We underestimated how bad things really were in South Africa: CEO

[Nat Quinn]

We underestimated how bad things really were in South Africa: CEO

Coming out of the state capture era, businesses in South Africa were more than willing to step up and partner with the government to help the country recover – but the task was far greater than many had imagined.

This is according to Business Leadership South Africa (BLSA) chief executive Busi Mavuso, who said in a note this week that many underestimated the damage done during state capture and the scale of the task to reverse it.

Looking back at the last 30 years of South Africa’s democracy, Mavuso said the country had two clear ‘eras’: the first involved a lot of post-apartheid growth, in which the economy and business leapt forward, benefitting from the end of apartheid and the country’s reintegration into the global economic system.

“By 2008, we were regularly recording economic growth of over 5%, we boasted an investment grade credit rating and had a sovereign debt:gdp ratio of 24% as well as an unemployment rate of just under 20%,” Mavuso said.

“Per capita GDP had leapt from $3,786 in 1994 to $6,356 and would go on to peak at $8,800 in 2011. This created a strong environment for business, which rapidly evolved.

“Major investment took place, including mobile phone networks built across the country, making us one of the most connected populations in the world, while our financial sector became a continental giant. Many South African firms became global titans.”

The second era, however, was one of regression, where government-led extortion and corruption took hold. Since the ‘peak’ in 2008, South Africa has slid backwards on just about every one of these indicators, Mavuso said.

“Debt:gdp is now about 75% and growing. We will not even manage economic growth of 1% this year and barely more than that next year. Unemployment is at 32% while GDP per capita has fallen to $6,130.

“The business environment has deteriorated sharply with energy availability deteriorating every year until this one, the logistics system severely underperforming and an alarming growth of extortion and corruption.”

Mavuso said 2024 marks the first time that actual progress is being noted on some of these fronts, with many in government and the business community failing to grasp the sheer scale of the damage done during the state capture years.

During this time:

• The relationship between government and business fell to a low point;

• Formal business came under attack;

• The kleptocracy infiltrated state-owned enterprises as targets for rent-seeking;

• Institutions of accountability fell as the corrupt sought to evade consequences;

• The state lost huge numbers of people who had been forced out simply for trying to do their jobs well and honestly;

• Corruption flourished at every level of government;

• The few institutions that stood as obstacles, including the Reserve Bank and National Treasury, were attacked.

“When the (Jacob) Zuma government ended, business was ready to lean in to support the government in the reconstruction. We responded strongly to President Cyril Ramaphosa’s ‘Thuma Mina’ call, rallying resources to support the reconstruction,” Mavuso said.

“I think it is fair to say, though, that both business and the new administration underestimated just how big the task was going to be. The extent of the devastation of our institutions, from state intelligence all the way down to municipal services, was underappreciated.”

However, five years after the ‘renewal’ process began, some progress is being made, she said.

“We are finally seeing the fruits of extensive changes in the electricity sector that have enabled massive investment by the private sector in new renewable energy production…We are working hard on the logistics crisis,” she said.

“These successes give me hope for the next phase of our development as a country. The policy framework is everything – get it right, and over time you get the results.”

Mavuso said the state capture era has made clear what happens when bad leadership and bad policy are in place. And heading in to the 2024 elections, this should be top of mind.

“If you want a business environment that generates growth and employment, there is no mystery about what you have to do: regulate effectively, empower the private sector to invest, and ensure public services work. It doesn’t matter who is in government – those facts don’t change,” she said.

 

source:We underestimated how bad things really were in South Africa: CEO – BusinessTech

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