Durban has many tourism attractions and conference facilities – two areas which South Africa should be marketing aggressively to attract people trying to avoid the Middle East, writes Busisiwe Mavuso.
The war in the Middle East is likely to harm the global economy, with the magnitude depending on how long it goes on. South African businesses are already working to contain the damage, and we need our politicians to work with us, writes Busisiwe Mavuso.
Everyone is worried about the impact on the fuel price, from small businesses to large corporations. The mining sector will be significantly affected, with costs going up for diesel-dependent road and rail transport as well as operating costs at the mines. Consumers will also be directly affected, constraining spending and confidence.
I was troubled to see news last week that Glencore, which runs one of the two biggest ferrochrome units in South Africa in a joint venture with Merafe, might abandon talks with government to save its smelters. As many as 1 500 jobs could be lost if Glencore abandons talks. The tenfold increase in electricity prices since 2008 has already forced many smelters out of business, and the last two large plants are now at risk.
The other, Samancor Chrome, is already going ahead with layoffs affecting up to 2 400 people. The smelters play an important part in the industrial value chain. South Africa has already lost roughly half its share of global ferrochrome production over two decades as electricity costs rose, with raw ore exports increasingly replacing local beneficiation.
Put that in the context of a more fragile global environment, with growth risks rising and energy costs climbing. The risks to our industrial base, which is already facing multiple threats, grow further. Glencore’s predicament, in which it cannot continue losing money because of massively higher costs, is faced by many businesses across our country. Higher diesel prices also raise the cost of keeping the lights on, as both Eskom and businesses rely on diesel-powered backup generation. Businesses that have only just been hanging on will find the latest shock devastating.
Fuel levy as a lever to protect the economy
This war is, of course, not of our making. But it is a reality we must face. We must be deliberate about putting the economy first, protecting it in every way we can. Energy prices are the most obvious threat, and government should consider the levers at its disposal, including temporary variation of the fuel levy as was done at the start of the Ukraine war to cushion the economy.
South Africa imports the majority of its fuel and pays for it in dollars, so a global oil shock is amplified locally by currency weakness and passed quickly into inflation. Fuel costs feed quickly into food prices through transport and fertiliser inputs, making this shock particularly regressive for households.
The fuel taxes announced in the February budget can be delayed. Unfortunately, our strategic oil reserves are not in a state to support any solutions. South Africa’s strategic stocks are small – about two to three weeks’ worth against the global 90-day benchmark – and the country’s reduced refining capacity limits how much relief they could realistically provide. We have never recovered stocks since the appalling decision by the Zuma presidency to sell down 10 million barrels of the reserves, which was later ruled to have been illegal. The tax lever is therefore the most immediate lever to pursue, but it can only be temporary so as not to damage our fiscal position. Longer term, we must deliver supply diversification, better stock management and refinery logistics.
Every crisis has opportunities
But threat management alone won’t see us through this crisis. We must also grasp what opportunities it presents. The Cape sea route will see sharply increased traffic as shipping avoids both the Red Sea and the Strait of Hormuz. Our ports have shown meaningful improvement over the past year – handling times at Durban have gone down from 21 days to two days. That progress must accelerate now. Every ship we can service efficiently is revenue and jobs we desperately need.
Beyond shipping, we have a window to position ourselves as a stable alternative in an unstable region. Dubai and Qatar have built themselves as financial and business hubs, but right now, expatriate workers and their families are evacuating, and firms are scrambling to relocate staff. We share their time zone. We have the infrastructure. Cape Town and Johannesburg must move aggressively to attract that displaced talent and those operations. The global conference and events industry is in the same position – they need destinations unaffected by air travel disruptions and security concerns. We can be that destination, but only if we act decisively.
Tourism faces similar displacement. Travellers who would have gone to the Middle East are looking elsewhere. Our industry must be ready to absorb that demand with targeted marketing and capacity. These opportunities won’t wait for us – other destinations are already positioning themselves.
Our diplomatic focus must be pragmatic: securing alternative oil supplies and the industrial chemicals our manufacturers depend on. Foskor needs sulphur and ammonia. Our plastics sector needs polyethylene. Supply constraints will drive prices up across our entire industrial base. We cannot wait for global markets to settle.
The short-term pain is real and businesses are feeling it. But this crisis will pass. What matters is whether we use it to build resilience or simply endure it. Government must move quickly on fuel levy relief. Business must accelerate contingency planning and supply diversification. And together, we must seize the opportunities this moment presents. When global markets stabilise, South Africa must emerge stronger, not weaker, from this disruption.
Busisiwe Mavuso is the CEO of Business Leadership SA.
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