President Jacob Zuma at a meeting with business leaders in Cape Town on Tuesday. Picture: ESA ALEXANDER
President Jacob Zuma at a meeting with business leaders in Cape Town on Tuesday. Picture: ESA ALEXANDER

BUSINESS leaders presented President Jacob Zuma on Tuesday with an eight-point plan that they believe will save SA from a damaging sovereign ratings downgrade to junk status and long-term decline.

The plan includes an acceptance of tax increases in Finance Minister Pravin Gordhan’s 2016/17 budget, but a plea that they be broad-based — that is an increase in value-added tax or the fuel levy rather than those that harm economic growth and investment. An increase in the marginal tax rates for wealthy individuals is also accepted as part of the plan.

The main question left hanging after Tuesday’s frank talks between Mr Zuma, cabinet ministers and more than 100 CEOs is what the follow-through will be, both by Mr Zuma in his state of the nation address and Mr Gordhan in his budget.

Business expectations of both are high. Mr Gordhan told the CEOs that the Treasury would evaluate the suggestions.

The talks focused on the crisis facing SA and the need for all sectors to pull together behind a united and confidence-inspiring plan. The businessmen and women interviewed were confident that if the plan was implemented, a credit ratings downgrade could be avoided.

The plan was drawn up by the country’s top CEOs under the leadership of Old Mutual CEO in charge of emerging markets Ralph Mupita and Nedbank Group CEO Mike Brown.

It includes concrete measures such as uniting behind a cohesive narrative and plan; overdelivery on fiscal consolidation; more effective management of state-owned enterprises, by appointing, for example, professionals to their boards; accelerated public private-partnerships; a review of legislative implementation to ensure consistency and certainty; ensuring that labour legislation contributes to inclusive growth, especially of the youth; and the appointment of a standing anticorruption committee to combat graft in both the public and private sectors.

The plan includes a commitment by business to support the government in the tough actions needed to tackle its fiscal challenges.

Mr Mupita said the government was "very receptive" to the plan, which would involve pain for business in the form of tax increases, and the government in the form of cutting expenditure to achieve its fiscal targets.

He said even though the proposals were of a long-term nature, they were likely to satisfy the credit rating agencies insofar as they aimed to enhance growth and were supported by the government and business. "Certainly business is very hopeful. This is really a fight for SA’s future."

Mr Brown was confident the proposals would avert a downgrade as they would create certainty over the government’s long-term policy trajectory.

"We do expect to see taxes going up, but we ask that it is done in a way that is least detrimental to growth. There has to be short-term pain to prevent the very long-term pain of a ratings downgrade," he said.

In meetings with Mr Gordhan, work streams were set up on avoiding a sovereign ratings downgrade; creation of a fund to support development of small and medium-sized enterprises; and investment promotion.

Hollard Insurance CEO Nic Kohler said business wanted "to support government and if necessary, make some sacrifices to help the economy get back on its feet, avoid a credit ratings downgrade, and to stimulate inclusive growth. If we work together, we can make sure that there is a positive narrative about SA and that sentiment starts to turn."

Mr Gordhan and Telkom chairman Jabu Mabuza would consolidate proposals and report back to business to formalise a programme of action. Mr Zuma said labour would be included.