The South African government is at risk of pouring billions of rands into initiatives that may ultimately prove wasteful due to poor planning and lack of structural reforms, warns Business Leadership South Africa (BLSA) CEO Busi Mavuso.
Two major projects are at the center of concern: a proposed R3 billion bailout for steel manufacturer ArcelorMittal South Africa (AMSA) and the formation of a R100 billion transformation fund aimed at economic empowerment.
Concerns Over AMSA Bailout
ArcelorMittal South Africa, one of the country’s largest steel producers, reported a staggering loss of R1.1 billion in 2024. As a result, the company has been forced to consider shutting down its longs business, a move that could put 3,500 direct jobs and tens of thousands more along the supply chain at risk.
The government has already intervened through the Industrial Development Corporation (IDC) to support AMSA’s working capital. However, the company states it needs at least R3 billion to stabilize operations.
A new government plan suggests using the Temporary Employer/Employee Relief Scheme (TERS) to cover salaries for 2,982 AMSA employees over the next 12 months at an estimated cost of R417 million.
While Mavuso acknowledges that worker support is crucial, she warns that without a clear long-term strategy, public funds could end up propping up an unsustainable business. “The government must ensure that public money is not being used to maintain jobs that do not add fundamental value,” she said.
Mavuso believes that rather than relying on bailouts, the government should focus on long-overdue structural reforms that could organically drive demand for steel and other industries.
“A restructured logistics system, for example, would trigger major investment in rail infrastructure through public-private partnerships,” she noted. “Firms are failing daily while waiting for the reforms needed to drive economic growth. AMSA is just one highly visible example, but there are countless others.”
R100 Billion Transformation Fund Raises Questions
The second major financial commitment under scrutiny is the R100 billion transformation fund, recently proposed by the Department of Trade, Industry and Competition (DTIC).
The department released a concept document outlining the fund’s objectives, which include:
- Promoting economic transformation
- Expanding funding access for black-owned enterprises
- Empowering and supporting these businesses
- Mobilizing financial resources from both public and private sectors through B-BBEE legislation
Despite these ambitious goals, Mavuso argues that the document lacks a clear diagnosis of the problem the fund is meant to solve. She points out that roughly 70% of new businesses in South Africa fail due to factors such as insufficient skills, limited market access, and inadequate funding. While various initiatives, including previous BEE programs, have attempted to address these issues, many have fallen short.
“There are many companies that have failed to gain traction despite significant financial backing,” she said. “The logic of the fund would be much easier to understand if the concept paper clearly identified the core challenges and presented an institutional framework to address them.”
Another major concern is the lack of detail about how the fund will be structured, managed, and monitored to ensure its effectiveness. Without a well-defined plan, Mavuso warns that billions of rands could be funneled into projects with no measurable outcomes.
“When money is being directed toward solving a problem, we need to ensure that it leads to a sustainable solution,” she emphasized.
Call for Structural Reforms Over Short-Term Fixes
BLSA’s CEO urges the government to prioritize long-term economic reforms over short-term financial relief. She believes that if the government follows through on its commitments to fixing infrastructure, improving logistics, and creating a more business-friendly environment, companies like AMSA would see natural demand growth—eliminating the need for repeated bailouts.
“Public money should not be spent on temporary fixes,” Mavuso stressed. “Instead, the government must focus on creating an environment where businesses can thrive without constant financial intervention.”
As South Africa grapples with economic challenges, these warnings serve as a critical reminder: Without strategic planning and real reforms, billions of rands risk being wasted with little to show for it.
