https://www.engineeringnews.co.za
Africa|Business|Charter|Cutting|Energy|Environment|Mining|Power|Projects|Renewable Energy|Renewable-Energy|Service|Sustainable|Infrastructure
Africa|Business|Charter|Cutting|Energy|Environment|Mining|Power|Projects|Renewable Energy|Renewable-Energy|Service|Sustainable|Infrastructure
africa|business|charter|cutting|energy|environment|mining|power|projects|renewable-energy|renewable-energy-company|service|sustainable|infrastructure

Mavuso laments all-time low in business confidence

15th June 2020

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

Font size: - +

Business Leadership South Africa (BLSA) CEO Busi Mavuso says business confidence in South Africa is destroyed.

In a weekly newsletter, she points out that the latest Rand Merchant Bank/Bureau of Economic Research business confidence index shows that 95% of businesses are dissatisfied with business conditions – the worst reading in history.

She highlights that business confidence is a leading indicator of economic growth and, therefore, companies that do not believe in the future will not invest and subsequently not expand.

“Confidence has been drifting down for almost a decade, leading the steadily weaker economic growth we have seen.”

Mavuso states that the last time business confidence showed a notable improvement was after the 2010 FIFA World Cup, and a “short bump” after President Cyril Ramaphosa won the presidency of the African National Congress.

Former US Treasury Secretary Larry Summers once noted that confidence is the cheapest form of stimulus, and Mavuso agrees, in part. “It is cheap in the sense that it can drive investment without necessarily incurring a direct cost to government.”

When businesses are confident, she says they invest, expand and grow the economy. However, Mavuso also points out that the problem is that confidence is not going to “magically appear”, and that there is a lot of work government must get done and some of it is going to cost money.

The phrase “structural reform” has been debated much in South Africa, to the point that Mavuso says it is now a hollow cliché. However, she notes that the country cannot lose focus. “There must be answers to the question ‘what has changed?’, that will compel businesses to revise their expectations of the future.”

Further, it is not difficult to understand what those changes should be, says Mavuso, adding that despite the debate over land reform being much needed, South Africa has undermined confidence in property rights.

“Nobody makes investments in assets they cannot trust will still be theirs in future. We need to conclude that debate and recommit to protect property rights so that investors have confidence that they can put their capital at risk.”

In addition, policy confusion continues to be rife, with the mining sector being the biggest victim, resulting in no new investment, she notes. “From the mining charter to amendments to key legislation, destructive debates have contributed to a weak environment for mines to operate for well over a decade.”

There are many other policy issues that affect energy, access to broadband, skills and education – all of which can be fixed to fundamentally alter business confidence, says Mavuso.

INFRASTRUCTURE INVESTMENT

Public investment in infrastructure has been declining as a percentage of gross domestic product for a decade, she points out. This was also a result of the priorities of the previous president [Jacob Zuma], who she highlights spent on consumption, through wages and other “political gravy trains”, all of which was financed by cutting back on infrastructure.

“In part this was an understandable response, to the fact that much infrastructure spending was wasteful and there were capacity constraints to delivering.”

However, the result is that South Africa now suffers a lack of economic infrastructure to support growth, and the social infrastructure to make it inclusive growth.

“This has to change,” she cautions, adding that Finance Minister Tito Mboweni has noted that the ballooning civil service wage bill needs to be cut as it has grown by 40% in real terms over the past 12 years without equivalent increases in productivity.

Notably, however, Mavuso also points out that Ramaphosa has prioritised infrastructure spending in the economic recovery plan after the Covid-19 disaster, with a Sustainable Infrastructure Development Symposium to be held on June 23. During the symposium, government is expected to announce a major pipeline of infrastructure projects.

“The President has said the private sector must play a critical role in this. There are many good reasons for that – the private sector has capital and skills that can unlock the infrastructure challenge,” she says.

For example, the Renewable Energy Independent Power Producer Procurement Programme raised over R200-billion in private sector funding between 2010 and 2015.

“If the government can deliver the structural reforms that are needed and mount a credible infrastructure programme that uses the private sector appropriately, we can turn what has been a long-running decline in confidence,” says Mavuso, adding that if this can be achieved, the strong economic growth will return to drive efforts to eliminate poverty and reduce inequality.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

Latest Multimedia

Magazine video image
Magazine round up | 29 March 2024
Updated 12 minutes ago

Showroom

Weir Minerals Africa and Middle East
Weir Minerals Africa and Middle East

Weir Minerals Europe, Middle East and Africa is a global supplier of excellent minerals solutions, including pumps, valves, hydrocyclones,...

VISIT SHOWROOM 
VEGA Controls SA (Pty) Ltd
VEGA Controls SA (Pty) Ltd

For over 60 years, VEGA has provided industry-leading products for the measurement of level, density, weight and pressure. As the inventor of the...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.182 0.254s - 178pq - 2rq
Subscribe Now