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21 May 2024

Navigating uncertainty in Cape Town

The power of public/private partnerships in action.

It’s no secret that we are living in complex times… 2024 will be the busiest election year ever recorded. Wars are raging on multiple continents and crime, unemployment, inflation and corruption continue to dominate the headlines. 

Understandably, there is a feeling of uncertainty in the world at the moment. But, despite seemingly unsurmountable challenges, South Africans prove that when individuals, businesses and communities unite, amazing change can happen. 

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At Investec's latest In conversation event in Cape Town, titled Navigating uncertainty, a panel of experts discussed the power of public/private partnerships driving growth in the Western Cape.

Where concept meets opportunity

Fumani Mthembi (co-founder and director of Pele Energy Group) explained that their company was founded by five young professionals, with no background in engineering. They knew they wanted to do something about development and wanted to be changemakers doing something that would move SA society forward.

“We appreciated that there is power in private capital and private capital actually has the ability to create a lot of public good. Soon afterward, the state announced the Renewable Energy Independent Power Producers Programme,” she said. “And that, for us, became the marriage of the two. Concept and opportunity. South Africans must appreciate that there are many opportunities created by our own state.”

Pele viewed energy assets as anchors for development in various remote and lesser known regions. “We don't have to be the government to ensure that more people receive a decent education. We don't have to be the government to ensure that more people have access to decent jobs and skills that are necessary for the future of the economy. We do all of this.”

Fumani Mthembi
Fumani Mthembi, co-founder and director of Pele Energy Group

Concept and opportunity. South Africans must appreciate that there are many opportunities created by our own state.

Using private assets and amazing partnerships, including a partnership with Investec, they leverage what is effectively a CSI budget to access even more capital for the development of communities.

Recent changes in legislation have made things even better. She explains. “The emphasis for me is on the fact that in 2011 already, the government created a platform that enabled five young black people who had zero financial capital to participate in the sector.”

She cites the example of her favourite community project to date - Touwsrivier in the Western Cape. “Our theory of change is that capable people provided with modern infrastructure are able to participate meaningfully in society. We focus on people, modernise infrastructure and ultimately industrialise the community. In this community we have a very deep focus on skills development.”

All the schools in Touwsrivier are solar powered and Pele set up a community centre where young people can access the Internet and also participate in various training programmes, including renewable energy skills training.

“The strategy really came together with the establishment of a commercial scale hydroponic farm. We’ve tapped into the nature of the existing workforce, which historically has been geared towards the agricultural sector. In that way, we've created jobs and established a new industry. We are hoping to create value chain linkages that will continue to modernise the community.”

The energy revolution

Globally, there is an energy revolution happening, from a technological perspective, from fossil fuel to distributed networks.

Reyburn Hendricks (CEO at H1 Holdings) commented that there are lots of other power generation happening in all parts of the country at different times of the day. “There is a massive revolution in how the grid works, is managed and funded. The big problem at the moment is we don't have enough grid capacity in the areas where the best renewable resources are. And that's going to be the investment.”

Business involvement makes a difference

Cumesh Moodliar, Investec Bank's new CEO, will now be taking over from his predecessor, Richard Wainwright and be part of the CEO Initiative, a collaboration between government and 130 CEOs from all over the country.

“This initiative was based on an absolute realisation that business can't sit back and see critical areas of infrastructure and the economy fall apart. It created three key workstreams around energy, infrastructure and logistics as well as crime and corruption.”

Cumesh emphasises that the role of the state and its contribution must be acknowledged. “The President renewed the term of the current Governor of the Reserve Bank for a further five years and extended the term of the commissioner of SARS. All of those things talk to monetary policy consistency. I think what you're going to see is greater involvement of private capital, potentially, together with government and state sector.”

He adds that the role of business is not to replace government. “The role of business is to support government and to work with civil society in support of government. Civil society has to hold government accountable. Government actually has to be held accountable for the service delivery that taxpayers and residents, who should be the beneficiaries of those services, are simply not receiving.”

On a philosophical level, it’s about capacitating the state to deliver. “The hope is that it becomes catalytic. That progress comes out of the momentum of the projects delivered by really competent people. And the second part is to inspire others to take the next step. That's the role we have to play. The risk is that we all sit back.”

Cumesh Moodliar
Cumesh Moodliar, Investec Bank CEO

To ensure broader social upliftment, it is important for businesses to work with government and society. It's also imperative that society as well as relevant stakeholders hold government accountable.

Cumesh gives one simple example. “Investec’s office is located on Grayston Drive in Sandton. It is at one of the busiest intersections in Johannesburg. During loadshedding, the intersection is gridlocked. We engaged the Johannesburg Roads Agency, looked at various solutions over a few months and connected it to our backup generator at our office. Subsequently, other corporates have done similar initiatives. But, it took a lot of effort from our team to create a precedent for this.”

Why is Cape Town a success story?

Cape Town is a tourist hub and the harbour is getting busier. Wrenelle Stander, CEO at Wesgro, said the docking of the Queen Mary's II and Queen Victoria was quite momentous. About 11 000 two-way passengers were embarking and disembarking. The vessels were also on a turnaround visit, so apart from refuelling, it required fresh produce, maintenance etc, which is great for the economy.

Wesgro is a tourism, trade and investment promotion agency and position Cape Town and the Western Cape to compete in the global economy. For example, Cruise Cape Town, powered by Wesgro, is a public/private initiative, which works to attract cruise vessels to the Western Cape.

“We are expecting a lot more ship calls at the port of Cape Town because of the conflict in the Red Sea. The shipping line itineraries for next year are being planned now and they're likely to continue coming past the Western Cape.”

Wrenelle comments that Cape Town’s success is fundamentally due to visionary leadership, a shared vision, a competent administration to deliver basic services, good governance, a collaborative public/private sector ecosystem and a focus on infrastructure spending.

“This is what underpins everything that happens here. The administration is not only competent, they're also innovative. For example, as part of the province’s rapid school building programme, 25 new schools have been built since 2022.”

A further example of a public/private initiative is Cape Town Air Access (powered by Wesgro). Its goal is to attract international air services to the Western Cape. “We've seen a direct correlation between increased air access and economic growth. For every 100 international air travellers that arrive, we create one job. Last year, we added 13 direct services between the Western Cape and the USA, connecting three cities - Atlanta, New York and Washington. There's a huge demand.”

Wranelle Stander
Wrenelle Stander, CEO at Wesgro

Cape Town’s success is due to visionary leadership, a shared vision, good governance and public/private collaboration.

She continues. “One of the biggest things the Western Cape is getting right, is the shift from consumptive spending to spending on infrastructure. The City of Cape Town has a R120 billion programme over 10 years, with investment into sewage, sanitation, a water reuse system and rapid bus transit systems. There is also a plan to mitigate loadshedding.. In Cape Town’s city centre alone 22 new private sector building projects are underway. All of this builds investor confidence in the Western Cape.”

In addition, every second month they host CEOs at the Premier's residence. Together with the Mayor, they discuss opportunities and challenges facing the province. Importantly, investors also have access to conversations with these top leaders. “It's important to share what works. We often have delegations visit us and we are also looking at joint projects with other provinces.”

Youth employment to future-proof SA

The 59% youth unemployment rate is of serious concern to business and government. Ravi Naidoo, CEO of Yes4Youth, a youth employment service, says the best way to future proof a country is to empower them for the future.

“Future sectors are changing, job categories are changing. We have to prepare our youth for the future. It's the best endowment you could make.”

He elaborates that Yes4Youth is a public/private partnership and started in 2016 when the private sector identified the key issues facing sustainability in the long term. Then there was the question - if the private sector contributes to youth employment, what will the government give in exchange?

Investec’s founder and former CE, Stephen Koseff was a driving force here – the company was the first sponsor of the Youth Employment Service. “The idea was to take high potential youth from very poor households and get the best talent into the game. And, with leadership and good implementation, others will join. Today, it is 100% funded by the private sector and 1 700 companies are involved. So, that's the real story here. It starts with one.”

Ravi Naidoo
Ravi Naidoo, CEO of Yes4Youth

We take high potential youth from very poor households and get the best talent into the game

He gives another example. “We run a fairly large programme for youth to become commercial drone pilots. It was a programme funded initially by Google, Naspers and Transnet. We now have thousands of pilots - all funded by the private sector. Some of the participants even set up their own company and subcontracts to agriculture.

The professionalisation of bureaucracy

Cumesh adds that the professionalisation of the bureaucracy could ensure the success of a city and province.

“The reality is when you look at other provinces. The concept of the professionalisation of bureaucracy doesn't really exist in the sense that it's a political bureaucracy versus an administrative bureaucracy. A professionalised bureaucracy should serve the government of the day. That's where we need to get to as a country.”

He continues to say that there are incredibly professional teams, for example The Auditor General employs close to 800 chartered accountants. It’s about how to support more and more of those initiatives. “Business, the public sector and the community should be in a three-way contract. It's not just about business and government.”

“Business, the public sector and the community should be in a three-way contract. It's not just about business and government.” Cumesh Moodliar

If you’re president, what would you do?

Reyburn would take inspiration from other leaders and make hard choices, for example around education. Ravi would involve South Africans with a track record, individuals who can turn something around and are driven to make this country succeed. Wranelle states that it’s important to rebuild South African pride and reinvigorate integrity.

For Fumani the focus will be on women. Women who genuinely understand their identity and can stand up for the vulnerable. “I think like everyone else, I'm looking for candidates who actually have experience and have leaned into their work. I think the bigger economic challenge for South Africa is to rethink the way we think. I appreciate progressive economic thinkers.”

Cumesh will turn his attention to two clusters that requires significant revitalisation - security and governance. “Capital and investment only happens in a safe environment. You need to make sure you have a strong Security Ministry, Justice Ministry, etc. We have some really strong people in our economic cluster, but you need to build that out.”

Inconversation | Navigating uncertainty in Cape Town panel

Facilitated by renowned journalist, Ferial Haffajee, the panel consisted of Cumesh Moodliar (Investec SA CEO), Fumani Mthembi (co-founder and director of Pele Energy Group), Ravi Naidoo (CEO of Yes4Youth, Reyburn Hendricks (CEO at H1 Holdings) and Wrenelle Stander (CEO at Wesgro).

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