South Africa’s business-government partnership is moving far too slowly to meet South Africa’s urgent reform and growth requirements, says Chris Hattingh, executive director of the Centre for Risk Analysis (CRA).
“We think we’re in the ‘rolling backward’ scenario. The reform effort hasn’t received the necessary political will and backing by business for the right kind of things to happen quickly. We’re not in the worst-case scenario, but we are sliding backwards.”
The partnership still leans too much towards vested interests in politics and business, he says.
“They’ve papered over some cracks, but it doesn’t fix the deeper underlying issues like substantive legislative and policy reforms. We haven’t seen those. The lights are on, but the conditions that gave rise to our low economic growth and declining service delivery and living standards haven’t changed.”
Business needs to engage more robustly with the government about what it expects or wants, rather than just following the agenda the government sets.
“Where are the lines for them? If X and Y don’t happen, what does business require or demand? If a minister is found guilty of wrongdoing or is deeply compromised and isn’t fired by the president but just moved to a different portfolio, what does business do or say about this?”
The compliant attitude of big business is exemplified by Business Leadership South Africa chair Adrian Gore’s relentless optimism about economic growth, which Hattingh feels is driven more by sentiment than policy and legislative fundamentals.
“We need to see the data backing up that kind of story. If we saw real fixed investment increasing, if we saw new businesses being created, if we had substantive policy changes, if in policing we saw serious reforms and accountability and real intent to tackle organised crime, then I’d say the optimism and confidence would be more justified.
“But I worry that these are calls for confidence and positivity despite the data. Sure, we had 0.5% growth earlier this year, but we’re not seeing signs in the real economy that things are turning around.”
Root causes
The financial sector’s doing well and the JSE’s at record highs. But as Gore and President Cyril Ramaphosa wax lyrical about phase 3 of the business-government partnership, the experience of most South Africans in terms of crime and service delivery has got worse.
According to the CRA’s July 2026 macro review, crime is costing the economy 10% of GDP annually — about R700bn.
South Africa is not a failed state because to a large extent it is “protected or enabled” by the private sector, Hattingh says. Consumers are taxed more than double to pay for this instead of using their capital for productive investments and savings.
“So now we’ve got a strained middle class and a strained tax base that has to pay for all sorts of services many times over, and it’s hammering the country’s economic potential. It’s about spending to keep our head above water; it’s not productive spending.”
Instead of patting the president and his government on the back for the supposed achievements of phase 2 of the reform programme, business should be holding them accountable for moving so slowly or, in the case of organised crime, almost deliberately doing as little as possible.
The recently tabled South African Police Service Amendment Bill “has some good bits”, but it reinforces centralised control over structures that are already failing and does nothing to address the exposure of businesses to the construction mafia, for instance.
“At the moment it seems to be ‘just stabilise the system, keep the lights on, get the trains running on time, and then we’ll get 2% or even 3% growth’. It’s not addressing the root illnesses.”
Hattingh doesn’t share the hopes being pinned on the local government election. “You might get some progress at a local level, but then you need the wider policies to support that. You need political change and a business attitude change.”
The government feels no pressure to make fundamental changes, and business is giving it no reason to feel pressure, says Hattingh. “Business needs to be more transactional, more robust. Communicate clearly with the government and with South Africans about what they want to get out of the partnership.”
It needs to set targets and deadlines and “relentlessly” hold the state to them. “It might cause some tension in the short term, but if you don’t, it really continues to be long-term managed decline. South Africa’s competitiveness will continue to decline. GDP per capita last year was lower than in 2007, so people are becoming poorer. But at least your business is fine, so you don’t make too much of a noise.”
Business continues to go along with BEE, which costs the economy up to R290bn a year, or about 3% of GDP, because it gets points and government business. “The state spends easily R1-trillion per year on procurement. To get those lucrative contracts you need influence and contacts, and you can get them easier if you have a better scorecard.”
With business fixing things for the government using its own investment and skills, there’s a danger of the state being let off the hook and never being held accountable for its failures.
“That’s a reality. Business, the private sector, NGOs can plug the gaps and give the veneer that things are OK. But beneath that veneer people are still dealing with the reality of serious crime, low economic growth and no service delivery.”
It’s a collusive arrangement that allows government ministers, policymakers and bureaucrats to pretend they’re doing things without actually having to perform or change anything.
What comes next?
Looking ahead, Hattingh thinks parts of the state, like the National Treasury and the South African Revenue Service, will continue to function well. At the same time, municipalities and many government departments and state-owned entities will continue to deteriorate.
“It’s difficult to say it will all fall apart. A lot of it already has.”
For the middle classes who can afford solar and boreholes and private security, life will go on. But the vast majority, living in places like Diepsloot and Alexandra, will continue trying to function without basic services or jobs. What’s changed — and this is worrying — is that they no longer expect anything from the system.
From 2010 to 2020, lack of services, unemployment and rising crime levels came with violent protests “as economic pain translated into pressure on the state to act”. Since 2020, while crime and service delivery failures have got worse, reflected in GDP slowing “to a trickle”, the number of violent protests has fallen.
Hattingh links this to declining voter participation. “Protest action could be seen as one form of participating in democracy. If you don’t feel your vote makes a difference but you protest, that’s one thing. But now people aren’t even protesting as much, so what do they turn to?”
According to the CRA’s analysis, people are going to move away from participatory democracy to figures or movements that are not seen as establishment politics represented by parties like the ANC and DA, even the EFF to an extent.
“We could see more people moving towards supporting movements like Operation Dudula and March and March, and individuals like KwaZulu-Natal police commissioner Lt-Gen Nhlanhla Mkhwanazi. People see him as someone who tackles crime. The fact that he’s not a politician in the formal sense adds to the attraction.”
From an ANC point of view, there’s a risk of accelerated deterioration, he says.
“A lot of people have wished for the ANC’s decline, but I worry about what replaces it. For all of its many, many ills — and it needs to be held accountable for those — there is an element of respect for democratic constitutionalism which other parties don’t share. And if they take pieces of the ANC, in what direction do they push South Africa?
“So if our system of participatory democracy, parties trying to work together, doesn’t deliver growth and improved living standards, you’ll see increasing opportunities for radical populism or overthrow of the state; people following the line that democracy doesn’t do anything for them, ‘so let’s vote for people of action’.”
Another risk flagged by the CRA is uncertainty about the next leader of the ANC and probably the country.
“If there’s one thing markets and investors hate even more than bad policy and slow reform, it’s uncertainty.”
