Time to rebuild, reinvest in South Africa – BLSA CEO

13th September 2021 By: Simone Liedtke - Writer

Business Leadership South Africa (BLSA) CEO Busi Mavuso has commended President Cyril Ramaphosa’s decision to move South Africa back to adjusted lockdown Level 2, which she says is “ultimately the route back to a fully functioning economy and freedom to get back to a normal life”.

While the move is considered a positive one, Mavuso did, however, question the specifics of the introduction of a vaccine passport and alcohol sales rules returning to normal.

The curfew could also have been removed completely, she suggested, though she admitted that it was a step “closer to normality”.

While the country continued on its journey back to a fully functioning economy, Mavuso in her weekly newsletter referred to July’s civil unrest in KwaZulu-Natal and parts of Gauteng which, in the first available data, had shown that as a result, manufacturing fell 4% in July compared with the year before.

“The fact that we manufactured even less is serious. In June, manufacturing had been up 12% compared with the previous year while July was 8% lower than June. We also had business confidence figures last week that showed a fall in the third quarter compared with the second,” she lamented.

She stressed that these figures reflected not just that factories were directly affected by the violence and destruction, but also the ripple effects of supply chain disruptions as those who were manufacturing could not get goods to customers while ports and other key transport nodes were frozen.

Government has announced various measures to support those affected, including a R3.7-billion support package and rapid access to the Unemployment Insurance Fund for those who cannot work.

There had also been “good work done” to ensure that businesses that were insured could submit claims efficiently to State-owned insurer South African Special Risk Insurance Association, which covers risks related to unrest, and which has in turn promised quick payouts.

Mavuso admitted that these measures would help those most affected, but she stressed that the problem was that “they don’t on their own change the prospects for businesses” which are now having to decide whether to put their money at risk again and rebuild.

She explained that as a result, businesses that received a payout have to then decide whether they would use the proceeds to reconstruct and restart, for which they need a high level of confidence about the future.

“Rebuilding is an investment decision – there needs to be high confidence that the returns will justify the risks. There is no longer a sunk cost and businesses can instead decide to use insurance proceeds for other purposes, including building elsewhere in the world, or giving the money to shareholders rather than putting it at risk,” she stressed.

She is hopeful that these businesses – both locally and foreign-owned – will choose to reinvest.

South Africa also now has a window of opportunity to rebuild business confidence, for which Mavuso has expressed BLSA’s support in assisting government to drive the reconstruction and reinvestment process.

“There are many distractions – the pandemic, and now an election, among others. But the time is now – if we miss the opportunity to give companies that were affected a positive shot of sentiment, the destruction of July will be locked in and a component of our economy gone forever,” she emphasised.