South Africa’s biggest flaw is back, and risks sending investors running
South Africa’s historic penchant for dragging its feet on critical reforms is rearing its ugly head once again, says Business Leadership South Africa (BLSA) head, Busi Mavuso.
With the national power utility, Eskom, and unions pushing back against the unbundling and reform of the energy sector, the wrong signal is being sent.
According to Mavuso, the recent unemployment data published by Stats SA points to a worsening jobs crisis in the country.
The data showed that South Africa’s unemployment rate rose to 33.6% in the second quarter of the year, with youth unemployment at shocking levels.
The BLSA lead said the figures are a sign of failure to get South Africa’s economy growing at a pace that creates jobs.
“The causes are not mysterious—from logistics to the energy system, investors are waiting for implementation so that they can start investing,” she said.
However, instead of demonstrating a national commitment to implementing the reforms that will unlock investor confidence, “there are too many signs of a lack of urgency and commitment to follow through,” Mavuso said.
The Eskom board’s resistance to the unbundling of transmission assets into an independent system operator (ITSO) is one of the clearest examples, she said.
The National Union of Mineworkers going to court to block these reforms is another.
Mavuso said the unbundling of Eskom’s transmission assets is complex, particularly for the group’s lenders, who have put up billions of rands to invest in it.
Eskom argues that moving the assets to an independent company would compromise the utility’s financial position, causing issues for its lenders.
However, the BLSA said that the utility is weaponising the process’s complexity to slow it down—potentially in hopes that political will to follow through on the plan fades.
“Respect for the rights of lenders and other investors is paramount in the process. But the bankers and lenders I speak to are clear that they are open to the conversation,” Mavuso said.
“It just needs to start. The Eskom board is not starting it. That is the problem. There is a difference between acknowledging complexity and weaponising it to resist change.”
South Africa needs to follow through
Mavuso said that South Africa has a reputation for not delivering on its promises—a reputation which only recently started turning.
However, the change is not happening fast enough, she said, noting that it has been almost 20 years of slow collapse that is not yet close to reversing.
The country needs the economy to grow. President Cyril Ramaphosa has long targeted 3%-plus growth—the country has barely managed to get over 1%.
“We forget that South Africa was once a country that delivered on its promises. The result was economic growth of 5% a year, an investment-grade credit rating, and an unemployment rate far lower than today’s,” Mavuso said.
“We lost our way after 2008, particularly through the Zuma years. We have been too slow to get back on our feet.”
The BLSA CEO said that South Africa’s problem isn’t planning or knowing what needs to be done, but doing the job and executing what has already been decided.
Mavuso said that South Africa has the potential to trigger substantial new industries that would create many jobs.
This includes renewable energy, “which holds huge promise,” she said.
“But we are at risk of fundamentally undermining investor confidence by not following through on already-agreed policy,” Mavuso said.
“What stands between us and their delivery is a small number of actors—in boardrooms, in unions, in government offices—who are content to slow-walk change while millions of South Africans wait for jobs that are not coming.”
“We must reject that with contempt and focus single-mindedly on doing what is necessary to get this economy growing again.”
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