South Africa’s economy is ‘almost beyond repair’

Despite recent moves to cut red tape – especially for small and medium-sized businesses – analysts and trade experts say the Department of Trade and Industry and Competition (DTIC) is actively “limiting” investments in South Africa trying to force companies to do things their way. .

The managing director of advisory and consultancy group XA Global Trade Advisors, Donald MacKay, told the Sunday time that the ministry’s interference in all aspects of trade and business has effectively deterred investment in the country on an unknown scale, leading to an economy “almost beyond repair”.

He said the government wanted investment, to stimulate the economy and create jobs, but refused to compromise – trying to force companies into impossible deals when seeking tariff relief or deals that would benefit people. a company.

MacKay said those contracts bind the companies to “frightening covenants” for three years, such as commitments to investment, price controls and employment.

He said that instead of incentivizing investment by creating a more attractive business environment – cutting red tape, fixing infrastructure, restoring electricity, getting rid of corruption – the government is transferring all corporate responsibility.

The trade expert used the acquisition of Burger King in June 2021 as an example, where the deal stalled due to a lack of BEE. The deal was only reached after firm commitments from the new owners to invest more and not cut jobs.

The same thinking is driving the government’s efforts on localization and other trade issues, MacKay said, adding that it’s a core ideology within the department and government as a whole that will continue. to discourage investment.

Commercial matters

The government at least seems to be aware of this particular stumbling block on some level, with recent ministry moves reducing some of these requirements.

The department this week issued new regulations for public comment to reduce – or rather provide exceptions – on restrictions on horizontal and vertical practices for small and medium-sized businesses.

This followed announcements by President Cyril Ramaphosa that his administration would cut red tape for some businesses in struggling post-Covid-19 sectors.

However, the ministry recently released new regulatory proposals aimed at tightening the country’s scrap metal trade.

He said the regulations would combat the widespread theft of copper and other metals in the country and discourage the practice by making the process of importing equipment more difficult and also requiring registration and licensing. to legitimate resellers.

This has also been criticized.

Legitimate scrap metal dealers – in whose form the stolen metals are ultimately exported – would be burdened with more red tape, and the whole industry would suffer. Meanwhile, the European Union has also challenged the plans, saying they do not follow World Trade Organization rules.

The business community has criticized the government’s interference in business and its failure to do the simple things needed to get the economy back on track.

Investec Managing Director Fani Titi and Local Banking Director Richard Wainwright recently said that unless the government implements structural reforms, the global macroeconomy will not grow significantly in the long term. .

Wainwright cited an “avalanche” of regulations, especially for small and medium-sized businesses, which he said are strangling the economy. Both men also raised concerns about the precarious state of Eskom and the continued delays in the supply of additional electricity from independent power producers.

“We’re not competitive – and its basics, as opposed to rocket science,” he said. “We’re not trying to land people on the moon or go to Mars. Just get electricity that works and doesn’t strain the economy.

“All you have to do is move goods from one point to another for the economy to function properly. Simply allow businesses to do what they need to do without overburdening them. These are simple things.

Business Unity South Africa CEO Busi Mavuso meanwhile flagged issues around home affairs and other departments where the government just can’t get their act together as being a massive push factor for business – local and foreign – trying to operate in the country.

MacKay said the government talks a lot about boosting business and making it easier to do business with South Africa – but politically and ideologically it does the exact opposite.

“The underlying philosophy is always that of the government deciding what the private sector should do. And I don’t see how it works,” he said.

Read: Government’s new plan to crack down on copper theft in South Africa

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