Johannesburg – Talks of “radical economic transformation” and land expropriation without compensation do not guarantee real change, said Jabu Mabuza, chairperson of both Business Unity South Africa (BUSA) and Telkom.
Mabuza was speaking at the Annual General Meeting of the American Chamber of Commerce on Thursday. As the business leader of the CEO Initiative, Mabuza shared what Team SA, a partnership between government, business and labour, was doing to avoid a credit ratings downgrade. He also mentioned the importance of achieving inclusive growth.
“Talks about radical economic transformation and expropriation without compensation is more about political theatre than real policy change,” said Mabuza.
In the same breath, Mabuza added that radical economic transformation was “entirely sensible and pro-business”. He highlighted that if South Africa continued to “hobble” along with the current levels of inequality and unemployment, the business climate would worsen and corporate profits would shrink.
He added that achieving inclusive growth and reducing the inequality gap would help to protect fiscal sovereignty.
President Jacob Zuma had elaborated on the ANC’s visions to achieve radical economic transformation at the State of the Nation Address (SONA) held in February.
Zuma said through regulations and programmes, government will be able to use the state’s buying power to empower small enterprises, rural township enterprises and promote local industrial development.
Referring to the political noise and rhetoric, Mabuza said that he understood it would make investors anxious. But despite the noise, South Africa remains a highly attractive investment destination and that there is reason for business to feel “moderately” confident about the country’s economic prospects, he explained.
“I am acutely aware prospects of better growth remain highly dependent on implementation of critical structural reforms,” said Mabuza. These include reforms in state-owned enterprises (SOEs), the energy sector and labour market.
It is easy to think that the country is heading down a “dark path” but the facts show that the country remains committed to the Constitution and rule of law. Additionally government is working closely with the private sector to achieve inclusive growth, governance reform and fiscal discipline.
Since the launch of the CEO Initiative, led by Finance Minister Pravin Gordhan and Mabuza, the country has regained its footing and recalculated its direction, he said. Mabuza also pointed out that this collaboration was mandated by the president, and the team reports to the president and Cabinet.
Mabuza said that the progress of the CEO Initiative was reflected in its ability to help avoid a downgrade of the sovereign rating to junk status last year.
Ratings agency Standard and Poor's kept the sovereign rating at BBB- with a negative outlook. Fitch kept its rating to BBB- but downgraded the outlook to negative. Moody's which has South Africa two notches above junk, kept the rating at Baa2 with a negative outlook.
“Credit for this goes to Treasury’s willingness to make and enforce difficult decisions, which was seen in the Budget.”
Businesses also helped to communicate to ratings agencies that it was united with government on terms of fiscal and monetary policy discipline, he explained. The initiative also helped make the public aware of what was at stake.
“South Africans now understand that the sovereign rating is not something that concerns capitalists,” he said. “People in every suburb, township and even in deep rural areas understand it is about the price of everyday realities and necessities.” It impacts the cost of borrowing and the chances of getting and keeping jobs.
Mabuza said there was “tremendous value” in business raising its voice constructively in policy debates.
The CEO Initiative also helped set up a Youth Employment Scheme, to provide opportunities for one million youth between the ages of 18 and 29 to gain work experience over three years. This is a public-private partnership where the costs are shared equally.
The CEO Initiative also developed an SME Fund, chaired by Discovery CEO Adrian Gore. This is a model to fund small and medium enterprises and to provide necessary mentorship for these businesses to thrive, explained Mabuza.