JOHANNESBURG – The South African Chamber of Commerce and Industry (Sacci) on Wednesday warned the government that the financial doldrums of state-owned enterprises (SOEs) and local government were inhibiting economic performance and weighing on sentiment.
This as Sacci’s business confidence index dropped to 92 points in July from 93.3 points in June and marked the worst reading since March.
Sacci said the decline in the index was largely due to decreases in the sub-indexes of import and export volumes, manufacturing and new vehicle sales.
New vehicles sales are usually a good gauge for both consumer and business confidence.
Sacci economist Richard Downing said the widely reported poor financial position of SOEs and municipalities has been, and continues to be, a huge cause for concern.
“It is Sacci's view that the manner in which SOEs and municipalities are led, managed and operated is the primary cause of their problems. Government’s own current practice of how leadership and management is appointed to run its businesses and municipalities is where all problems start,” Downing said.
“As mentioned in Sacci’s previous comments, it is no longer negotiable that government urgently restructures its policies and procedures on how SOEs are managed, particularly through the independent appointment of competent boards and management.”
The past three months have seen a plethora of senior management resignation at South Africa’s SOEs.
The erstwhile chief executive of power producer Eskom, Phakamani Hadebe, in May resigned from the role and laid bare the toxic nature of what is arguably the toughest job in South Africa.
Hadebe, in a frank statement, said the job to turn around the fortunes of the debt-laden power producer had had a negative impact on his health.
Eskom’s group treasurer, Andre Pillay, last month said he would leave the power producer at the end of this month, ending an eight-year career with the utility. Eskom last week reported a record R20.7 billion loss for the 2018/19 financial year.
Former South African Airways (SAA) chief executive Vuyani Jarana in June resigned from the role, citing lack of government support in stabilising the entity.
In a scathing letter of resignation, Jarana said the lack of commitment to fund the national carrier was systematically undermining the airline’s turnaround strategy and making it near impossible to break even by 2021.
Jarana’s resignation was followed by that of SAA board chairperson Johannes Magwaza in July.
South African Post Office chief executive Mark Barnes last week also resigned from the role.
Investec chief economist Annabel Bishop said South Africa had lacked meaningful growth-enhancing economic reforms that result in substantial, and sustained turn-around in economic activity, confidence and investor sentiment.
“Business confidence has been depressed this decade, hindered by the slow pace of turn-around at financially embattled SOEs and the continued growth in government debt, while private sector fixed investment has been essentially crowded out by the reallocation of a substantial portion of funding sources to government,” Bishop said.