*First published on Sunday Times’ Business Times on 15 December 2024.
By Prof. Busisiwe Mavuso
There is reason to celebrate as we go into the holiday season. We look set to end the year with three quarters mercifully free of load shedding, thanks in part to years of hard work by the National Energy Crisis Committee to deliver on the Energy Action Plan, drawn up by the Presidency’s Operation Vulindlela. Progress is also being made on implementing a Just Energy Transition in the wake of COP29.
There has also been some progress in dealing with our logistics crisis. Figures from our ports show that wait times have been reduced since the worst of the crisis, and there are also improvements in the flow of goods on rail. On the criminal justice system, the National Prosecuting Authority continues to regain its capacity, and we’re seeing the trickle of successful commercial prosecutions growing into a stream.
In the fourth quarter we learnt that the number of national and provincial government departments receiving clean audits had increased from 93 to 142 in five years. We also saw credit rating agency S&P Global revise its outlook on South Africa to positive from stable – the first positive move on South Africa since Covid struck.
Our revitalised outlook coincides with the launch of the second phase of the Government-Business Partnership, which aims to deepen reforms, boost investment, and foster positive national sentiment with the support of Business Leadership South Africa (BLSA) and many of its members.
Confidence is the cheapest stimulus
This year has provided a wealth of evidence that when the private sector is able to partner fully with government and get into solution mode, we can successfully deliver an improved business environment. In response, business confidence is showing glimmers of hope. We’ve had three successive quarters of improvement in confidence, with the third quarter reading at the highest level we’ve seen in over two years.
Investment decisions are made by individual investors and companies, not by a collective. When the prospects of an acceptable return are not there, they will not invest, no matter how much they are encouraged or cajoled. Conversely, when the investment outlook improves and confidence returns, a wave of investment is likely to follow. This is why former US Treasury Secretary Larry Summers so often said: “Confidence is the cheapest stimulus”.
Persistent challenges
We in business truly believe that a great many of our seemingly intractable problems are solvable. But there is still so much more to do. While the energy sector has made strides, the road ahead is still fraught with obstacles. The Electricity Regulation Amendment Act has faced legal hurdles, highlighting the complexity of implementing reforms.
The disappointing third-quarter GDP growth figures revealed that parts of the economy are still struggling, particularly agriculture. The work we’re doing through the National Logistics Crisis Committee will help, but climate and weather also play their part. Challenges persist in the logistics sector, and without urgent intervention, water supply is clearly the next major crisis area.
Government has made progress in dealing with the bulk water infrastructure end of the value chain: the National Water Resources Infrastructure Agency was established earlier this year to ensure that the right dams and connecting infrastructure are developed. But we are seeing serious failures at the local government level, which are catastrophic for business.
While we are cautiously optimistic that this period of fragile stability under the Government of National Unity might lead to the collaborative approach to sustainable economic growth that South Africa so desperately needs, Africa also remains vulnerable to the escalating uncertainty of the international geopolitical arena. It is vital that regional cooperative agreements such as the African Continental Free Trade Area are supported and enabled to build resilience of local trade and supply-chain networks.
Future outlook
Nevertheless, for the first time in years, South Africans are justified in focusing on the positives and the potential for more progress to come. 2025 will be a consequential year as South Africa assumes the presidency of the Business 20 (B20) and Global 20 (G20), providing a unique opportunity to preside over and shape the global debate and articulate the country’s needs and priorities.
We have seen history made this year, resulting in significant changes to our government and the shape of the networks contributing to the nation’s success. But the underlying problems remain the same. The single biggest opportunity to drive poverty reduction and inclusion is to stimulate economic growth and investment. Higher levels of economic growth are an absolute precondition for a more inclusive economy.
This growth cannot occur without underlying structural reforms.
To accelerate the implementation of structural reforms, effective collaboration between business, labour, and government remains crucial. By working together, we can seize this window of opportunity and build a more prosperous and equitable nation.
