Service non-delivery domino effect impacting business

The Western Cape might be ahead of the curve in terms of performance, but there is little room for complacency. Events in other provinces have a direct impact on our regional economy, and may presage challenges to come. 

One such harbinger of misfortune is the mooted closure of ArcelorMittal’s long steel business - a reminder of how businesses are ultimately at the mercy of factors largely beyond their control, in this case the logistics crisis and the demise of Transnet Freight Rail. In recent months we have seen how the Western Cape is similarly impacted by logistics failures, with agricultural exports particularly hard hit.

ArcelorMittal South Africa (AMSA) has blamed dysfunction within Transnet Freight Rail for the planned closure of its Vereeniging and Newcastle plants, a move deferred for six months pending negotiations with government and labour stakeholders. Transnet’s underperforming rail and port network cost AMSA around R1,4-billion in 2023, according to a report in Business Day. In a letter to shareholders AMSA chairperson Bonang Mohale did not hold back in his critique of the current business environment: “We have a public sector that is making it almost impossible for business to work with TFR’s appalling under-delivery having a devastating impact on job creation and investment,” Mohale said.

It is worth considering the potential impact of AMSA closing its long steel plants. According to AMSA’s annual report Newcastle accounted for 34% of AMSA’s total procurement in 2023. In other words the town and its municipality would face disaster should the mooted closure go ahead.

Another example of service non-delivery impacting business is the current Rand Water crisis. The company’s corporate business plan for the five-year period from July 2023 to June 2028 reportedly warns of expected supply constraints which potentially could impact around 14 million people in four provinces. The Western Cape has lived through its own water crisis in recent years and requires no reminder of the negative impacts on household and business activity.

With an election looming next month, voters should be aware that the country faces dire consequences if the economy continues to buckle under the pressure of service delivery challenges. 

John Lawson
CEO of the Cape Chamber of Commerce & Industry