THE business-government partnership is strong enough to survive criticism of government by business, says Business for South Africa chair Martin Kingston, “but the government obviously does not appreciate commentaries that are seen to undermine it in any shape, size or form”.
Take former Sibanye-Stillwater CEO Neal Froneman. He was told by the presidency to leave the partnership after saying government members responsible for policies in support of Iran, BEE and expropriation without compensation should be sanctioned by the US rather than South Africa as a whole.
Isn’t holding government directly accountable for economically destructive policies precisely what business should be doing?
“Neal wasn’t speaking on behalf of business; that was his own view,” says Kingston. “It may well be shared by other people, but to the best of my knowledge there is no business position that has been formulated in the context of government policy towards Iran.”
Shouldn’t there be?
“Perhaps there should be, but there isn’t. We are all very mindful of the fact that there is a significant polarisation of views around both domestic and international policy insofar as it affects our economy, and specifically in this case.”
He talks about the significant input business has made in terms of resources and expertise to help the government address major economic challenges such as electricity, logistics and crime. Doesn’t this entitle government’s business partners to criticise it however they see fit?
Americans having a view on South Africa’s allegiance to or association with Iran is outside the remit of the partnership, he says.
Is it within the remit of business to criticise policies such as expropriation without compensation and BEE, which business acknowledges are deterring investment and stifling the economy and job creation?
“My day job is about mobilising capital in South Africa from very large multinationals, and not one of them has ever raised the issue of expropriation without compensation. Not one.”
What about BEE?
“I want to raise another point, which is how we as a country properly position in a responsible way a narrative about a growth-driven agenda, and do we do so in a properly articulated, compelling manner which is not undermined either by individual policies or by statements … which cause investors to shy away from South Africa.”
As for criticism of BEE, “I agree 100%,” he says.
“The issue is do we have policies that alienate investors, because investment is the key to growth and growth is the key to jobs. I believe absolutely that we do. But at the end of the day, what is the best way to land the right outcome from those responsible for the design, development and implementation of policy?”
Open debate
Kingston’s experience is that the government “does not respond positively” to having this debate in the public domain.
“If the objective is to overhaul BEE, then the question we should be asking is what is the right way to conduct that conversation?”
If it’s about persuading investors that the government is serious about creating a competitive enabling environment, then surely the way to do this is to debate such policies openly?
“The government won’t debate publicly; we know that. We’ve had 30 years of experience. So we have to deal with the dynamics at play. We can’t just decide we’re going to apply our own template and not be attentive to the environmental dynamics. That doesn’t take us forward at all.
“The custodian of BEE is the department of trade, industry & competition, whether we like it or not. They need to ensure they listen to and take into consideration constructive and necessary input so that we maximise our chances for the mobilisation of international and domestic investment.”
The executive director of the Centre for Risk Analysis, Chris Hattingh, says whatever the business-government partnership is doing, it is far too slow and inadequate.
“I agree with everything he says 100%,” says Kingston.
So does he also agree with Hattingh that business hasn’t shown the necessary political will to make the right things happen quickly enough?
“It takes two to tango,” he says. It’s government, not business, that needs to show political will “to push through difficult decisions and then implement them”.
Shouldn’t business be putting more pressure on the government to move faster?
“We can only play a tangential role because, whether we like it or not, that government was democratically elected and they’ve got the mandate to govern. We do try to apply appropriate pressure, in the correct way, to expedite decisions so that we can either remove constraints on economic growth or accelerate opportunities where we are underperforming relative to our potential.”
That’s why they put mining on the platform, he says. “It’s badly underperforming relative to its potential.”
Hattingh says the partnership has papered over some cracks but is not fixing underlying issues such as substantive legislative and policy reforms. Veteran mining analyst Peter Major talks about layer upon layer of legislation disincentivising investors.
Says Kingston: “This is why we said to the Minerals Council South Africa, would it be helpful to put mining on the partnership platform? They say it would because they’re not making the progress they need to, recognising that in the final analysis it’s the department of mineral & petroleum resources that has to push forward the right legislative and regulatory changes and they can’t force it to.”
Meanwhile, investors aren’t investing because they don’t find the environment appealing or competitive, and mining and other industries continue to decline.
“At the moment there’s a very noisy, very inefficient way of addressing what needs to be done to improve the competitiveness of the country to attract investment to stimulate growth,” he says.
Business will use every platform it can to secure the right outcome, he says.
“But we need to do so in such a way that the government listens to what we have to say, allows us to persuade them on the merits and then has the political will to take difficult decisions and use the capacity made available by business to implement them. That’s the beginning and the end of the partnership model.”
‘Shouting won’t help’
A softly-softly, don’t-antagonise-government model?
“No, but shouting at the government is not going to help.”
What about setting deadlines and holding government to them?
That’s what they do all the time, he says.
So why are the results so underwhelming?
“You can’t say that.”
Why is the already catastrophically low GDP growth rate down 0.2% in the second quarter?
“We’re on record as saying that is completely and totally unacceptable and we need to be at a minimum of 3.5%. At 3% and below, unemployment grows. But we can’t drive economic growth on our own. Government needs to make the right policies and implement them.”
He cites electricity and logistics improvements as evidence of the partnership’s success.
But PwC’s latest South Africa economic outlook report — citing rail and port underperformance, regulatory complexity and uncertainty, missed timelines and projects not happening — doesn’t paint a picture of a partnership that is shooting the lights out, does it?
“What do you think the picture would look like without the partnership?” Kingston asks.
If that’s their measure of success, then surely they’re aiming too low?
“We’re not aiming too low. I think our achievements do not correlate to where we’re aiming.”
The consensus is that the growth target of 3% by 2030 announced at the launch of phase 3 of the partnership by President Cyril Ramaphosa in August is hopelessly too low.
“We’ve said 3.5% is what we need to create jobs on a sustainable basis and scale. For the past 15 years we haven’t been above 1.5% growth. We’re saying there are limited resources available to the country. So I don’t think we’re setting our sights too low; I think we’re being realistic about the fact that we are constrained by the circumstances in which we find ourselves.”
What will business do differently to accelerate a reform process moving too slowly to save the economy?
“We need to hold people individually and collectively accountable when they don’t meet timelines.”
Is business going to put pressure on Ramaphosa to dismiss underperforming ministers such as mineral & petroleum resources minister Gwede Mantashe?
Phase 3 of the partnership or not, at the end of the day only the electorate can hold government to account, says Kingston.
“They’ll be at the polls in less than three weeks and we’ll see what they do in terms of holding government to account.”