The people South Africa needs to save its economy

South Africa is missing the mavericks it needs to drive its economy forward by starting new businesses, growing existing ones, and taking the risk of investing in the country. 

The country has historically had these mavericks, from Harry Oppenheimer and Sol Kerzner through to Adrian Gore, Patrice Motsepe, and Michiel le Roux. 

These individuals and those around them have created multi-billion rand businesses that employ hundreds of thousands of South Africans, generate billions in value, and contribute meaningfully to the country’s fiscus. 

More recently, South African corporates have become increasingly associated with prudent financial management, conservative cash allocation, and an unwillingness to invest heavily in the local economy. 

There has also been a noticeable decline in the creation of sizeable new businesses, with only a handful such as Yoco, iKhokha, PayJustNow, Switch Energy and others emerging in recent times. 

Many entrepreneurs have been limited by the country’s stagnant economy, surging unemployment, and an increasingly difficult environment in which to do business. 

These missing mavericks are a major reason why the country’s big corporates are sitting on over R1.8 trillion in cash, Stanlib chief economist Kevin Lings said. 

The other reasons are well-known, such as the country’s low business confidence and stagnant economic growth. This has been coupled with entrenched conservatism in how companies are managed amid elevated uncertainty. 

“The idea of ‘just in case’ money is deeply embedded, and the CFO wants to know that if something unexpected happens, they can respond immediately. They don’t want to be at the mercy of a bank’s bureaucracy, waiting for credit approval,” Lings said. 

That instinct has made South African corporations among the most financially conservative in the world, with corporate debt at about 31% of GDP. Without Eskom, Transnet and Denel, this drops to 20%. 

By contrast, in many developing and developed economies, corporations carry far higher levels of debt and invest more aggressively in growth and innovation.

Furthermore, in a stagnant economy, businesses already have enough capacity to meet demand, resulting in there being little need to invest heavily in expanding operations. 

“In South Africa, the growth in corporate cash holdings has far outpaced inflation for years. That tells you something about behaviour – it’s not just about the amount of cash, but how quickly it’s accumulating in an economy growing at 1%,” Lings said. 

The missing mavericks

One of the major reasons behind the lacklustre investment from corporates in the local economy is the deeply conservative people who run South African corporates. 

Lings made it clear that this is not a bad thing and has very positive implications for the economy, with companies having strong balance sheets and able to withstand external shocks. 

He also explained that much of the caution from business leaders is cultural, a by-product of operating in a country with elevated uncertainty. 

Many South African companies are run by accountants, and even when dealing with industrial firms or manufacturers, one will find that the CEO used to be a CFO or comes from a finance background.

“Their focus is on financial soundness, ensuring the balance sheet is strong, and the business looks good to shareholders,” he says.

That focus has undeniable benefits – low leverage, stable earnings and well-managed risk. But it also has consequences. 

“If you’re an accountant by training, your strength is financial management. While your balance sheet may look great, it’s important to consider whether there is a pipeline of new ideas as well,” Lings said. 

“When I ask South African companies about their research and development (R&D) departments, many don’t have one. If you ask who’s responsible for design or innovation, there’s often no clear answer.”

In countries like Denmark or Norway, Lings said every major business has a design or R&D department tasked with developing new products and staying ahead of the curve. 

“Here, we don’t prioritise that. So, as money comes in, we put more of it in the bank – not into new ideas or markets,” he explained.

Lings said there is a clear absence of the mavericks – bold, risk-taking entrepreneurs who spot opportunity in chaos.

“Elon Musk is a maverick. Richard Branson is a maverick. Sol Kerzner, who built Sun City in the middle of nowhere, was a maverick. These are people who take risks, see opportunities others miss, and go for it,” he said.

South African business leaders are highly skilled, diligent and deeply knowledgeable about regulation, tax, and compliance.

However, they may not be wired to make the big bets that change industries. And yet, he acknowledges, the context matters.

“When you don’t know if you’ll have electricity, water, or social stability tomorrow, risk-taking becomes harder to justify,” Lings said.  

“Many CFOs tell me they’re simply trying to stay in business. I understand that. But even within that reality, there’s room to be more creative, more entrepreneurial.”