Investment is key for economic growth, and businesses only commit their money to expanding capacity when they are confident about the future. Last week there were three events that mark important confidence turning points: local government elections that will decide how our cities are run, a breakthrough on access to skilled visas, and signals about our trade relationship with the United States.
The local government elections were a good indicator of the strength of our constitutional democracy, with free and fair elections and mature political contest.
My hope is that they will lead to municipalities with capable leadership who can deliver the best possible services to its residents. In the difficult negotiations parties will now be going through, in an effort to form coalitions to govern the metros, the parties must place service delivery front and centre. Unstable coalitions with precarious leadership teams cannot deliver. That is what we have faced in Johannesburg for a decade, with frequent changes of mayor, budgets that go unspent and infrastructure left to fall apart. Parties have the chance to change that by forming enduring coalitions with clear rules for how decisions will be made and disputes resolved, putting performance and service delivery first.
When municipalities break down, it imposes an enormous economic cost. Businesses depend on electricity, water, sanitation, roads and other essential infrastructure. When those fail, businesses either have to spend money on infrastructure to provide for themselves, or, if they can’t afford to, simply shut down. For businesses looking for places to invest, municipal performance can be a big uncertainty. The reliability and quality of public services are key factors they must consider.
Johannesburg matters most to business. It is our economic hub, with 70% of the country’s companies headquartered there. The serious dysfunction that we’ve witnessed over the last decade or more is bad not just for the city but for the whole country. If businesses cannot operate efficiently, it has repercussions for everyone in the form of higher prices and fewer jobs. Tshwane, eThekwini and Ekurhuleni are also major economic centres where coalitions are going to be in charge. In all four, capable administrations focused on service delivery would inspire confidence in business.
Business is ready to help. BLSA has already committed skills and resources to supporting local government, ranging from mentorship to help develop scarce skills from engineering to project management. We can bring our private sector capabilities to support delivery. I look forward to working with new leadership in the key metros.
The second event last week was the announcement that the trusted employer scheme operated by the Department of Home Affairs has approved 71 new companies to access its expedited skilled visas service. I cannot count how many times I’ve been contacted by desperate company leaders who have waited months, and sometimes years, for visas for critical people. No company is going to invest in new plant and machinery if it cannot be sure it can bring in the specialists needed to operate it. The scheme does not change the rules – South Africans still get priority for jobs – but it cuts waiting times sharply for companies with a track record of compliance. Minister Leon Schreiber and his team deserve credit for this and for the broader modernisation under way at Home Affairs. The next step should be to extend the scheme quickly to more companies, including mid-sized firms that depend just as heavily on scarce skills.
The third development was a setback, but one that opens a path to a positive outcome. The US removed South Africa from the list of countries eligible for the African Growth and Opportunity Act. In practice, the damage is more limited than it would once have been, because the tariffs the US has imposed on our exports since last year had already eroded much of the benefit. Government also prepared the ground well, signalling clearly that the change was coming.
But on the positive side, the loss of AGOA could prove to be a catalyst. AGOA was a unilateral US concession that has long stood in for a proper trade agreement between our two countries. President Cyril Ramaphosa said last week that government wants to focus on forming a bilateral trade agreement based on negotiated trade rules and mechanisms. That would be confidence-building.
Such agreements should extend far beyond the US – the more agreements we have, the larger the markets our companies can access. Of course, these must be formed with careful consideration of our interests, ensuring our competitive industries gain access to markets without threatening domestic markets with foreign competition. The greatest gains will often come from economies that differ from ours, where our strengths complement theirs rather than compete with them.
If we make progress on these three fronts – strong local government that delivers, access to global skills, and wider markets for what we produce – the confidence impact will be very notable. That would enable more companies to invest to expand, leading to the growth and jobs that we so need.
By Busi Mavuso, BLSA CEO