French riots a cautionary tale for South Africa, big business warns

Some of South Africa’s top business leaders believe there is still more room to lobby the private sector for increased investment in continued efforts to grow the country’s anaemic economy – and avert the kind of social unrest currently seen in France.

The warning comes as South Africa continues to grapple with high unemployment and inequality, fuelling concerns that the pressure on households could eventually trigger widespread unrest (again).

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France has become a cautionary tale for South Africa, as authorities there scramble to bring the situation under control.

Ninety One CEO Hendrik du Toit – speaking at the Financial Times Africa Summit in London on Thursday – says SA is not immune to a similar response to its own socioeconomic challenges.

“If you look at the TV in France, and you have South Africa’s unemployment rate, you need to think carefully.”

Cost-of-living protests in France escalated into looting and arson in several parts of the country this week, raising alert levels across Europe over the possibility of more unrest.

The precursor to the riots happened last month when French high school students hit the streets, demanding greater means for education.

“Business is trying its best but is still having a conservative posture, rather than an aggressive posture which would unlock a lot more opportunity and deal with the unemployment threat,” Du Toit told delegates.

Warnings that poverty and South Africa’s 33.6% unemployment rate pose a serious risk to social stability are not new.

Read:
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While unemployment wasn’t the main trigger of the July 2021 unrest, reports have highlighted how the country’s entrenched poverty, joblessness and severe inequality created conditions that left millions of South Africans vulnerable to the turmoil.

More than 350 people died during the violent unrest, while mass looting and property destruction cost the economy an estimated R50 billion in just eight days.

Starting point

South Africa has set itself an ambitious target of achieving 3% economic growth – roughly three times its current pace.

The economy has not grown at that rate in more than a decade, with shortcomings in government policy widely blamed for the prolonged slowdown.

Economists have repeatedly identified 3% growth as a starting point for sustainable job creation.

Despite his criticism of government performance, Du Toit says political developments in recent years have improved South Africa’s standing in global financial markets over the past year or two.

“We have moved on decisively from the risks of the [Jacob] Zuma years to the initial uncertainty of the [Cyril] Ramaphosa years to now, a GNU [government of national unity] which hasn’t yet settled down but which signals that the centre is holding.

“This has given a certain confidence to investors. They’re not excited by any means by South Africa because growth is what excites investors; creativity, innovation.

“At the moment, South Africa is solid and back from the brink and you’ll see the bond market investors have rewarded South Africa significantly.

“The rand is stable and strong, it hasn’t moved against the major currencies for a long time but there are no big commitments, particularly in mining, where we have been very uncompetitive.”

Du Toit believes higher investment in the country’s mining industry and recovering the industrial base could help pay higher dividends to the economy and fast track recovery.

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But he says it can’t be left to government alone to scale up efforts.

He calls for greater private-sector investment to build on an existing effort by big business to work with government to stabilise the economy, implement key reforms and stimulate growth.

This includes labour-intensive growth and growth that expands the country’s weakened industrial capacity.

Part of the agenda is ultimately to drive investment, productive activity and jobs.

Business Leadership South Africa CEO Busi Mavuso, who joined Du Toit and other South African business leaders at the summit, says: “We’ve done a good job so far but I think we have to see this through to its logical conclusion so we can move to the right growth levels that can deal with the high levels of unemployment that we have.”

Read:
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Mavuso says the best outcomes will depend on the state addressing inefficiencies. She argues that South Africa’s weak growth is not the result of a lack of resources, but of government ineffectiveness.

“You cannot think about growing the South African economy if you don’t take care of the basics.”

Diplomacy

Business leaders also agree that sound domestic economic policy must go hand in hand with a coherent international economic diplomacy strategy.

As Du Toit says: “Without the political consensus that you are driving this, you will get stuck at 3% growth.”

He adds that South Africa needs to improve relations with other African countries following damage to its reputation caused by anti-immigration protests in parts of Gauteng and KwaZulu-Natal.

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Earlier this month, nearly a dozen cars were torched and several buildings set alight in the two provinces.

The violence subsided after the Department of Home Affairs withdrew a September directive that had allowed asylum seekers to lodge applications following a Constitutional Court ruling that people could not be excluded from the asylum process solely because they had entered South Africa irregularly.

Refugee Reception Offices around the country were overwhelmed by asylum seekers within days of the directive being issued, a development the Constitutional Court order had not anticipated.

The department has yet to conclude a process to determine the most appropriate operational approach to comply with the court order.

Read/listen:
Home Affairs withdraws asylum directive after refugee offices overwhelmed
Constitutional Court violence signals growing threat to SA’s rule of law
Court bars anti-immigrant protesters from going near Home Affairs

Deputy Finance Minister David Masondo, who could not travel to London because of the Medium-Term Budget Policy Statement tabled on Wednesday, also addressed SA’s relationship with the rest of the continent.

“There has been a deliberate effort politically, on our side, to engage the African fellow political leadership in addressing the economic growth on the continent because migration is a pull factors associated with poor economic growth in other African countries.”

He says discussions with other African governments focused on how to use existing policies and regional platforms, including the African Continental Free Trade Area, to support economic growth across the continent.

While African markets remain key, Masondo says SA will also continue to nurture its trade relationship with the US, which has been strained for some time.

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