There has been a positive shift in the government’s view on what is necessary to solve South Africa's economic challenges and often-highlighted key issues currently restricting employment and business growth have now been acknowledged by President Cyril Ramaphosa and Finance Minister Enoch Godongwana, says business organisation Business Leadership South Africa (BLSA) CEO Busi Mavuso.

“Jobs are what we need to deal with our overwhelming challenges of poverty and inequality in South Africa. I am more optimistic about the chances we now have to do that, with government recognising that it cannot sustainably be the sole source of employment growth any longer,” she says.

During the State of the Nation speech in January, Ramaphosa clearly acknowledged that business is central to sustainable job creation, saying: “The key task of government is to create the conditions that will enable the private sector – both big and small – to emerge, to grow, to access new markets, to create new products and to hire new employees”.

He pointed to the structural impediments that need to be fixed, including reliable electricity, efficient ports and rail, scarcity of broadband and water quality. He spoke of the need to eliminate red tape that saddles companies with costs and damages their efficiency, Mavuso highlights.

Additionally, Godongwana bravely held the line on improving the government’s debt outlook and keeping expenditure under control on key consumption lines, while directing increased spending in a targeted way. This gives confidence that government is now in control of its massive debt and will be able to turn the trajectory on the debt-to-gross domestic product ratio in the next few years, she adds.

Further, company profitability has been struggling and corporate income tax has been shrinking in the overall tax mix. However, reducing tax rates encourages companies to do more business in South Africa rather than in lower-tax jurisdictions elsewhere.

As Godongwana says, the corporate tax system must support companies to “grow, increase investment and employ more people”.

“[Godongwana] stuck to the plan to reduce the corporate tax rate from 28% to 27%. This had been announced in the last budget as part of a wider tax shake-up to eliminate several tax incentives, and is neutral overall. However, it will be positive for business sentiment and bring South Africa’s corporate tax rates closer to international averages,” avers Mavuso.

The challenge is to turn this alignment into real changes that drive business investment.

“There is nothing complicated about the conditions under which businesses will invest – it is when companies foresee a return in excess of the cost of investment. Lower tax rates instantly improve the return outlook.

“Improving the efficiency of the economy is a longer-term project to do the same. The less cost faced by business to move goods around the economy, the better for everyone and the better the case for investment. Reliable, low-cost electricity would dramatically help the case too.”

Mavuso points out that, in the energy market, despite the deep structural reform announcement last year allowing self-generation up to 100 MW, the "preposterous requirements" from electricity regulator the National Energy Regulator of South Africa means it will be impossible to get any of these projects under way anytime soon and government needs to intervene urgently in this regard.

The wider challenge is to get rid of red tape that bogs down business without any corresponding benefits. This is a project in which BLSA is keen to work with government to deliver, states Mavuso.

The country should start with the remaining Covid-19 restrictions on workplaces, which frustrate businesses from bringing staff back to work and unnecessarily constrain employment, she suggests

“It is tempting to believe that our country is stuck, unable to make the changes needed to get the economy growing. Yet, this year I have noted a positive shift in the government’s view on what is necessary to solve our economic challenges,” she says.

“For once, I feel like business and government are not pulling in opposite directions. This gives an opportunity for BLSA and the rest of organised business to work together with government to deliver the conditions we need to grow the economy and create jobs.

“I look forward to working with government on the many other ways we can make South Africa a better place to do business and contribute to the economy,” she says.