South Africa CEOs Heed President’s Call to Take Pay Cuts

(Bloomberg) --

South Africa Inc. is putting up and shutting up.

Business leaders across industries are following President Cyril Ramaphosa and his cabinet in taking about a third of their pay for the next three months and donating the money to a government fund to fight the coronavirus. Their largesse comes after months of criticism of the government’s failure to implement structural reforms needed to revive the economy.

For Rob Shuter, the chief executive officer of Africa’s largest mobile-phone company MTN Group Ltd., that will mean a donation of about 1.43 million rand ($77,000), based on his basic annual pay last year of 17.3 million rand. Alan Pullinger, the CEO of the continent’s most valuable bank, FirstRand Ltd., will be giving away more than 730,000 rand.

The show of support from company bosses will bolster the trust and confidence Ramaphosa enjoys from business, although it may come at a cost to winning over rival factions within his ruling African National Congress, said political analyst Ralph Mathekga.

“Politically it says business is too close to government to the point they might be dictating,” he said by phone. Still, for the first time since schisms in the party erupted with Ramaphosa taking over as president from the scandal-tainted Jacob Zuma in February 2018, corporates are stepping in with donations, Mathekga said.

His ascension to the presidency was greeted with “Ramaphoria,” a term coined to describe investor confidence on expectations that he would reform a struggling economy.

By the middle of last year, that exuberance had all but dissipated as infighting in the ANC crippled progress, with business leaders criticizing his dithering on big decisions dealing with debt-laden state-owned companies and structural changes in the economy.

That was until the coronavirus struck and Ramaphosa sprang state machinery into action. He started with a 21-day lockdown on March 27 that was later extended to the end of April. The central bank cut interest rates to a record low, injected liquidity into capital markets and loosened capital rules for banks to free up money for lending to try contain some of the damage.

Read more: South Africa Weighs New Plans to Reboot Virus-Battered Economy

The country’s richest were among the first to respond, with the family of Nicky Oppenheimer and that of Johann Rupert committing 1 billion rand each to support small businesses and save jobs. The Oppenheimer family later added another 1 billion rand, while that of billionaire Patrice Motsepe and his companies pledged to spend 1 billion rand on fighting the Covid-19 pandemic.

Next Challenge

Companies are also responding in other ways. Investec Group, a South African bank and wealth manager whose top executives are also donating their pay for the next three months, is providing two meals a day to 100,000 people, CEO Fani Titi said in an interview.

The Johannesburg Stock Exchange donated two-days of trading, clearing and settlement revenue to the government’s Solidarity Fund, while chemicals firm Sasol Ltd. provided a million liters of jet fuel to help repatriate South Africans stuck abroad. Insurer Old Mutual Ltd. is providing free life cover to health workers, while Dis-Chem Pharmacies Ltd. is matching contributions made from members of its loyalty program.

Ramaphosa’s next challenge is getting business leaders behind efforts to reboot the continent’s most-industrialized economy. A virtual cabinet meeting on Wednesday night decided that further discussions were needed to before a final economic plan can be approved at the next meeting on April 20, the government said in a statement.

“The devastating casualty of the lockdown is people’s livelihoods,” said James Formby, the CEO of investment bank Rand Merchant Bank. “We need to shift the strategy from lockdown to gradual restart to avoid irretrievable economic damage.”

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