After the Bell: Open for business — bring your own power and water

For as long as I can remember our government has been claiming to promote business, and to want economic growth. For the past 11 years we have even had a dedicated “Small Business Development Ministry”.

Whenever our ministers go to Western countries or places like Davos they will use the slogan “South Africa is open for business”.

And from time to time you will see President Cyril Ramaphosa or Department of Trade, Industry and Competition Minister Parks Tau arriving at some kind of launch, or the opening of a factory.

But look at how tough it actually is to run a business in South Africa. 

Take Astral Foods. They produce something that probably three-quarters of South Africans consume. It’s a simple business, they take maize, and feed it to chickens, which are then slaughtered and sold.

It is a business replicated around the world, it happens almost everywhere people eat meat.

And while we are not the biggest producer in the world (it has been said there is one farm in Brazil that literally produces as much chicken as we do) we are no slouches either. We have been doing it for a long time.

Gary Arnold, CEO of Astral Foods, says the company budgets R10-million a month for water and electricity because the municipality can't meet the Standerton plant needs. (Photo: Supplied)

All of this means that for Astral, to make money should not be hard. It should be one of the simplest businesses in the country.

But because local government has been so useless, and it must be said, mainly because of the way the ANC has allowed its people to govern, it is now incredibly hard.

In fact, Astral said in its results yesterday that it had been subsidising the price of chicken, it had actually been making a loss.

It is true that this is a hugely competitive industry; like anything in the world, if it can be done here it can be done somewhere else, and the only argument is around pricing. 

For years the letters section of the Business Day newspaper was overtaken by the fight between domestic poultry producers and people who imported chicken on the question of whether Brazil was dumping chicken here. In other words, selling it for less than it cost to produce (for reasons that are not clear to me, people in Europe prefer the white breast meat of chickens, while most of us — correctly! — prefer the drumsticks, thighs and wings, meaning Brazilian producers could sell the bony parts at a loss).

It’s also true that the avian flu outbreak in Brazil might well make life a lot easier for Astral pretty soon.

But we shouldn’t forget the real reasons for this.

On Monday night this week, Astral’s CEO Gary Arnold said on The Money Show that the fact that the Lekwa Municipality around Standerton could not provide enough water and electricity for their big plant there was costing them R10-million a month.

It’s been so bad for so long that this is now an embedded cost; Astral budgets for it every year.

This is R10-million a month that could be going to profit, or to higher salaries for all of the people who work there. 

Or even lower prices for people who buy what they produce.

They are not the only ones hit by problems in councils, virtually everyone outside of the Western Cape is.

Earlier today the CEO of the Minerals Council, Mzila Mthenjane, said that: “In remote and rural areas where the bulk of mining happens, the dysfunctionality of municipalities makes daily operation difficult and unattractive for investments for any companies considering setting up businesses.”

No one is going to invest in places where people are desperate for jobs.

Joburg is now so bad, with so little prospect of a recovery in the medium term that some firms must be wondering how hard it would be to move, no matter what the cost.

The main reasons for this are not about resources or the ability of South Africans.

It’s all about politics. And so often, the politics of the ANC.

It’s usually (but not always) in the councils where they provide the mayor, or are the biggest party, where this happens.

Ditsobotla Municipality is the best example. For a very long time it was known as the town “with two mayors”. This was not a fight between parties, it was a fight between two factions of the same party. Both of these “mayors” came from the ANC.

Unfortunately, local government is not the only problem companies like Astral face.

As they put it in their results yesterday: “On the global front, the uncertain landscape characterised by trade wars, various conflicts and shifting alliances poses risks for an economic slowdown, market uncertainty and currency volatility.”

Again, this is all the fault of politicians. Some of them here, some of them in other places.

So this evening, raise a glass to people who run businesses. 

It’s hell out there. And we all know who to blame for that. DM