Feb 06

The State Of Business Address (SOBA)

An Article By Ian Kilbride Published on 6 February 2024.

President Ramaphosa referenced ‘business’ no less than 21 times in his 2023 state of the nation address. By contrast, Former President Mandela mentioned business just four times in his 1998 SONA. This would indicate an increasing awareness of the importance of business and constructive relations between government and business, but it may also indicate a shift in the vexed political and power relationship between the two.

I think the evidence favours the former assumption, however, as government has recognised that the business sector is a vital partner in the future development of South Africa and we should view ourselves in less ideological terms and more as developmental partners seeking the same broad outcome, a prosperous South Africa

While the relative prominence of business in the recent SONA is to be welcomed and companies are cautioned to take seriously the content and commitments made in the annual address, it behoves organised business to speak for itself and reflect annually on the state of our sector. This then is a call for an annual State of Business address (S.O.B.), or the more apposite homophonic acronym, SOBA.

Looking at today’s state of affairs, in many respects, South African business is actually in “helluva state” to put it in the vernacular.

In purely technical terms, the S&P Global South Africa Purchasing Managers Index contracted for a second consecutive month in January this year. Another authoritative PMI saw business activity slump to levels not seen since the Covid pandemic and global financial crisis of 2008/9. This is a sobering state of affairs and should be recognised as such in this year’s SONA.

February is also Mining Indaba month and this year we have been reminded of the brakes undermining this vital sector by the rail crisis at Transnet, the dysfunctionality of our ports and the backlog of 2,000 applications for mining licences that are lying fallow, due in part to the absence of an operating cadastre system. This in a country that was once the envy of the world for its mining prowess.

The local cement industry is in crisis due to the weak economy, lack of demand, foreign imports and the lack of infrastructure spend repeatedly promised by government. Similarly, the local steel industry is rusting under the lack of demand, foreign imports and the failure of government to deliver on its major infrastructure projects.

Nor is it just the local mining and industrial sectors that are in pain, at the other end of the business spectrum, the private health care sector is now threatening to take legal action to stop President Ramaphosa signing the National Health Insurance bill into law.

The state of the local retail sector is somewhat more diverse, however. Clearly higher for longer inflation, high interest rates and consumers trading down has squeezed margins further and is forcing some household retail brands to the point of financial vulnerability and ripe for take over.

But despite this doom and gloom, there are some bright spots. Our country’s financial services sector remains world class. Our banks, asset managers and wealth managers are more than holding their own against their international peers. I have just returned from an extensive overseas business trip, and I can attest to this personally. A number of our bell weather JSE stocks are forging ahead and returning excellent results (particularly from their international earnings) and provide a haven for private and institutional investors.

And sometimes, foreigners see things more clearly than we do at home and have more faith in our economy than locals. In this regard, one need look no further than the global online behemoth Amazon making a huge investment in South Africa with its new regional head office on the banks of the Liesbeek River in Cape Town. Can Jeff Bezos and his team really be that wrong about Cape Town and South Africa? I don’t think so. Rather, I think Bezos sees South Africa as a market that is ripe for growth, relatively underserviced and brimming with local talent.

This is a viewport and philosophy I share and the reason why I continue to invest heavily in South Africa.

So, do we need an annual SOBA? Absolutely and it is up to the business community to get together and deliver this. But do we need to use the SOBA platform to shout at government and talk down the country? Absolutely not. But at a bare minimum, business has to lift its own voice, put its case to the nation, promise what it can deliver and deliver on what it promises.

Oh, and unlike the SONA the SOBA should be conducted without the disruption of people in red overalls!