The private sector and government need to work together in order to fix the structural weaknesses that face the economy, otherwise the country’s financial system will face collapse, Sanlam CEO Johan van Zyl said on Tuesday.

Using the imagery of South Africa as a boat with holes leaking water, he said that government was sitting on one side and the private sector on the other; both pointing fingers at each other and not working together to plug the holes and avert the proverbial sinking ship of the country.

“In order to start moving forward we need to reach the tipping point,” he said; “the point where we fix the holes and start rowing the boat that is SA Incorporated in partnership.”

Van Zyl, who is also the chairperson of the Association for Savings and Investment South Africa (Asisa), told delates at the association’s conference at the Sandton Convention Centre that the National Development Plan (NDP) was the right blueprint to move the country to that tipping point.

“The good news is that we have a solid blueprint in the NDP to steer the boat on course,” he said. “It carries the support of the private sector, but there is growing impatience amongst citizens and foreign investors for our strategies to be implemented.

“Foreign investors want South Africa’s private sector and government to work together."

NDP hampered by structural problems

He said that the successful implementation of the NDP was hampered by the lack of institutional capacity, skills, intent and synergy between business, the government and labour.

“As a result there is a growing impatience among South African citizens as well as foreign investors who are wanting to see the country’s ambitious plans implemented at a faster pace in light of South Africa’s pedestrian GDP growth, lack of power generation abilities, growing debt ratios and twin deficits.”

According to Van Zyl, the NDP implied costly interventions such as infrastructure development and National Health Insurance, which would require funding. “Yet the absence of solid funding plans from the NDP is constraining investment,” he added.

Government partnering with Asisa

He told delegates that Asisa, in partnership with government, was exploring viable options that would allow private capital to effectively participate in the financing of social and economic infrastructure.

“There has already been successful participation by Asisa members in the Department of Energy’s Independent Power Producers procurement process. Also on the cards is participation by Asisa members in the equity and debt financing of coal and gas. Municipal funding and financing of affordable housing are also in the pipeline.”

Van Zyl pointed out that Asisa, as a member of Business Unity South Africa (Busa), had also pledged its support for initiatives addressing the current electricity supply challenges.

“Asisa and its members agree that the successful implementation of the NDP requires a solid public–private partnership. Each one of Asisa’s strategic objectives is therefore aligned with at least one of the government’s NDP objectives.”

SA needs to become more business friendly

Van Zyl said that in order to attract much needed capital investment, South Africa would need to become more business friendly.

“For the financial services industry, for example, the uncertainty created by some of the regulatory reforms has resulted in significant opportunity costs.”

He said a great deal of the industry’s capacity had been invested in preparing for the implementation of these reforms at the expense of product development and other important projects, which had placed immense cost pressures on businesses.

SA wrapped in red tape

“A very pro-South African Sanlam board looks at investment opportunities and often it chooses them outside South Africa in Asia and other parts of Africa, because they are better than this country.

“It is not surprising then that many of the large players in our industry are emptying their war chests elsewhere. The truth is that it is easier for our industry to make acquisitions and start new ventures in the rest of Africa and Asia than in our own country.

"The reality is that doing business in South Africa is fraught with red tape and hurdles such as capital requirements that promote regulatory arbitrage.”

Don’t buckle to global reforms

Van Zyl recommended that instead of simply imposing reforms on the savings and investment industry in line with international trends, South Africa should apply discretion and reject reforms that would result in unintended consequences.

“In my view much more could be achieved if all stakeholders jointly decide on five critical outcomes and then work towards achieving the appropriate input required to achieve this. I am convinced that this approach would result in the required outcomes being achieved at a much faster pace, and with fewer unintended consequences.”

Van Zyl concluded by reminding delegates that Asisa and its members – an industry that manages assets of more than R7.8-trillion – were well positioned to contribute significantly to solutions on how to increase South Africa’s savings pool, protect it, and then deploy it responsibly to help achieve the goals of the NDP.

“What the government wants to achieve for this country and the goals that our industry has set for itself are not that far apart. Therefore an alignment in the approach to achieving these goals in partnership is critical.”

News24.com