More than rate hikes, these companies are crippling South Africa

According to the Sunday Times, Investec CEO Fani Titi stated that poor management, corruption, and the overall failures of Eskom and Transnet would keep South Africa in crisis unless the government made some difficult decisions.

Titi added that, the challenges surrounding state-owned entities are having a greater impact on businesses than interest rate increases.

According to the Sunday Times, South Africa’s economy is growing at less than 2%, exacerbated by a national power utility like Eskom that is load-shedding at record rates and a national port and freight company Transnet that is experiencing consistent failures.

“Our problems are not monetary policy management but fiscal policy and the inability of the economy to grow and stop unemployment,” said Titi.

“Interest rates have gone up probably 250 to 300 basis points. We are back to where rates were just pre-Covid. Our clients have been able to conduct business at these rates. More increases are expected, but this will be tolerable in the South African environment,” he said.

“Bigger issues, however, were the macroeconomic reform programmes and the growing challenges around state-owned entities,” he added.

The worst national power outages on record have plagued 2022, forcing businesses to invest private funds in order to stay afloat. Shoprite, for example, stated that purchasing diesel to keep stores lit costs an additional R100 million per month.

According to the Sunday Times, Titi also stated that Transnet is equally harmful to South Africa’s economy, stating that the freight rail company is becoming a constraint in terms of ports and rail.

According to the Minerals Council of South Africa, the 12-day strike in October cost the mining sector R6 billion per day, on top of the R50 billion already lost by previous failures for iron ore, coal, chrome, ferrochrome, and manganese exporters based on delivered tonnages versus contracted rail tonnages. This compares to an R35 billion loss in 2021.

Domestic supply chain constraints are at the top of South African CEOs’ concerns. Backlogs at ports and rail systems take six to nine weeks to clear, causing the business to stall.

Labor unrest at the company has also been exacerbated by crime syndicates that take advantage of the system and poor infrastructure.

Action is required

Titi stated that the country is rapidly running out of time and that the government’s inaction is crippling the country.

“As in any difficult situation, there is pain whichever road you take. Our leadership has to make the tough calls now. They need to execute with competence and skill and have the courage to face the consequences of their choices. We cannot continue to drift as we are doing today,” he said in an interview with 702.

Titi added that South Africa can do several things right now, such as open up the electricity market to the private sector and cut a lot of red tapes so that capacity can be brought online, but this requires the government to have the courage to make the right decision.

“What is also required is a higher degree of participation by the private sector to create new capacity in the economy and to create jobs. This will see the private sector prosper and, consequently, the country.” He said.