You are currently viewing our desktop site, do you want to visit our Mobile web app instead?
 Registered users can save articles to their personal articles list. Login here or sign up here

South Africa ‘in repair’: Is SA’s investment strike over?

Are investors who have pledged billions in investment taking a leap of faith in President Ramaphosa, or is SA’s economic tide turning?

NOMPU SIZIBA: President Cyril Ramaphosa on Friday dared to declare that the investment strike was now over; this after some R290 billion worth of money was pledged by a number of businesses, both local and international, over the next three to five years. Investments are set be made in a number of sectors – including food, energy, the auto sector, banking, mining and more.

There appeared to be a really positive vibe at the Sandton Convention Centre, with the promise of some decent job creation as a result. But now the announcement has been done and the party is over, so to speak, can the investment summit make all the difference?

I am joined on the line by Dr Petrus de Kock, the general manager at Brand South Africa. Thanks very much, Dr De Kock, for joining us. Were you pleasantly surprised by the amount of investment monies that were pledged to the economy?

PETRUS DE KOCK: Good evening. Thanks for the introduction. Yes, definitely, a pleasant surprise if you look at, as you indicated, the number of sectors involved, both local and international companies. I think one thing it illustrates is a huge capability in the South African market to unlock opportunities.

The other thing that we need to acknowledge at this point is the preparation for this summit; yes, it focused on investment, but if you look at the kind of work that we’ve been doing with investors – the presidency, the Industrial Development Corporation, the kind of work focused on – yes, ultimately we need investment in the economy by both local and international investors, but at the same time we need to examine what the blockages are.

So there is a lot of other work that is being done to understand our economic environment, the experiences of particular companies, and to unblock issues.

So I think we have established the, I would say, ecosystem at this point in time to understand what the investors need, what the challenges are, and how we can ultimately make it easier to get that kind of economic activity going.

NOMPU SIZIBA: Obviously there were several companies that made their pledges, and of course one of the big ones, one of the oldest companies in South Africa, Anglo American, announced a big contribution to the economy – some R72 billion over the next number of years. I suppose this is testament in part to some satisfaction of the sector around the revised mining charter?

PETRUS DE KOCK: I think there is still going to be a long debate around the mining charter issue, but I do think it’s more than just a symbolic move by the company. I think it really illustrates that in the South African mining sector we still have potential. There was an assessment done a number of years ago – I can’t remember the exact amount now – but South Africa has the world’s richest uncut mineral resources in all sectors. So if you think platinum, we own about 80% of the world’s platinum. In chrome we are also up there in terms of world resources. So there is definitely not a lack of opportunity. There’s a lot of work that still needs to be done to deal with concerns in the mining sector, but I think we have made progress and what Anglo has done is really show that a company like that can, putting it proverbially, put the money where its mouth is, to make these investments good.

NOMPU SIZIBA: Some of the announcements that were made were very clear, with companies laying out specifically where the money would be spent – whether a new factory or whatever it may be – even detailing how many jobs, direct and indirect, would be created. But some of the monies are just that. They are just pledges with little detail. To what extent can we be really excited about that?

PETRUS DE KOCK: Look, in our preparations for the summit we were very clear, especially with investors and the president’s economic advisors, that we need to separate between the kind of projects that you refer to: “Say ‘In the Eastern Cape we are going to build a factory, we are going to employ so many people’ – ringfence that, because there you have a clear indication.”

Then you have your pledges. The pledges like the ones coming from the United Arab Emirates [UAE] and China, etc. Those will become real, but there is still a lot of work to be done regarding the sectors involved, the how, the what, the where and the when. Those things are definitely on the table – it’s not that they need to be questioned. But I do think much more homework needs to be done to show how it will become real in the end.

NOMPU SIZIBA: You did hear my market analyst, [we] spoke about how important it is that we attract investment – but at what price? We need to ensure that ultimately the people who are going to invest here will make their profit, but that it benefits South Africa as well, particularly in the area of jobs.

PETRUS DE KOCK: Yes. For sure. Look, I think our regulatory environment in South Africa is quite strong. If you look at our special economic zones, occupancy rates in these zones average about 30%, and some of them even more. I’m just using that as one example. So when a company enters our market, the Department of Trade & Industry’s regulatory requirements are fairly clear, as well as the attached incentives. We are not just a well-regulated market to ‘police’ companies that come in so that they don’t abuse our labour system; that they don’t abuse the resources that we use. I think our market is quite well prepared to deal with companies and to negotiate, and to use what some people may always raise as a very controversial example.

If you compare Chinese company activity in South Africa with other peer African markets, they are in some cases comparing chalk and cheese because, by the way, about 35% of Chinese investors in the African market come through South Africa. And when you look at their labour practices, and when you look at how compliant they are with South African regulations, their behaviour here is very different from a lot of other countries. The reason for that is that we have a well-established system. It’s not ideal, it’s not perfect. However, I think we have the basis from which we can negotiate and we can say, okay, fine, if you want to bring your business to our country, then you have to comply with X, Y and Z. I don’t think we need to be apologetic about that.

If you look at black economic empowerment and the questions that foreign companies often ask, I think we’ve got very well-established examples like Siemens, for example, and what they have done to become compliant ultimately. Yes, we are well prepared to deal with those kinds of challenges.

NOMPU SIZIBA: International bodies like the World Bank and the International Monetary Fund often encourage economies like ours to put in policies that make it conducive for the private sector to invest. With all these pledges, one would think that policy uncertainty in South Africa had suddenly disappeared. Do you think this signifies that perhaps investors are taking a leap of faith based on what Cyril Ramaphosa has been saying about our moving towards fixing our policy uncertainty issues, despite things like the national election being around the corner?

PETRUS DE KOCK: I think if you look at global patterns in the world of political risk analysis, for probably two decades, any country that goes into an election, whether its Thailand or Indonesia or Mexico or whatever, there are always going to be questions – what’s going to happen with the election, who’s going be in power, etc? So I think it’s natural for a democratic system and population.

But I do think when it comes to this year – particularly if you look at the president’s focus on reviving the economy, unblocking investment challenges that companies face, dealing with issues of policy uncertainty, dealing with mining or dealing with questions that relate to land reform, etc – I think a lot of hard work is being done to say that underlying all of this is a country on a historical journey of transformation, and the policies that it is implementing are all part of that bigger picture.

So I think we must be honest as South Africa that we have not even nearly arrived at the place where we want to be, and when we engage with investors, when we engage with foreign countries, the message must be very clear: when you come into this market, you can’t [do as you please]. There is a very specific framework in which you operate in this country. So inasmuch as there are areas where we can say, yes, there is policy uncertainty, I think there are a lot of other dynamics in the market where you are very sure when you enter the South African market how you will be supported, where you are protected. For example, in the World Bank, in the ease of doing business, we rank 22nd in the world for the protection of investment. That is something which we are safeguarding, and that’s a message that not only the president but a whole lot of industries are sending out into the international economy.

So I think the message ultimately is, yes, there are areas that we are still working on. But at the same time, there is a lot of security in the market.

NOMPU SIZIBA: While some parts of the world appear to be getting government’s message that there is no intention for the expropriation of land without compensation to harm security of tenure, or mess up economic growth, I think the key question is when this matter will be clarified. For as long as there is no certainty in this regard, perhaps investors with a longer-term investment horizon, beyond, say, five years, may hold off putting their money here until there is clarity. Isn’t that a concern?

PETRUS DE KOCK: I think there will be people who have that kind of concern. However, I should say, as to the manner in which the issue is being handled so far, parliament is still involved in the process. Look, I think there are several ways of this happening. On the one hand, there is the constitutional review process, asking that question. So that is underway. But at the same time, I think the major message that has gone out is that we are not a country that is going to engage in random state-sponsored invasion of private property and the taking away of that like we saw in our northern neighbour, Zimbabwe. Let’s be frank about that. There is no such thing.

So what we have here is a constitutional democracy based on the rule of law, with a very well-functioning court system that has proved itself through and through, time and again, that it will challenge decisions made by executive authorities, and it will put its stamp ultimately at the highest level of the Constitutional Court.

So the message I think is that we really need to start understanding, as South Africans, that there is uncertainty around it, yes. You cannot embark on the process of land reform without an element of uncertainty. However, at the same time, what the president has been saying, if you listen to the kind of message coming from cabinet, it’s ultimately that yes, we are engaging in this, but at the same time we will be sure not to go the route of random, haphazard, invasions and occupations. In fact, the whole spirit behind this is asking the question: how do we unlock potential in a rural economy? It’s all just to go to the rural economy ultimately.

Land ownership in our cities, our metros, where populations are more than 60% urbanised, where – outside of North African nations in the desert – we are the most urbanised nation on the continent. So land in South Africa is a question of how we use it in our cities, but ultimately how we create new ecosystems of business, like agriculture, that does not only deal with the issue of land reform, but also open whole new vistas in our economy for opportunity. So that’s the kind of message that I hear coming through, and I think we can be quite sure that we will have to be disciplined about it as South Africans.

We also need to steer clear of extremes. Extremes will just cloud the issue and, I think, take away a lot of the positive images out there. If you look, in the past month or two there was an agricultural conference in Lephalale in Limpopo, for example, with emerging farmers, established farmers, agricultural unions; I think AgriSA was also involved in that. If you look at the message that came from there of collaboration, and the willingness of people to work towards reform of the land-ownership regime, I think that is the message that we also need to latch onto because that’s part of the image of a transforming country.

NOMPU SIZIBA: Lastly, do you see the tide turning in South Africa? You are speaking very positively. You are obviously on a high about the future of South Africa. In terms of better economic prospects. I say that based on all the initiatives that have been put in play – the investment conference, the jobs summit, the government seeking to ensure that foreign people with skills can come in more easily, more flexible visa regulations and so on – do you see the tide turning for us?

PETRUS DE KOCK: I think the tide is turning. But what will underlie and ultimately be the salvation of that tide turning is that each and every one of us in South Africa needs to be aspiring to success. We must stop looking at ourselves in the mirror, always thinking we are dying of some disease, or that there is some problem with us. Honestly, I think the potential in our people is firstly the magic of what South Africa is. Secondly, how do we transfer that energy that brought us to this point as a country into new economic activity? There we need to be extremely innovative in the 21st century because the challenges are out there. And it’s not just we as a society that are confronted with that. There are always challenges around the world and, as South Africans, therefore, I think the tide turning will depend a lot on our own energy and how we innovate in our private lives, in our public lives, and ultimately as a society.

NOMPU SIZIBA: You are right, absolutely. Self-determination is important. Thank you very much for your time and insights.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.



To comment, you must be registered and logged in.


Don't have an account?
Sign up for FREE

Pledges are a far cry from actually investing. If the pledges come from any of the Brics Governments or other governments which may have been primed to make pledges to make us look good, then they are not worth the paper they are written on. Money will only begin to flow once charges have been brought against the people who stole money from the state and the criminals still being protected by the ANC Government. We want to see convictions happen and fast tracked through the courts. Set up special 24/7 courts if necessary. And we want to see a smaller government saving our taxes instead of squandering it. Ministers already caught stealing or lying need to be fired on the spot. No lengthy investigations or second chances.

Misleading headline, there was never an investment strike, there is however still minimal policy clarity and discussions must have been had to clear those roadblocks with future changes.

The mining charter for instance being settled will allow for investment, it’s not rocket science and yet we have had this situation for a decade.

Pledges….perhaps what SA is not being told is either those countries that have, have a fine print clause “wait & see before handing over”

Or the actual pledges SA has to make to others countries to get pledges of investment

“But at the same time, I think the major message that has gone out is that we are not a country that is going to engage in random state-sponsored invasion of private property and the taking away of that like we saw in our northern neighbour, Zimbabwe. Let’s be frank about that. There is no such thing.”
If you change the constitution to provide for EWC then it is back to state sponsored invasion and all of a sudden it is legal! And there certainly is such a thing.
Do not renege on your negotiated settlement ANC, keep to what you negotiated in good faith – or was it good faith?

>Q01942 – Well, the word is out there that this government and its employees have emptied the bank accounts of all SOE’s and are raping the wallets of the entire country because we, the taxpayers, have to foot the bill for the massive thefts that have occurred. The debt this country is in will be there for a long time. Your grandchildren will b e paying off this debt. thjhink about that.

The pleasant little Pledge Party fools nobody. Investors will want to see strong, trustworthy leadership. They will weigh every utterance – especially one’s like “there are no killings of… white farmers in South Africa” Will they want to invest in a country where social unrest will assuredly follow food insecurity?

I read in another article somewhere that most of the pledges were investments that has already been announced or maintenance capex that needs to be spent.

I do not want to be a pessimist but one needs to remain realistic. If property rights are not guaranteed then nobody in their right mind will invest. Just like phyisics have immutable rules – like gravity, economics have some rules than cannot be changed. Property rights is a precondition for investment.

Biggest reason why Africa has lagged the west? Lack of property rights. I do not believe it is coincidence that the development of Europe really kicked of after feudal rule ended and property rights for commoners became entrenched.

One has to admire the positivity and denialism of Doctor Petrus de Kock [MAHFGR] and acknowledge that he is paid by Brand SA. But not a word about “ease of doing business” in SA (or lack thereof); a corrupt fiscus, still denying that its Stalingrad Strategies to delay (steal) refunds; biased courtes, increasingly transformed into making bizarre decisions (increasingly commercial contracts have “arbitration” dispute resolution clauses to avoid politically correct but useless judges) nor our business-hostile environment, particularly labour legislation – as the Concourt recently ruled in a different context, the power to hire must include the power to fire.

Neither de Kock nor the coverage of the talkshop mentioned how Cyril the Charmer is going to remove our biggest “blockage”, the Liberationbeforeeducation dysfunctional education system.

Load All 8 Comments
End of comments.






Follow us:

Search Articles:Advanced Search
Click a Company: