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Stand-off between government and corporate SA as business sphere deteriorates – Katzenellenbogen
Corporate South Africa is frustrated by the state of the country and its lack of influence on government, leading to a standoff between the two. Many CEOs have come forward to voice their concerns about the power crisis, crime, and empowerment policies that make it difficult to attract investment. The CEOs of MTN, Standard Bank, Nedbank, and Shoprite have been some of the vocal ones. President Cyril Ramaphosa had earlier been viewed as a reformer and doer, but his lack of action has disappointed many. Despite government distrust of the private sector, the state has raised funds from business to help in emergencies. Read more in the article below.
The big business – government stand-off
By Jonathan Katzenellenbogen*
All the signs are that there is now a stand-off between government and corporate South Africa, while the business environment deteriorates.
Leaders of corporate South Africa are deeply frustrated about the state of the country and their lack of influence on government. There may not be much more that big business can really do to help the government, if it is unwilling to fully engage and change direction.
‘We are getting to the stage where we are having to ask as the private sector that given that there isn’t a quid pro quo from government in any real sense, are we becoming complicit in nothing happening’? Cas Coovadia, the CEO of Business Unity South Africa, the body which speaks for corporate South Africa, said to Business Day.
It has taken a long time for the country’s leading CEOs to lose their timidity in speaking out. For years they have been quiet on many of the big issues so that they could prove their patriotism and good corporate citizenship. Since 1994, business has been silent on the gathering power crisis, crime, and empowerment policies which make it difficult to attract investment. It has been forced to tolerate the charade of talking to the government in the National Economic Development and Labour Council in the name of social partnership. All this while the business environment deteriorates.
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Many CEOs have decided that power cuts, water problems, transport, and security problems are now so bad and pose such a threat to their companies and the economy that they have to speak out. Over the past few years there were a handful of bosses who came out with criticism. Now there are far more. The list over the past few weeks includes the CEOs of MTN, Standard Bank, Nedbank, and Shoprite.
We are now in the season when many of the country’s big stock exchange listed companies announce their results. That has given the bosses the chance to speak out on the direction in which we are headed. It is not as though they are in any way stepping out of their lanes, as the problems of power cuts, water supply, transport and infrastructure directly impinge on the future of their businesses and are of the utmost concern to their shareholders. As one speaks out, it gives courage to the others to speak their mind. This is encouraging, but the process has some way to go.
Earlier this week, the CEO of MTN, the mobile operators, Ralph Mupita, warned that if the country does not address the crises, we risk becoming a failed state. MTN earnings are under pressure because the company is having to heavily spend on batteries and generators to keep its network going.
Sim Tshabalala, the CEO of Standard Bank, told the Sunday Times, “We worry intensely that policies or political positions that get taken” will prevent us accessing capital markets. Those in the supermarket business are worried that power cuts will hit their entire value chain from the farmer to the consumer, and they might not be able to ensure food on the shelves.
Soon after he was elected in 2017, many in business saw President Cyril Ramaphosa as a reformer and a doer, but have been deeply disappointed. His office has drawn on business expertise, and the private sector has donated substantial amounts to help a Solidarity Fund deal with the Covid emergency, and more recently to a special fund to help the Presidency deal with the energy crisis. It has also advised him on policies to increase growth and investment.
Yet, at last month’s Mining Indaba, President Cyril Ramaphosa said the private sector should “get out of their armchairs and work with the government.”
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Business has been, ‘busting our butts to work with the government’, Coovadia says.
‘The private sector came to the party during Covid-19 and have been at the party since. We have done a phenomenal amount of work on energy, logistics, law and order ̶ all with the view to giving the President two pages on each of these and saying these are the three things, you need to do, and if you do, this is how the dial will shift on investment and growth’, Business Day quotes Coovadia as saying.
‘There are parts of the government that ideologically don’t trust the private sector. There are parts that want to control as much as they can without having the capacity to do anything good and optimal in controlling stuff. And yet the resources and capacity lie in the private sector’, says Coovadia.
Despite parts of the government not trusting the private sector, there is no hesitation by the state in raising funds from business to help out in emergencies.
Last week Business for South Africa, B4SA, a business lobby group, said it had raised R100m to help launch the Resource Mobilisation Fund to pay for technical capacity to support the President’s energy plan and work with the National Energy Crisis Committee. The idea behind the fund is to finance technical expertise that the government does not have, in order to find a way out of the energy mess.
Any big corporation, when asked for money for technical expertise for the Presidency, would think twice about declining such a request. After all, the big companies need to come across as good corporate citizens. To do business, they probably depend on licenses that are frequently up for renewal.
That means there is an element of a shake-down in raising funds for the government from business. These should really come out of general tax revenue. Moreover, raising these special funds is not good practice as it does raise questions about backdoor business influence.
A better course of action would be for the government to encourage many with expertise in the private sector to spend time in government. The problem is they might get frustrated and head for the door.
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Could business take action to force the government to re-think?
There is no way the private sector could launch a tax boycott against a democratically elected government. All it can really do is to speak out loud and clear against severely damaging policies, much like a few business leaders did back in the 1980s, against PW Botha’s reluctance to reform.
We are hearing a lot from business about the pressing issues of the power and infrastructure crises, but not on other policies. We have not heard anything from the banks on the Expropriation Bill, which is a threat not only to private possession of farmland, but also to financial institutions which have lent to owners whose assets might be seized.
In the end, business can do little to save a country from poor government.
*Jonathan Katzenellenbogen is a Johannesburg-based freelance financial journalist. His articles have appeared on DefenceWeb, Politicsweb, as well as in a number of overseas publications. Jonathan has also worked on Business Day and as a TV and radio reporter and newsreader.
The views of the writer are not necessarily the views of the Daily Friend, the IRR or BizNews.
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