Johannesburg - An interim committee has been set up by President Jacob Zuma with business to help fix and stabilise the economy. It will aim to avoid a credit rating downgrade, identify infrastructure projects companies can invest in and address the losses incurred from the drought ravaging the country.
The committee, to be co-chaired by Finance Minister Pravin Gordhan and Business Unity South Africa president Jabu Mabuza, was announced by Zuma after his meeting with chief executives of top companies in Cape Town yesterday.
“We are turning the corner. The channels of communication needed to remain open at all times,” Zuma said.
This is the first concrete move by the government to get local business to invest into the economy for the long haul.
The meeting comes at a critical juncture, ahead of Zuma’s State of the Nation Address tomorrow, which is expected to detail how the government plans to restore growth and avoid the credit downgrade.
“We will have a small grouping to work out how we can grow the economy and reduce unemployment,” said Zuma.
The committee would not be permanent.
Saving jobs
Zuma told journalists after the meeting that both the government and business had agreed to work on getting the country back on track. Business contributed 85 percent to gross domestic product, he said.
The country is facing massive job losses this year as the economy continues to limps along. The World Bank has projected just 0.8 percent economic growth for South Africa this year.
Some economists warn that a recession is around the corner, which some say can partly be blamed on the government and business talking past each other.
The meeting yesterday also came as the government battles to restore confidence.
The business confidence index recovered last month from its lowest level in 23 years after an increase in credit to the private sector. The index rose marginally to 80 from 79.6 in December.
Zuma said: “The low economic growth is a cost to business, community and (the) government.”
Low growth was a problem that “would not be able to produce immediate solutions to help the economy”, he added.
The government has invested billions of rands in infrastructure development in the past five years and Zuma said the government would invest further.
Mabuza told Business Report on the sidelines of the meeting that part of the stabilisation plan was to do certain things urgently, including avoiding a downgrade by ratings agencies.
The economy has been under pressure for some time, and the firing of Nhlanhla Nene by Zuma last year wiped out billions of rands in the markets.
Zuma is now mending relations with business. He first had discussions with them before the World Economic Forum in Davos last month, and yesterday’s meeting was a follow up to that meeting.
Nene’s successor, Gordhan, also met with about 60 chief executives last month to discuss how South Africa could avert a rating downgrade.
Mabuza said he was confident that solutions would be found on the economy.
He confirmed that Zuma instructed the committee to report back to him in May.
Partnering
Anglo American chief executive Mark Cutifani said business must speak the same language as the government. In addition, business wanted policy certainty from government.
“We need to understand what to do to support (the ) government,” Cutifani said.
While the meeting was welcomed across the board, Cosatu said it was incomplete without labour.
Cosatu spokesman Sizwe Pamla said it was concerned that the outcomes would be unilaterally imposed on workers.
“The emerging message and discourse coming from both capital and the state hint at strategies that includes privatisation, cut in social spending and labour flexibility. These are only meant to defend and maintain the status quo.
“Cosatu will not agree to wage cuts, freezing of vacancies and unilateral attempts to raise productivity without workers being consulted,” Pamla said.
“It is patently obvious that solutions to the current retrenchment crisis cannot be found through negotiations at a plant level or even at an industry wide level. This should be an issue for national negotiations between labour, business and the state.”
* Additional reporting by Amy Musgrave and Zintle Mahlati
BUSINESS REPORT