Johannesburg - As SA’s ruling African National Congress met to review the government’s performance and recommend policy changes, business leaders bemoaned a lack of regulatory certainty in Africa’s most industrialised economy.
Regulations routinely change without warning, and the lack of consistency and stability is hindering investment, Khanyisile Kweyama, CEO of Business Unity South Africa, said in a panel discussion at an ANC policy forum near Johannesburg that ended Sunday.
“The role of the private sector is not being taken seriously enough or is being undermined,” she said. “We get put on the back foot, made to seem as if we are unpatriotic, as if we are not committed to the country. Is this relationship between the government and the private sector ever going to be a true partnership? We are not yet there.”
Recent regulatory measures opposed by business include changes to visa rules that have caused a slump in tourist numbers because they require visitors to apply in person at a centre for travel documents. Laws enabling the state to expropriate property paying market-related compensation, take a free stake in all new energy ventures and force all security companies to be locally controlled are also under consideration.
Delegates at the ANC conference called for a review of all manufacturing incentives, state support for steel and agriculture, policy certainty for the oil and gas industry and the refurbishment of aging power stations.
While South Africa was judged the 49th most favourable place to do business out of 140 countries ranked in the Geneva-based World Economic Forum’s 2015-2016 Global Competitiveness Report, its government regulation was ranked the 117th most conducive to carrying out commerce.
Government regulation
“If we are to attract the kind of investment we need to get the growth and get the capital formation, we have to tackle the issues about the burden of government regulation, which is something that is pulling us back,” said Ralph Mupita, CEO of insurer Old Mutual’s emerging markets business.
Companies had a record R689.4 billion ($51.6 billion) on deposit in South African banks at the end of June, up from R671.5 billion in November, according to Stanlib Asset Management, the nation’s third-largest domestic mutual fund manager.
Several senior ruling party officials have accused business leaders of withholding investment and undermining confidence in the economy.
‘Investment strike’
“People who talk about an investment strike should just say why would someone who has money hides it under the mattress?” said Edward Kieswetter, CEO of retirement- fund administrator Alexander Forbes. “Why would you keep it in a savings account that doesn’t give you a great return? Essentially what there is, is an environment that is not conducive to investment.”
Besides a lack of policy uncertainty, investment is also being deterred by energy shortages, strikes and a slowdown in demand from Europe and China. The economy contracted an annualised 1.3 percent in the second quarter, while the rand has slumped 13 percent against the dollar this year.
President Jacob Zuma, who has led the ANC since December 2007 and the country since May 2009, said the government was committed to working with business in a challenging global economic environment.
“More than anything you need to support the ruling party, because it has very good policies,” Zuma, 73, told a fundraising dinner on the eve of the ANC conference on October 8.
The government is reviewing the tourist visa rules, while Zuma is considering whether to approve the laws regulating ownership of the oil industry. Parliament is processing the land expropriation and energy industry legislation.
The Zuma administration’s economic blueprint is the National Development Plan, which aims at bolstering the economic growth rate to more than 5 percent by 2019 and halving a 25 percent unemployment rate. Drawn up by a panel headed by former Finance Minister Trevor Manuel, it calls for a reduction of red tape and a review of labor laws to make it easier for companies to hire and fire workers.
‘Centralised management’
“We are not happy” with the progress made in implementing the National Development Plan, Enoch Godongwana, head of the ANC’s economic transformation committee, told reporters at the conference on Sunday. “The environment has not been favourable. A key thing that is needed is a centralised economic management and policy formulation body.”
There’s a “big gap” between the intent of the NDP and actual legislation, said Simon Freemantle, an economist at Standard Bank Group, Africa’s largest lender.
“There are quite simply too many departments in cabinet that have the capacity and ability to define economic policy,” he said. “They need to be aligned to some kind of common purpose.”
BLOOMBERG