As the ANC gathers for its elective conference, business outlines its views on what needs to be achieved.
Top of business's wish list for the ANC's 53rd conference, which kicks off in Mangaung over the weekend, is that the gathering will make policy decisions that give investors the certainty they need to make long-term investments in the economy.
"A major contributory factor inhibiting private investment recently has been the cumulative impact of policy uncertainty - ranging from nationalisation and collective bargaining to government/business relations. If SA is to avoid a low growth trap of about 3%, which is inadequate to meet its socioeconomic challenges, positive signals will need to come from the conference," says Prof Raymond Parsons, special policy adviser to Business Unity SA.
Policy certainty is one thing. But Parsons also cautions that the party needs to unite around the right policy direction. While the ANC is at odds over what the right policy direction is, business is looking for a ringing conference endorsement of the National Development Plan (NDP). The plan sets out a 20-year path to a bigger and stronger economy which also requires government to make some tough, potentially unpopular trade-offs.
"What is needed at Mangaung are broad policy decisions which give certain economic direction supported by strong leadership. The biggest single thing the Mangaung conference could therefore do from an economic and business point of view would be to throw its weight behind the NDP. SA urgently has to raise its game, especially given recent global economic developments. The eventual outcome of Mangaung will have an impact in its own right and then the impact is multiplied through business and the markets, through that elusive but profoundly powerful force for SA called 'confidence'," says Parsons.
Though cabinet and the SA Reserve Bank have endorsed the NDP and business hopes that a move by the ANC to make Cyril Ramaphosa deputy president of the party and of the country would allow the plan to take centre stage in government, there is opposition to it in some quarters of the ANC. The party's labour alliance partner, Cosatu, for example, views the plan as a "neoliberal" one crafted by a team overseen by former finance minister Trevor Manuel, who served under former president Thabo Mbeki. The latter copped severe criticism from labour for imposing policies that led to jobless economic growth.
Manuel appealed to the Cosatu conference in September to support the NDP. But Cosatu's response was, at best, lukewarm. The labour federation is supporting President Jacob Zuma for a second term on the back of his promise to introduce "radical" change in his second term. This includes restructuring the white-dominated economy so that many more South Africans enjoy the fruits of freedom.
The Black Business Council's Sandile Zungu agrees that ownership in the economy is "dangerously skewed" towards the white minority. New JSE research on black ownership of the exchange confirms this, he argues. This research shows that 21% of the value of available shares listed on the exchange is owned by black individuals. But only 9% of their value is held directly. The remaining 12% is held through mandates like pension funds and unit trusts.
Zungu says this situation is made worse by the few black people who have become wealthy since democracy who tend to "flaunt" their wealth. He says this breeds resentment among "those [poor black South Africans] who have nothing to lose".
The question is what policy and legislative tools the ANC will use to change the unacceptable racial character of the economy. Zungu cautions that the solution does not lie in shifting ownership from white hands to the state. ANC policy proposals to the conference emphasise state intervention and state ownership as a driver of economic growth.
Zungu says: "There's an influential sector in the ANC that openly despises black ownership and wants to shift ownership to the state instead. Quite frankly, this is flirting with danger."
The ANC, says Zungu, needs to recognise "once and for all" that the key to unlocking the economy's potential to create jobs is a business environment in which small and medium enterprises can multiply and thrive. "The ANC has got to go back to basics," says Zungu. He hopes the party will focus on the details that make an economy tick more than it does on big, macroeconomic issues.
While the conference will consider a macroeconomic review that has been prepared by the ANC economic transformation committee, manufacturing businesses echo Zungu's call for a close look at what holds business, and therefore the economy, back. Though a revival of the manufacturing sector is central to government's economic and industrial policy, the sector has shed 300000 jobs since 2008. More than 440000 small businesses closed down between 2006 and 2011. This is because SA's manufacturing sector simply can't make goods as cheaply as other countries can. Aside from high annual wage increases, other input costs have also rocketed. The sector, for example, has had to absorb a 200% increase in electricity prices over the past five years.
The Manufacturing Circle (MC) says decisive action is required from the ANC if the trend of deindustrialisation is to be reversed and if the sector's potential for "job-rich" growth is to be achieved. The MC's wish list includes a call for SA manufacturers to get more incentives and subsidies, as enjoyed by their counterparts in competitor countries. For example, while SA manufacturers are bracing themselves for more electricity price hikes, Brazil is preparing to cut electricity costs by 28% in 2013. The MC's wish list also requires the ANC to take a bold stand against China by imposing heavier duties on its exports to SA. The prices of Chinese-made goods are about 40% lower on average than the local market prices and, in some cases, according to the MC, are below the raw material costs.
MC spokesman Coenraad Bezuidenhout says the ANC also needs to look at how monetary policy can be tweaked so that the rand is more competitive and more stable.
Mining is another sector where business is hoping for clear and coherent signals from the ANC conference. The party has rejected nationalisation of the country's mines. But it remains under pressure to come up with ways to ensure the country's mineral wealth benefits more poor black South Africans. Policy proposals talk of strengthening the state mining company and the need to identify and manage "strategic" minerals in the national interest, but the party seems to be leaning in the direction of imposing further taxes on mining companies.
This won't bolster business confidence, and it may prompt rating agencies to downgrade SA's sovereign rating further. The chairman of the ANC's transformation committee, Enoch Godongwana, has shrugged off this possibility, arguing the ANC needs to act to avoid an "uncontrollable revolution" from constituencies that are becoming increasingly frustrated with the slow pace of change. Business has cautioned Godongwana's committee not to take policy decisions that will, in the end, make this social and economic predicament worse.
Claude Baissac, MD of mining risk management company Eunomix, argues that the ANC should address the causes - not the consequences - of poverty, unemployment and inequality. The causes are low growth and low investment and the way to address these is to place emphasis on private-sector development.
Zungu agrees, saying that the ANC has rejected nationalising the country's mines but, unless it spells out the kind of plan that business wants to hear, domestic and foreign investors will not make the kinds of fixed investment needed to grow the economy and ease the political pressure on the ANC to reduce poverty and joblessness.
What it means
Need greater policy certainty
Conference must endorse the NDP