the government is also now talking about introducing third parties into the logistics space.

“Government is planning not to work alone,” said Mavuso.

Examples of positive steps being made between the private sector and government in the electricity sector include the fact that on 10 March, the Resource Mobilisation Fund, established for private business groups to contribute to assist the National Energy Crisis Committee, secured R100 million to support President Cyril Ramaphosa’s efforts to end load shedding and develop the sector.

Later that month, Cabinet also approved new regulations allowing private generation projects and power trading. The Electricity Regulation Amendment Act, which was drafted, outlined an entity to buy power as a step toward establishing a competitive market.

Furthermore, the government has recently announced that it plans to reduce red tape and allow further generation capacity in the renewable energy space.

There have also been positive developments in the logistics space.

On 29 March, President Cyril Ramaphosa directed Transnet to implement reforms to fix the crisis it is in. One of the most notable reforms, backed by Ramaphosa, is enabling third-party access to the freight rail network by private rail operators while the network itself remains in the ownership of the state.

Bringing key industries up to standard must be achieved if South Africa would like to keep its title as a “Gateway into Africa” for foreign investors.

Mavuso said that the state of Eskom especially, is a real concern for global markets and has been contributing to the country becoming insignificant in the international economy.

“There is a shift from South African to East Africa; despite CEOs trying to sell the country, it is hard to do so authentically,” said Mavuso.

Watch the full interview here: Business Talk – BLSA CEO Busisiwe Mavuso on the future of South Africa

Read: New rules for challenging SARS this tax season – what you need to know