South African President Cyril Ramaphosa said his administration is on track to lure $100 billion in new investment within five years, with more than $16 billion already committed and many more projects in the pipeline.
With the economy stagnating, unemployment that’s stuck at about 30% and the country in danger of losing its sole investment-grade credit rating as the state’s finances deteriorate, Ramaphosa needs an injection of new capital to shore up growth. His campaign got off to a good start in October last year when an international investment conference secured pledges that helped push inflows to a five-year high.
Of the 31 projects that were previously announced, eight have been completed and 17 are under construction or at the implementation stage, Ramaphosa said at a follow-up investment summit in Johannesburg on Wednesday.
“We want growth in our economy and we are putting a number of measures in place to correct what business people have said are the impediments and constraints that are holding growth back,” Ramaphosa said in an interview with Bloomberg Television at the gathering.
“Investors had seen our country sliding down, bedevilled by corruption, by state capture,” he said. “We have corrected that and state capture is now being dealt with. We are now focusing on creating that investment climate and environment for them to invest.”
Investment pledges announced at the conference include:
- Pulp and paper maker Sappi said it will spend R14 billion at four of its plants over the next five years.
- Toyota Motor Corporation intends to invest R2.4 billion on building a new hybrid model passenger car in South Africa from 2021.
- The New Development Bank will earmark a minimum of $1.6 billion for infrastructure development projects next year.
- Clothing retailers including Woolworths Holdings, Foschini and Edcon Holdings committed to spending R6.5 billion on new manufacturing capacity that will create 20,000 jobs.
- Seven vehicle manufacturers, including BMW, Ford Motor Company and Volkswagen plan to establish a R6 billion fund to encourage more black South Africans to participate in the industry over the next decade.
Despite the uptick in investor interest, the National Treasury projects Africa’s most-industrialised economy will expand an average of just 1.5% over the next three years as electricity shortages constrain output. Lower-than-expected growth has curbed tax revenue, causing debt and deficit levels to soar, and Moody’s Investors Service has warned it may downgrade its assessment of the nation’s debt to junk unless urgent action is taken to turn the situation around.
The government is committed to taking the necessary measures to stabilise its ratio of debt to gross domestic product, and restructure struggling state power utility Eskom Holdings. It’s held productive talks with labour unions over what needs to be done, and a new chief executive officer will be appointed within the next few days, Ramaphosa said.
“We don’t have to be dramatic to get things done. We’ve got to work together with our partners,” he said in the interview. “Of course people want dramatic events, they want bones to be broken, they want heads to be smashed. We are saying in this country we have done things a lot better by building consensus and working together.”
Anglo American chief executive officer Mark Cutifani said his company invested R15 billion in South African mining projects in the past year and is committed to expanding output at its key platinum mines. While South Africa remains Anglo American’s best operating area in cost terms, more needs to be done to improve the business environment and certainty of power supply, he said in a panel discussion at the summit.
Phuthi Mahanyele-Dabengwa, the CEO of Naspers’s South African unit, said her company also sees scope to invest and expand more in the country but continued to encounter regulatory hurdles.
The Congress of South African Trade Unions, the country’s largest labour group and a ruling party ally, said while efforts to attract new investment were laudable, the government and business had been “very lethargic” in implementing decisions taken at previous summits.
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