I want to congratulate the Presidency, Infrastructure South Africa and their partners on last week’s investment conference. It was the fourth instalment, and it was the best so far. That is for two reasons: it was well put together and managed, but more importantly, there was a better background situation in the country thanks to some genuine reforms that have been made.

I said before the conference that investment needs good government policy, not conferences in which companies are cajoled into investment commitments, much of which would happen anyway. The conference succeeded in amplifying certain large investments happening in the country, which does help to improve sentiment. But what really did help was the very frank assessment of the challenges from the President. He was pragmatic and did not trivialise our problems, from crime and corruption to high unemployment. That frankness gave him credibility that has been further helped by his clear recognition that the private sector is essential to resolving those problems. This is a government that acknowledges the need for pragmatism given the environment we are facing.

The background reforms are the tangible processes that business can say: “These do move the dial on investment.”

The successful spectrum auction (barring some legal challenges) that was concluded the week before the conference is the best example. It will enable the mobile networks to start investment that has been held back for over a decade thanks to policy implementation inaction and confusion. Changes to the Electricity Regulation Act to allow private companies to build plants up to 100MW without a licence are also very positive, though this move risks being undermined by bureaucracy imposed by the energy regulator on the process of registering projects.

The president spoke a lot about the need for the public and private sectors to work together. I certainly agree with that, and we at BLSA have always been committed to working productively with our public sector counterparts to deliver, particularly on infrastructure investment. But we must not lose sight of the fact that largescale investment in a country like ours only happens when millions of people feel it is appropriate to put their money at risk by investing. It is not something anyone can micromanage but something that emerges when the right policy environment and economic conditions come together.

Right now, we are benefiting from high global commodity prices. This is a stroke of good luck. But investment is not responding – miners and others who are making profits thanks to high prices are not using those profits to expand production. Why not? Because they do not have confidence in the policy environment. They are uncertain that future regulatory changes may damage the returns they can earn on that investment. In that context, the rational decision is to rather just give the cash back to their shareholders. That is why you need good policy as well as good economic conditions for investment to happen. People need to be confident both that global economic conditions will be positive and that the local business environment will be positive. Otherwise they won’t take the risk.

I believe the President’s efforts are starting to change this. But we absolutely have to keep up the pressure. We must find areas of reform that will improve the outlook. Mining and logistics are obvious areas. It is a travesty that our ports are among the most expensive in the world. Our rail network is also expensive and unreliable. There are lots of ways that this can be fixed, particularly with government and the private sector working together. Mining continues to be dogged by policy confusion. This has to change.

Overall, though, my confidence has improved thanks to the conference last week. There is progress. There is a positive spirit of cooperation between government and the private sector, and agreement – at least at the level of the Presidency – on what needs to be done.

Our challenge remains getting the public sector as a whole to coordinate and focus on delivering on the objectives. In that, I am enthusiastic to work with our social partners to ensure it happens.

 

BLSA welcomes the relaxation of Covid-related restrictions, particularly at public gatherings. However, the decision to keep restrictions on business activities in place is perplexing, I write in my Fin24 column. Businesses need to be able to operate as efficiently as possible given the state of our economy and our unemployment levels.

 

The spectrum auction was successfully conducted and raised nearly double the amount expected at R14.4bn, reflecting how powerful market forces can be. This is good news for our SA’s investment sentiment, I write in Business Day. because it signals government’s intent to deliver reforms despite numerous challenges they are facing. For renewable energy projects to potentially inject another explosion of capital into the economy, Nersa needs to resolve the cumbersome approval processes and cut the red tape for plants under 100MW.

 

This is a weekly newsletter from BLSA CEO Busi Mavuso.

BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. In 2017, BLSA signed a contract with South Africa, committing business to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.