South Africa’s biggest businesses send a warning to Ramaphosa

Calls are growing among South Africa’s organised business sector for stronger government intervention in the continuing decline of Johannesburg.

In a joint statement, Business Leadership South Africa (BLSA), Business Unity South Africa (BUSA), and Business For South Africa (B4SA) described the state of the city as a “national economic emergency”.

This comes at a time of an improving economic outlook for South Africa, with the country recently seeing its first sovereign credit rating upgrade from Fitch in over two decades.

However, the three concerned organisations warned that this progress would likely be short-lived if Johannesburg is allowed to decline further.

The city accounts for approximately 16% of South Africa’s GDP, yet its financial stability has been severely undermined in recent years by corruption and misadministration.

Finance Minister Enoch Godongwana recently threatened to cut government financing to the city if it does not manage to turn itself around.

“It is the country’s commercial capital and the city where a disproportionate share of domestic and foreign investment decisions are made,” the business groups said.

“When Johannesburg is in a state of visible decline, it undermines the national growth story at precisely the moment a more positive narrative is gaining credibility.”

Issues of service delivery continue to plague Johannesburg, exacerbated by a capital expenditure which sits at just 6% of the city’s annual budget.

Meanwhile, the rates and charges for these declining services have more than doubled in the last 15 years, even as property values in the city have fallen.

The Auditor-General of South Africa (AGSA) recently issued a qualified audit opinion on the city’s finances, citing concerns of irregular expenditure, as well as water and electricity losses.

In an interview with 702, BLSA CEO Busisiwe Mavuso discussed the role that administrative instability has played in Johannesburg’s sharp decline.

“It is not just a failure of this current administration,” Mavuso said. “There’s been failures of previous administrations and that has just compounded.”

“That doesn’t mean this current administration is not doing a bad job itself. It’s a function of governance being undermined at a whole lot of levels, and it has now come to this point where it is really a crisis.”

Nine people have served as executive mayor of Johannesburg over the past decade, with some holding the position for as little as one month despite the official term length being five years.

Incumbent mayor Dada Morero has faced three separate votes of no confidence since his term began.

Government support needed to save Johannesburg

BLSA, BUSA, and B4SA have called on all levels of government to urgently step in and prevent Johannesburg’s condition from further deteriorating.

The three parties addressed their statement not only to President Cyril Ramaphosa and the Government of National Unity, but also to all political parties participating in the upcoming local election.

Commercial properties account for just 26.5% of property values in Johannesburg but make up 55.4% of rates revenue, reflecting the sizeable interest that business holds in the city’s turnaround.

While they said they would remain non-partisan, the concerned parties have offered to assist government initiatives to turn the city’s dire situation around, provided they are committed.

“We need to know that the party we’re going to be dealing with on the other side is willing to work with business,” Mavuso said. “We are not going to waste our time, energy and effort.”

“We need to know that our interventions and the offer that we are giving is actually taken seriously. But I think we need to address all of these issues and failures we have outlined.”

The three parties listed a set of short-term demands which they believe are critical to restoring the City of Johannesburg to some semblance of stability.

Firstly, they called on the city’s current administration to immediately stabilise its finances, report transparently on service delivery issues, and implement accountability for corruption.

They also called on all political parties contesting the elections in November to give cost commitments on how they would address the city’s financial and service delivery crisis.

Finally, they called on Ramaphosa, as well as national and provincial government, to support the city’s structural and financial reforms, and to enforce consequence management for misgovernance.

On their end, the three organisations said they had already engaged in securing government funding and assisting with infrastructure repairs such as potholes and traffic lights.

However, they emphasised that these interventions were isolated, and hoped to better coordinate their efforts with government in order to scale them.

“Once we sit around the table and agree what the collective objectives are and the outcomes that are required, we can pool our resources and see what needs to be done,” Mavuso said.

“It is not beyond being fixed. It just needs the commitment from government. We believe we can make a difference if we are allowed the space to do so as business leaders in this country.”