•  Government’s fuel levy relief, costing R15bn, is enabled by SARS collecting R24.7bn above its R2tn revenue target, showing an improved fiscal position that allows tactical responses to global shocks.
• South African markets have weathered global selling pressure better than others, with reform momentum differentiating the country from emerging market peers facing the oil crisis.
• The investment conference demonstrated a commitment to irreversible reforms in the electricity, water and logistics sectors, with the R2tn investment target dependent on delivering real opportunities for private capital.
•  Investment alone doesn’t matter – what counts is whether it reduces costs and expands capacity, enabling businesses to compete globally and hire workers to address unemployment.

I am glad that government has heeded the call to soften the impact of the global oil price shock through temporary relief on the fuel price levy. This will cushion the blow to the economy of a precarious global situation that businesses are trying to manage.

The fact that government was able to provide relief is a result of the hard work of repairing its finances and the structural improvements undertaken to boost economic performance. SARS announced on the same day that it had beaten its target in raising over R2tn in revenue. This means government’s overall debt outlook is more positive than it was a month ago in the budget.

Economists estimate that the fuel levy relief will cost about R15bn in foregone revenue over the coming months, but SARS collected R24.7bn above target, more than making up for it.

Our economy, however, is facing serious global headwinds. The war is creating uncertainty while disrupting the movement of not just oil and gas but also fertilisers and other industrial chemicals. There will be higher inflation as a result. Investors are worried and global markets show they are withdrawing from riskier assets. Our own markets have been affected, with considerable selling on the JSE, the bond market and weakness in the currency.

But it is notable that weakness is less severe than what other markets have faced. All markets have faced selling pressure, but South Africa’s has been relatively contained. Our reform momentum is what differentiates us from the rest of the world. South Africa has a relatively good story to tell.

Unlike the Covid crisis, when government finances were in trouble after the disastrous Zuma years, we face this crisis in a healthier position, able to brace for the storm. But while we must be prepared for pressure on our growth through interest rates that won’t fall as fast as we were expecting earlier this year, it is now more important than ever that we are steadfast in delivering the structural changes that will spur our performance. The global situation is beyond our control, but our domestic situation is within it. We must use that to continue driving the policy shifts that will get our economy working better.

This progress was on display at the investment conference last week. President Cyril Ramaphosa and the minister of trade, industry and competition Parks Tau highlighted how the conference was taking place in much better circumstances, thanks to the reform agenda. The president emphasised the importance of working with the private sector and ending inefficient monopolies that can’t innovate. He pointed to the water sector as ready for private investment, with plans to create professionally run water entities and launch an intensive infrastructure build programme. He emphasised that these policy shifts are irrevocable and irreversible. That means investors can trust our story, build confidence that we are on an improving trajectory, making us a good place for investment.

This is precisely the right approach. A tactical move like the fuel levy relief protects our economy, but the real task of building it remains firmly in the domain of structural change. And on that front, we must push on with our electricity sector transformation, enabling a competitive electricity market, and overhauling our logistics system to ensure there is competition with new alternatives for ports and railways. The R2tn of investment that government is aiming to attract can happen easily if the policy changes really do deliver opportunities for the private sector to invest. From grid infrastructure to crane gantries, the private sector stands ready to invest.

But we must remember that it is not the investment itself that matters, but the consequences of it. Our economy needs cheaper logistics so that our businesses can be competitive in global markets. When our ports are among the slowest and most expensive in the world, our goods are more expensive than those of other countries. When our electricity grid cannot move power from areas where it is cheap to produce to where it needs to be consumed, costs mount. Ultimately, investment must reduce costs and expand capacity, which enables businesses to grow. That is when they can hire more workers, helping to solve our most critical challenge of unemployment.

The investment conference reinforced business and government’s commitment to driving improvements to conclusion. The global situation is beyond our control, but our domestic trajectory is ours to determine. When oil prices stabilise and global markets settle, South Africa must be positioned as the competitive, reform-driven destination that attracts sustained investment. That’s the foundation we’re building now, and we cannot let global uncertainty deflect us from it.

+++
BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed 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.