Sipho Mila Pityana, President
Colleagues and friends
We meet at a crucial moment for our nation.
Just this week, we passed two important milestones on the road to salvaging the battered economy: the COVID-19 lockdown has been scaled down to level 1, bringing with it the resumption of most of what we regard as “normal” business activity.
And a few hours before that announcement was made, a conclusive agreement was reached between government, labour community representatives and organised business on a new Economic Recovery Action Plan which will enable us to pick up the pieces, make best use of the space that exists under level 1, and really get down to business.
When BUSA established Business for South Africa (B4SA), we sought to appeal to the patriotic instincts of each and every one of our members and beyond. We invited you to put the country ahead of the narrow pursuit of profit and sustainability of our individual enterprises. You did not disappoint: an historic unity of purpose saw us lead the charge with the establishment of the Solidarity Fund, donations in cash and kind, including supplying essentials like water tanks, making available facilities to expand healthcare provision.
We commend, particularly those who deferred dividends, cut executive salaries, skipped bonus payments, kept directors’ fees unadjusted and introduced a range of creative ways including job sharing and short time in order to avoid putting employees and contract workers out of jobs through retrenchments.
I appeal for more of this empathetic approach as the uncertainty of more job losses is what many a household fears the most today. Our journey in solidarity with society is not yet over. The foundations of a meaningful social partnership are solidly laid in the difficult and testing times of the kind we are going through. As business, we dare not fail the nation, even as we have to contend with the challenging economic environment.
You brought to bear your expertise, skill, and other resources to put forward a set of solid and well considered proposal for economic recovery. Our proposals are not about short-term fixes and profiteering, but an agenda for sustainable inclusive economic recovery strategy that addresses unemployment, poverty, and inequality. Through it, we have introduced a business voice that is not about winner takes all, but the one that says it is possible to win together.
I would like to thank all those who responded well to our B4SA efforts and encourage you to continue to embrace the agenda we progressed through it in your own business formation and corporates. Our journey is not yet over.
We salute all the social partners in Nedlac for this tremendous achievement.
I would like to acknowledge the sterling work that has been done by you, our members, as well as our other partners in business in not only providing a framework for our economic recovery, but in doing so through a process of inclusive consultation.
Building on the imperative for social compacts, our delegates — and many others — have helped to shape the guts of what now forms the Economic Recovery Action Plan that was adopted this week.
Of course, it has taken much more than our own work to ensure the development of joint solutions.
Here, we must all pay tribute to the President of the Republic, Cyril Ramaphosa, for his leadership. Yes, there have been times when we felt leadership was lacking. But we cannot deny that, as the pressure of the COVID-19 pandemic began to recede in recent weeks, the President has stepped up – as he did at the beginning of the pandemic – and the necessary action has, by and large, been taken.
We appreciate, also, the spirit with which organised labour and community representatives approached the discussions, and their commitment to shaping a shared future. This bodes well for the future of social compacting.
We certainly are not out of the woods yet. There remains much unfinished business. But we now have a commitment from all social partners which will lead to progress in significant areas of the economic recovery once the plan has been approved by Cabinet.
Saving lives and livelihoods agenda was always going to get us to a point where we reflect on the journey to restore our economy to good health, and we appreciate the President’s ready reception to hear our reflections, and those of others, on what this journey should look like. I must add that it was not the President alone: other senior government leaders, including Ministers and DGs, have spent an inordinate amount of time on engagements in Nedlac.
The same applies to our social partners from labour and the community. It has been a long time since there has been such collaboration on such a critical issue as economic growth, and we deeply appreciate the commitment of all involved.
In our discussions with the President at Nedlac this week, we were able to agree on most of the critical areas that need attention, and most of the action steps that need to be taken. And we gave the President the assurance that we will make every effort possible to work with social partners to implement our commitments.
Just to refresh your memories, the critical priority areas identified in the document, which we must focus on over our next term in office, are:
· Aggressive infrastructure investment
· Employment orientated strategic localisation, re-industrialization and export promotion
· Enabling conditions and a supportive policy environment
The action plan details critical implementable action items in each of these three priority areas and serves as a platform for putting our country onto the first rung of the investment and growth ladder we need to climb.
Some crucial detail still needs to be addressed as a matter of urgency, however. These include:
· The criticality of addressing the energy crisis (particularly security of electricity supply), including getting the RFP for the next tranche of renewables out — and urgently.
· Not delaying the release of spectrum. We are unhappy with ICASA’s announcement of a delay and urged the President to instruct spectrum be released now. We stand ready to assist with capacity to fast-track this.
· The government must lead social partners in working together to mobilise the necessary resources to implement these actionable items, and to address ongoing growth.
· The Covid19 pandemic has been devastating, but we have also learnt good lessons. A case in point is the development of local manufacturing of PPE. We are committed to utilize best practice in this area to ramp up local manufacturing.
· We have indicated business is ready to support government to carry out its mandate by providing, where possible, capacity and expertise from the business sector. We urge the President to engage us to enable us to do this.
· We recognise the real threat and consequences of a runaway public debt and urge that we commit, as the document does, to a recovery plan that does not erode our fiscal sustainability.
We particularly welcome the President’s stated commitment to dealing with corruption and stand ready to assist in whatever way possible with this. Business must play its role in having a zero-tolerance approach to unethical and corrupt practices amongst our members. The same applies to all our social partners.
The reform agenda must be underpinned by efforts aimed to strengthen good governance, fight corruption, ensure the guarantee of the rule of law and enable citizens to enjoy fairness, prosperity, and dignity. We must also strive jointly to enhance regulatory flexibility to effectively respond to the inter-connected risks and opportunities of this new era.
But as is the case with all aspects of the economic recovery action plan, the critical imperative for all social partners now is: Implementation, implementation, implementation. And that must begin, with urgency, the moment Cabinet has signed off on the plan in a couple of weeks.
It is time to bite the bullet. We can no longer afford stalled policy reform as it erodes the economy’s potential growth and its global competitiveness. Bottom line: we cannot continue to spend more than we raise in taxes indefinitely.
We also need to keep our eye on the horizon, and on the medium and long-term priorities that need to be addressed. There are three critical matters that have medium to long-term impacts, but must be engaged on immediately:
· The fundamental structural reform interventions in the economy to enable global and local investment and inclusive and sustained growth at appropriate levels.
· Our dire fiscal crisis and what critical interventions need to be made now to stabilize our fiscal situation over a period of time. This includes managing debt and drastically reducing public expenditure – now, before it is too late. Here, we look to the Minister of Finance to provide some clear direction in his medium-term budget policy statement next month.
· Hard decisions on the architecture of our SOE’s, which includes
o Optimizing the efficiencies of strategically significant SOE’s
o Rationalizing those SOE’s that can be rationalized
o Considering equity participation in appropriate SOE’s
o Divesting out of SOE’s that are not, and have no prospect of, yielding either an economic or social benefit to the country, either through disposing of these or closing them
It is also important to note the significance of the framework agreement that has been developed for a social compact on supporting Eskom. This will hopefully ensure that the vexing question of power supply will be dealt with as quickly as possible, and in a conclusive and inclusive fashion.
Colleagues: as I said in my opening, we have reached some significant milestones in the past term. We need to build on this and assert our rightful place in the engagements that are going to follow, to make sure we are doing more than making history.
I’d like to reiterate a point I have made consistently since assuming the role as president of BUSA: that the need for a social compact in South Africa, where all stakeholders concede to enduring some short-term pain, has never been more urgent.
So, if the key word for government now is “implementation”, the key word for all of us, as social partners in Nedlac, must be: “engage”. We have to engage, on as many levels as possible, to ensure that solutions are found through social compacting.
The health and economic impact of the COVID-19 pandemic has laid bare the centrality of public-private cooperation. This has laid a firm foundation for the social partners to outline a shared vision for building a more resilient and inclusive economy.
Sadly, the pandemic has also heightened the structural inequalities in our society, exposing the fractures, the inefficiencies, the lack of moral compasses.
The recent shock GDP outcomes of our economy comes on the back of a projected global GDP decline of close to 5%, something that is unprecedented in recent history. And given our fiscal dynamics, we have no room to provide significant fiscal and monetary support to the economy as we remain constrained by our low tax base, high public debt, and contingent liabilities for dysfunctional SOEs.
There are huge implications, therefore, for the country’s ability to earn revenue and to narrow a budget deficit that is set to breach 15%.
With SARB expecting our GDP to fall more than 7% — which would constitute our worst economic contraction since the Great Depression of the 1930s — the time to push ahead with long-awaited economic reforms is now.
What is to be done
Before I close, let me share observations about our two BRICS partners: India and China. India made stunning headway by fulfilling its incredible potential in the outsourcing business arena, paving the way for further economic gains.
China created a low-cost manufacturing base through special economic zones following its admission into the WTO, with spectacular success.
An educated and skilled workforce was key in these two case studies, underpinned by sustained investment in the nurturing of the STEMS skills. This holds lessons for fulfilling the incredible potential of our youth endowment. The nut to crack is to identify the comparative advantage of our country and ensure that our potential is matched with the requisite education and training and projected labour market demands.
The lack of economic direction in the past precipitated one crisis. COVID-19 precipitated a second crisis. All of us – government, business, labour and community — need to make the most of what we have learnt to ensure we do not enter a third, terminal crisis in which the wheels come completely off the economy, we are indebted to the IMF forever, with all the conditionality that comes with such a scenario.
We have risen to the occasion before, colleagues and fellow South Africans, and it worked. Let us do it again.
BUSA President Sipho Pityana