South Africa's consumer goods industry has warned that the economy can no longer withstand the damage being caused by infrastructure bottlenecks, load shedding and poor municipal service delivery.
The Consumer Goods Council of South Africa (CGCSA) yesterday said the government needed to do the right things to fix the economy before the country runs out of runway.
CGCSA co-chairs Gareth Ackerman and Johann Vorster separately said the cost of doing business had gone up as companies battle with a tough economic environment, which was affecting their ability to operate profitably, create value and invest for growth and employment creation.
Ackerman, who is the chairman of Pick n Pay Stores, said the government was failing to do its job properly, hence the initiatives by the business sector to partner with the State to address these structural and policy issues.
“The challenge is that the government is not doing its job properly and we now have to help it in doing things for which we are paying tax for it to be done,” Ackerman said.
“We need to make sure water, electricity, water, potholes and sewerage are repaired and they work. We have to deal with crime and poor service delivery. These are things that are unbelievably depressing yet they are basics.”
Ackerman was speaking at the CGCSA annual summit in Johannesburg.
The consumer goods sector is one of the largest employers in the country, accounting for more than 2.5 million formal jobs, and a significant contributor to annual gross domestic product (GDP).
Ackerman said the port and railway network was affecting the delivery and distribution of goods, forcing the consumer goods sector to use expensive road freight, which was damaging roads.
He said the cost of business insurance had gone up by nearly twice as much since the July 2021 riots in parts of Gauteng and KwaZulu-Natal.
Equally worrying, he said, was that salary and wage increases had not matched the rising cost of living and many South Africans were getting poorer and applying for social grants.
“It has become a lethal cocktail which needs to be adequately addressed by the government, working together with business to get things going on to grow the economy,” Ackerman said.
In 2021, dairy group Clover SA closed down the country’s largest cheese factory in Lichtenburg, North West, after recording large losses due to long-standing water and electricity disruptions, which it blamed “ongoing poor service delivery” by the local municipality for the decision.
Vorster, who is also the CEO of Clover, said the time had come to do things differently because it was now clear that South Africa can no longer continue on the current trajectory.
He said businesses in their own localities should help by doing simple things like cleaning up the environment and partnering with municipalities to repair infrastructure such as roads and water systems.
“We need to do things differently, that is the message here. If we ask whether South Africa is running out of steam, yes we have if we carry on the way we are doing now. There are times when I feel a little bit despondent when the government is focusing on things that are not priorities to save the country when Rome is burning,” Voster said.
“We need as businesses and every company to put its own pressure in its own community and municipality and we can win as a nation. There is a place for policy and government and I think as businesses we can also add something. To create jobs and get the economy moving, we need to work together.”
South Africa’s economic growth is forecast to remain subdued between 0.7% and 0.9% this year while the rate of unemployment at a record high of 32.6%, or 7.9 million people without jobs.
PwC senior economist Xhanti Payi said they had recently done calculation analytics looking at statistics over the past 10 years, which showed that economic growth did not equate to job creation.
Payi said for each unit of economic growth the country had, it could only get about 0.8 units of employment, thus the economy was not delivering on this one-to-one basis.
For instance, he said that South Africa’s GDP was now back above what it was pre-Covid, but the employment numbers have not recovered as much.
“Again, that tells us we can grow the economy, but the numbers are not going to actually get them because the structure of our economy has changed,” Payi said.
“And so what we have to think about is how we actually focus much more on developing and training young people and putting them into jobs and ensuring that they are part of the economy, because that is the one thing that's actually going to grow our economy.”
Payi said if the 708 000 unemployed youth with tertiary qualifications could be put into jobs and paid a minimum wage of R4 400, this could get R7 billion into the economy or 0.81% growth into the GDP and boost expenditure by R48bn.
“(The economy) is not going to grow first and then have people working. We have to first put people at work, and then the economy will grow,” he said.
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