In response to President Cyril Ramaphosa’s call for a Jobs Summit, Business Unity South Africa, together with its members and the National Business Institute, is working through the National Economic Development and Labour Council (Nedlac) to identity practical steps that can be taken by it, the public sector, labour and community, to address unemployment. BUSA has asked its members to make proposals about projects that can be delivered in the short to medium term that can help put a dent on unemployment, which continues to be a blight on South Africa.
The Jobs Summit will, by all accounts, precede the Investment Summit. It is imperative that the Investment Summit be clearly articulated and structured to allow prospective investors to work towards a successful event.
Since President Ramaphosa’s inaugural state of the nation address in February 2018, when he threw down the gauntlet of Thuma Mina, BUSA has participated in investor roadshows, the International Finance Corporation (IFC) engagement, the Heads of Commonwealth States Meeting, the Group of Seven engagement and other engagements of a similar nature.
These engagements must now get traction and result in tangible actions that will improve South Africa’s investment prospects. BUSA suggests a structured process and a formal role for business in organising the Investment Summit.
InvestSA has been playing its part, but this is not enough. Requiring prospective investors to approach a state entity for assistance on a case-by-case basis for assistance is unsustainable.
It is against this backdrop that BUSA welcomes the appointment of Trudi Makhaya as President Ramaphosa’s economic adviser, as well as those of the investment envoys, who include Phumzile Langeni and Jacko Maree. We stand ready to work with this distinguished group in achieving the president’s investment target, set at $100bn.
To reach that target, collective efforts should be focused on these four broad elements to give substance to the narrative of “South Africa is Open for Business”:
• Identify and address policy and implementation impediments to investment
• Address corruption
• Develop a cogent and concise narrative about how to address these
• Propagate success stories
2. IMPEDIMENTS TO INVESTMENT
Policy uncertainty remains the biggest factor cited for the low levels of domestic and foreign investment. Moody’s Investor Services, Fitch Ratings and S&P Global Ratings have also taken note of how policy uncertainty has undermined South Africa’s efforts to attract investment.
The government’s promises and assurances to address this need to be followed by practical and tangible steps. In addition, the lack of implementation capacity has often hampered good policies.
Here are some examples of how the dual challenges of poor policy co-ordination and the lack of implementation play out and reinforce the uncomfortable reality of policy uncertainty.
DELAYS IN APPROVAL PROCESSES
• The Water Use Licensing Regime is one of the most pressing, with a five-year backlog which could devastate agrarian land reform. There have been numerous engagements, but the system remains riddled with inefficiencies in the issuing licences and the onerous conditions imposed on holders, most of which cannot be met.
• Similarly Licencing in the Fishing Industry is restricting business. About 95 licences have been issued out of an estimated 700 applicants in an industry comprising mostly small, black emerging crayfish providers.
• The Immigration System remains hostile. There are delays in processing corporate visas, impacting business and potential investment, along with the challenges pertaining to tourist visas. This is one of the sectors in which all social partners can unlock value. However, the opportunities are continually lost and missed because of structural inefficiencies.
• Smaller and Startup Businesses are the worst-affected by bureaucracy.
Uncertainty not only deters new investment, but also puts at risk existing investment and jobs.
• The Draft Mitigation System on greenhouse gases for 2021-2035 is misaligned to the Carbon Tax Bill for 2019-2022, despite the significant adjustment costs required. This is compounded by the Climate Change Bill, and the recently published Air Quality Act that requires businesses to have a closure plan by 2030. Businesses are not able to comply (despite the eight-year period and high costs associated with retrofitting an existing plan).
• Mindful of the considerable challenges facing the country pertaining to Land Reform, since 2015 BUSA has been engaging with social partners at Nedlac on a number of legal instruments that are in various stages of consideration and implementation. These include regulations on land holdings, electronic deeds registration, communal land, labour rights and the like. Uncertainty as to the content and timing of this legislation, in addition to the relationship between various legal instruments, together with the parliamentary processes, do not create the stable foundation required for investment in the sector. Moreover, the Constitutional Review Committee consideration of the property clause has resulted in concern as to whether property rights, both moveable and immovable and incorporeal, are still secure.
• While the recent draft of the Mining Charter is improved it still has elements that make the sector uncompetitive and unable to plan and invest for the future. Given the fact that mining companies have 30-50-year planning horizons: a stable, predictable, and a competitive regulatory environment is required.
• Competition Law is currently under review, and needs to be monitored closely to ensure that it does not inadvertently deter investment – local and international.
COHERENCE AND CO-ORDINATION AMONG DEPARTMENTS AND A PROLIFERATION OF LEGISLATION
There is a proliferation of legislation that creates a compliance burden on business, which is aggravated by the lack of co-ordination among departments. Here are a few areas in which this is most apparent:
• At the same time when Nedlac constituents are negotiating on a Comprehensive Social Security Framework, a separate process is being pursued ]at Nedlac on National Health and related legislation is being released on health, occupational illnesses and diseases and unemployment insurance. These processes have not been aligned within government, and there is considerable overlap, in addition to the unsustainable fiscal impact and implementation challenges.
• It goes without saying that extensive legislation, regardless of how necessary or appropriate it is, creates a compliance burden that is a challenge, particularly for Smaller and Startup Businesses.
• Looking only at the skills development or labour law regime, one will observe a host of different pieces of legislation, supplemented by codes, guidelines and regulations that make it near impossible for businesses to comply therewith.
Unfortunately, the list could be longer. We could raise concerns pertaining to a host of other areas, which where we are similarly unable to rely on the regulatory framework as a basis for business decision-making.
3. ADDRESSING CORRUPTION
• BUSA and its members have committed to an integrity pledge and note the many steps that are being taken to address the ramifications of state capture, corruption and malfeasance. The auditing profession, as a guardian of assurance for private and public sector, has now also been tarnished. This fundamentally impacts on our investment prospects as a country.
• While many public and private sector parties are recognising and attempting to address this, the reputation of Brand SA (as a safe place for businesses to invest) has been tarnished.
• A national co-operation framework is required to co-ordinate and leverage our collective efforts, while painting a coherent picture of the restoration of good governance and trust.
4. WHAT IS TO BE DONE
BUSA suggests the following practical steps:
• Identify specific investment issues, and let us put together public-private project teams to develop solutions and report to the President.
• Sequence the big policy framework debates: education, skills development, land, social security and national health cannot be concurrently resolved. Until these frameworks are resolved, hold off on new legislation.
• Adopt the Singapore model of remove one, for every additional piece of legislation.
• Amend and strengthen the socio-economic impact assessment system to include specific assessment of the impact of new and existing legislation on foreign and domestic investment and on small businesses and startups.
• Focused engagement with investors to identify barriers and concerns with a particular focus on sectors, and smaller and emerging businesses. BUSA is willing to facilitate such engagements.
• Commitment to electronic tracking systems for all authorisations and approvals.
5. SUCCESS STORIES
Reinforce the narrative that “South Africa is Open for Business” by:
• Amplify the small wins, such as the agreement to consult on the Integrated Resource Plan. Now, the government must capitalise on this by publishing the dates on which the public comment process will begin. The same approach is required for the Integrated Energy Plan.
• Similarly, we need to reinforce successes in managing Public Finances
o Runaway debt and the massive wage bill pose a risk to public finances and are being closely watched by ratings agencies. Progress in this regard must be reported.
o We must also start seeing state-owned entities operating in a fit-for-purpose manner, as the biggest beneficiaries of government guarantees.
• Business is in agreement with the government and other social partners about South Africa’s growth objectives and the fact that unemployment, especially that of the youth, is a blight on our society. The levels of inequality are unsustainable, the economy needs the critical mass of greater absorption of the populace into the ranks of the employed. Business cannot survive or remain viable if the status quo remains, nor can the government, with its tax revenues already under immense pressure. The common purpose by all social actors needs to be reinforced.
• This calls for greater co-operation and co-ordination to ensure we do not lose the momentum and goodwill created by Thuma Mina.
• The Jobs Summit process is a useful reference point. We similarly recommend a formal role for organised business in the organisation of the Investment Summit in order to ensure its success.