South African elections: what big business wants for the future

The leader of South Africa’s second-largest party warned that failure to fix the economy “could end in violence, which nobody wants.”

After the election, Dion George, the Democratic Alliance’s (DA) economic policy overseer, told the BBC that parties needed to “set aside deeply entrenched ideological views” to get the economy growing again.

The African National Congress (ANC), the party that ended white-minority rule in 1994, came in first in an opinion poll last week but failed to win a majority and is seeking to form a government of national unity.

South Africa’s president, Cyril Ramaphosa of the ANC, said the concerns of the people must come first.

“These issues include job creation, inclusive economic growth, the rising cost of living, service delivery, crime and corruption,” he said recently.

About 8 million people are unemployed nationwide, with the unemployment rate at 32.9%.

It is one of the world’s tallest mountains and has been called a “ticking time bomb” in a UN report.

As power outages continued and businesses struggled to operate, the statistics bureau said this week that the economy contracted in the first three months of the year, with manufacturing, mining and construction being particularly hard hit.

Last year, South Africa’s economy grew by just 0.6%.

Widespread problems with energy supplies and state-run transport and water networks are “effectively forcing many small and medium-sized businesses to close,” said Busisiwe Mavuso, CEO of the influential lobbying group Business Leadership South Africa.

Members include local companies such as the Bidvest conglomerate and Absa Bank, as well as international corporations such as Amazon, Volkswagen and Nestle.

“The trading environment is not good,” Mbaso said, and union members were “looking to the government to really fix the fundamentals.”

The International Monetary Fund predicts it will regain its position as Africa’s largest economy by the end of the year, but foreign investment fell by a third last year due to trade difficulties, according to the central bank.

Among the major foreign banks withdrawing from South Africa are French bank BNP Paribas and British oil giant Shell.

Australia’s BHP made it clear in its recently aborted takeover bid for mining company Anglo American that it does not want the company’s South African assets.

Shell says the withdrawal is part of a wider review of its operations, despite having operated in South Africa for more than 120 years.

Competition for investment is fierce, and Mavuso says “it’s really hard for capital to land here.”

“East Africa is eating South Africa’s breakfast,” she jokes, hoping the size of the domestic market and the rule of law will ensure a return on investment once the economy recovers.

Mbaso said government “must create an enabling environment for investment” for both foreign and local companies, which he said would bring much-needed jobs to South Africa.

With many people out of work, inequalities are growing, which means “social stability will never be achieved,” she warns, so we are definitely at risk of a breakdown in social cohesion.

With unemployment for 15-34 year olds at 45.5%, frustration over a lack of jobs is common among Johannesburg’s young people.

“Business opportunities for young people” must be a top priority for the new government, says Tebogo Mokobane, an unemployed 23-year-old. “I’ve been looking for work as an animator for two years now but so far I haven’t found anything.”

Siphiwe Masila, a 24-year-old financial analyst, agrees: “More opportunities and jobs for young people” are paramount and must be “more accessible.”

She and Philasande Mnguni, a 24-year-old student, are concerned by the frequent power outages. Mnguni said the “lack of service is the biggest frustration” during a tough time “for many South Africans.”

South Africa is said to be the most unequal country in the world, and there is criticism from the left that the economy is not working well for the majority of its people.

The fourth-largest party, the Economic Freedom Fighters (EFF), calls for increased nationalisation and land expropriation to ensure a more equitable distribution of the country’s wealth.

The party argues that the ANC’s pro-business policies and some of the legislation aimed at promoting broad black economic independence do not address the country’s fundamental problems, a legacy of the racist apartheid system that was abolished 30 years ago.

With many people struggling to make ends meet in a stagnant economy, the government increased a range of welfare payments in its February budget.

More than 24.5 million people, or 39 percent of the population, receive some form of government financial assistance, which is one of the reasons why government debt has risen to 74 percent of the country’s annual income and the IMF warned in April that “decisive efforts to reduce spending are needed.”

South Africa’s Treasury has warned that “debt servicing costs are straining the economy and finances,” and now account for 20% of total government spending – more than basic education, social security and health.

On the electricity issue, the DA’s Dion George said it was “probably” important for the government to borrow money to fix the country’s failing energy grid, railways and ports, but he acknowledged this would be difficult.

Another option, he said, is to “change the model and bring the private sector in there,” which would ease the strain on government finances.

The centre-right DA, which won 22% of the vote and could have some influence over future policy, also wants labour laws such as minimum wage rules relaxed to boost employment.

“The minimum wage puts workers out of the market and employers are unwilling to hire at that level,” said Dr George, whose white-led party has proposed an exemption for 18-35 year olds who have been unemployed for two years.

But it is a policy that will pit the DA against South African trade unions, key allies of the ANC.

Trade unions have warned the ANC not to enter into any agreement with the DA.

“We reject any coalition with the DA,” Solly Phetoe, secretary-general of South Africa’s electricity workers’ union federation Cosatu, said earlier this week.

“This party was one of those that campaigned for the abolition of the minimum wage and national health insurance, and said that workers have too many rights.”

NHI refers to the National Health Insurance Bill, which promises universal healthcare for all and was signed into law by President Ramaphosa just before the election.

Peto’s comments reflect real concerns among ANC supporters that the DA will not support the ANC’s social welfare programmes.

For example, the DA opposes the black empowerment policies of both the NHI and the ANC.

“We need to curb the power of trade unions in our economy,” Dr. George counters.

ANC finance minister Enoch Godongwana agrees that South Africa has a growth problem, but he says there is disagreement over whether the ANC has a spending problem.

“We need to make choices to get the economy growing again, because if we don’t, we’re going to end up relying on bailouts and the economy isn’t going to grow. And then, of course, we could end up falling into violence, which nobody wants.”