Failed state warning for South Africa

Business Leadership South Africa (BLSA) chief executive Busi Mavuso says that businesses cannot function properly in a failed state, but partnering with the government to fix its failures comes at a steep cost.

The key signals of a failed state are a failure to provide basic services, economic decline, a loss of state control of critical services like the police, increased social unrest and political instability.

Over the past few years, South Africa has exhibited many of these signals.

This has been demonstrated through the load shedding and water crisis, collapsing infrastructure, freight and logistics bottlenecks, high levels of unemployment, ineffective governance and municipal collapse, and recent revelations and ructions within the SAPS.

Because of these risks, businesses have come together to invest in and support government programmes to reform and turn the country around.

Mavuso pointed out that businesses are doing this despite the steep cost to their own operations.

"Our fortunes as businesses are tied to those of government. If the government fails, the country fails. If the country fails, business fails. This is not sentiment, it is economic reality," she said.

Mavuso said that BLSA will this week launch a government reform tracker to try and keep up with all of the issues hitting South Africa and how the turnaround is progressing.

She said the ultimate test of economic reforms must be whether they actually change things.

These changes should result in a better business and investment environment that allows the economy to function and grow.

Because businesses are so inextricably tied to a functional government, Mavuso said it is in the business community's best interests to support the government and invest as much as possible in the reforms.

"When government systems fail, business carries the cost through higher security expenses, backup power generation, alternative logistics arrangements and lost productivity," Mavuso said.

"Ultimately, that renders us uncompetitive as an economy, compounding our problems by leaving us unable to compete in global markets."

However, she warned that businesses cannot write blank cheques for the state, or create a situation where the state is dependent on private sector resources.

She said that every rand spent helping the government is money not spent on building businesses; money lost that could have been spent on expansion, development, innovation and employment.

"There's an opportunity cost to deploying our best people to fix state problems rather than grow our businesses," she said.

Mavuso noted that shareholders and stakeholders already "rightly question" why businesses are subsidising government failures.

Because of this, she said businesses need to be clear and discerning with what state functions they support.

"We must be clear that we do not desire a permanent state of dependency," she said.

The CEO noted that, up to now, most interventions and partnerships with the government have focused on addressing the legacy of state capture.

This represents a period of a decade and half where widespread corruption within in the state and private sector drained South Africa's resoures, enriched the polical elite, and gutted institutions responsible for preventing this.

The private-public team-up has been successful in some respects. Significant reform has occurred in the energy sector, and the logistics sector has followed suit.

The country has also made significant progress in addressing blockages like the visa backlog and moving on from the IT and back-end service hangups that have kept service delivery slow.

Almost every day, the country inches forward in its reforms thanks to public-private partnerships and shifts in political will that enable them.

However, Mavuso said that these efforts must have an endpoint.

"Our efforts are not charitable endeavours, they are investments with measurable returns," she said. "We must ensure that, where we deploy resources, there is a clear pathway to conclusion."

"We need sprint targets, measurable outcomes and regular evaluation of progress. The BLSA Reform Tracker will support that effort."

The trackers are expected to launch later this week.