Instead of moaning about the plight South Africa is in, business needs to come up with more creative solutions and put direct pressure on the government to implement them, says Magda Wierzycka, co-founder and executive chair of asset manager Sygnia.
“Business needs to have stronger, more decisive conversations with the government that are not so broad. It needs to come in with more specific plans with tangible timelines and deliverables and hold the government to account for implementation,” she says.
Rather than just whingeing , business should be more “transactional” to ensure that the solutions President Cyril Ramaphosa said this week he wants from business are acted upon, says Wierzycka.
“Business needs to set milestones and deploy its capital aggressively and constructively as a lever so that the government is incentivised to meet these milestones. Instead of making broad statements, put tangible numbers on the table. Say to the government: ‘If you meet this deadline or milestone in the unbundling of Eskom this is how much we will invest.’”
It needs to employ the same methods venture capitalists do, she says: tell the government how much you’ll invest but don’t invest anything upfront.
“Put the money on the table but only deploy it in tranches as and when milestones are met. If you want to change behaviour, you change the incentives.”
Wierzycka, who came to South Africa as a teenager with her parents after fleeing communist Poland, started Sygnia in 2006 and grew its assets under management from R2bn to R285bn. She resigned as CEO in 2021 to focus on finding investment opportunities overseas but it was announced this week that she’d be resuming her CEO role in May.
The only positives she can see are that the government has recognised the need to fix Transnet and to unbundle Eskom — into a transmission company, which is investable, and a generation company, which is not.
“But how quickly that will happen given our track record in South Africa of having great ideas and complete lack of implementation ability is the issue,” she says.
“I don’t see anything positive in Eskom except the recognition that it must be unbundled. There are a lot of platitudes about renewable energy but what people don’t realise is that renewable energy will take 10 years to come online in any meaningful way.”
However, she says the timeline can be cut by half if the process of bringing renewable energy projects online is fast-tracked at unprecedented speed and more investment is attracted.
“You need an enormous amount of foreign investment and I just don’t see how you’ll get this unless the government sends a very strong signal to investors that it is removing all the obstacles and offering tax incentives to come to this country.”
It would also require the rapid unbundling of Eskom.
“If you unbundle transmission you have a sporting chance of attracting the foreign investment into renewables that you need. You cannot rely on a handout, which is exactly what we are doing,” she says, referring to the $8.5bn (about R150bn at this week’s rate) promised at the COP26 meeting in Glasgow in 2021 to help South Africa accelerate its energy transition.
“That’s a handout, it’s not true investment.”
The only other positive she can see is recognition of the need to fix the transport and logistics infrastructure. “But, again, it’s just recognition. That’s all I hear. We need to see implementation. I was at a conference three years ago where we heard about all the infrastructure projects that the government was going to unroll and the comment was made: ‘Implementation.’ The same comment still applies.”
As for social grants, such as the R350 social relief of distress payment that Ramaphosa extended in his state of the nation address this week, these are being paid from a declining tax base. “Blackouts and interest rates are killing our SME [small and medium enterprise] sector and we still have this concept of greylisting hanging over us, which places a huge constraint on the financial services sector in South Africa,” she says.
“And if we’re not greylisted now because someone gives us a pass, what about next year? Will we have put in place real measures to prevent greylisting? Again, that talks to implementation, implementation. Not promises.”
Another major problem not being fully acknowledged is a shrinking JSE, Wierzycka says.
“Everyone looks at it as some mechanism for enabling investment but the truth is domestic companies are delisting and the JSE is becoming a playground for dual-listed companies that have insignificant operations in this country and are siphoning money from South African investors to invest offshore. So they’re not investing in the South African economy.”
She hopes finance minister Enoch Godongwana’s budget later this month will address the nuts and bolts of change.
“We’ve got an opportunity in the budget to implement things that are tangible, that actually happen — short-term interventions.”
Short-term interventions such as tax support for SMEs so they can employ more people and reduce the “unsustainable” dependency on social grants. For that to happen SMEs also need to be freed from paperwork, Wierzycka says.
Edward Kieswetter, head of the South African Revenue Service, this week warned of a tax revolt.
“It’s already started happening by virtue of people emigrating and, indirectly, by SMEs closing down and international companies not investing in South Africa,” the Sygnia founder says.
On the international front she would like to see the government forming “some commercially clever political alliances”.
“I really cannot see another photograph of us shaking hands with Russia. I’m not even talking about the humanitarian aspect. I’m asking myself, ‘What is the commercial thinking behind that? Are these the right optics for people wanting to do business with us?’
“We have to be clever about what political alliances we strike and what commercial deals we get out of them.”
She says she expects increasingly populist promises from government as the 2024 elections approach.
"But I don't think anyone believes them anymore, and that also applies to people in the lowest income brackets. No one believes them anymore, and they've got two years to somehow turn words into at least some visible action."
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