Businesses deterred from investing in SA

Poor demand, the political climate and policy uncertainty are turning investment away, says Absa.
Absa economist says calls for radical policy changes could get louder. Picture: Waldo Swiegers, Bloomberg

Insufficient demand, policy uncertainty and the political climate are the most critical things holding back business from investing in the economy, says Jeff Gable, head of research and chief economist at Absa.

Research conducted by Absa in conjunction with the Bureau for Economic Research revealed that for almost five years these issues were the most cited by manufacturers in holding them back from making investments, Gable told a business breakfast hosted by the Ford Motor Company of Southern Africa this week.

“More than 80% of manufacturers are saying this is what keeps me up at night. Business confidence is not a nice-to-have, it’s critical,” he stressed.

Gable added that the last time policy uncertainty and the political climate was the single most important thing holding manufacturers back from making investments was in 1993 and 1994, which was “a pretty uncertain time”.

The factors that are no longer an issue

He said in 2005 the most cited impediment to making investments was the lack of skilled people while earlier it had been high interest rates, neither of which applied today.

Gable said that in the absence of investment in plant and machinery, capacity and people, the economy of tomorrow would be no bigger than that of today.

He said South Africa has always been a tough place to do business, but in the past business operated in an environment where it knew the rules of the game well enough that it could think about investments that made sense.

There was no need for the new government to enact a huge number of pieces of global best practices for the country to do better, but for business to understand the rules a bit more – and business would organise itself around them and move forward, he said.

A need for clarity

“That is understanding better what empowerment legislation is going to look like. We need to understand the solution for Eskom.

“If electricity prices are going to rise by 50% that is uncomfortable. If it’s going to rise by 100% over the next 10 years we need to know that because that is a very different business environment. So it’s trying to find answers to that that will be most important going forward,” he said.

Gable added that GDP growth is struggling to keep up with population growth and that without economic growth, the calls for radical policy changes would be louder.

He said South Africa has grown per person by a total of about 2% over the past 10 to 12 years but shrunk over the last five or six years.

“If, in a very clear way for most South Africans, tomorrow does not look better than today, because quite frankly today is worse than it was five or six years ago, then the calls for change will be much larger. This is not unreasonable on their side,” he said.

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Heard Kevin Lings of standard bank saying that the potential growth rate of our economy is 1%. If we try and grow it any more inflation just kicks in and unravels the growth.

That’s pretty shocking. Why so low? Poor policy, policy uncertainty, and high elelctricity prices. Add in low labour productivity and a lack of skills and suddenly it’s pretty amazing we can even do 1%.

The thing is, none of this is new. We’ve known it for years and we still do. Yet we do nothing.

The NDP calls for 5% growth. We all know that a lesser rate will just increase poverty, unemployment and inequality.

Therefore the ANC is the architect of these three scourges which it claims to want to abolish.

Watch out for a new 9 point plan while we trigger another round of skills and capital flight, treble electricity prices, and deter foreign investors with EWC and more BEE.

And the 9 point plan, AKA the 4th industrial revolution? “If we had some ham, we could have some ham and eggs, if we had some eggs.”

“The thing is, none of this is new. We’ve known it for years and we still do. Yet we do nothing.”

Short of a violent revolution of the French and Russian kind, which installs a highly educated technocrat rulership, there is NOTHING anyone can do. We are in a one-party ANC tribal state sustained by the lumpen proletariat which will vote either them in again or the even worse, the EFF.

If you have the funds and the mindset the only logical thing to do is leave. Otherwise we just have to suck it up.

BEE is the downfall. Cyril confirmed yesterday that they are going to accelerate BEE.

As the “first” citizen beneficiary he can not do anything else. People would crucify him.

BEE is just an epic failure and policy makers don’t see that. You need you head read if you invest where you are told upfront people are employed because of “You know What” and supply chain purchase items not because of quality and competitive pricing but “you known why”

They said the economy will be taken away from previously advantaged groups. So they wont invest will they.

The previously disadvantaged wont invest they want it for free via BEE don’t they.

Just go offshore.

BEE is a downfall. You sound like you against black owned business M.

What a silly response. BEE is destroying this nation because incompetent people are being hired because of the colour of their skin and not on merit. Wake up, buddy

Economic growth hit a brick wall. This wall actually has a name – Luthuli House. The tripartite alliance, and specifically the labour unions, is an enormous “tax” or penalty on unemployed people. Luthuli House uses the law to protect the unionised workers’ monopoly over the labour market. The labour laws exclude the majority of people from the job market and prevent them from offering their labour at competitive rates. We have got central planning of the labour market.

Eskom operates as a monopoly. This prevents competition and protects inefficiency and looting by cadres. We have got central planning of energy.
The monopoly of municipal service delivery is protected by law. This law protects incompetence and looting and exploits the residents. We have central planning of service delivery.

BEE is the monopolised access to extortion and looting, for the benefit of the political elite, and protected and enabled by BEE legislation. BEE monopolized entrepreneurship in the hands of central planners.

Luthuli House monopolized economic activity when they decided which citizens get employed (EE) and which citizens are fit for BEE projects. This is central planning of the economy.

Throughout history, all centrally planned economies failed. History has proven that the policies of Luthuli House have a 100% failure rate. The ANC owns a monopoly on the implementation of failed policies. Therefore, we should expect a sustained, protracted contraction, not growth. Luthuli House is a centrally planned failure.

The ANC’s revolution of destruction is intended to consolidate and increase its support but it will have the opposite effect.

More and more voters will decide they cannot look up to a conflicted party whose idea of action is a talk shop followed by a banquet.

Even business will eventually rally behind Julius Malema, just to have certainty.

And when that happens the plan for controlled opposition will have been completed.

Not sure what you are referring to.

Very simple strategy to counter. Phase 1 – Externalise all your wealth and IP. Phase 2 – externalise yourself and your family when your ZAR-based bubble loses its luster. For many people that’s already happened, for some of us not yet. The country is already dead

Busy with phase 1, hopefully, I will get to phase 2 early/mid 2020.

South Africa (our economy at least) is just waiting for the doctor to come round and declare us dead/vegetative state.

Likewise my in-laws who have bought Maltese citizenship.

The only way to get the economy up to speed is for the ANC to split, so that the “good” part of the ANC can team up with the opposition to kickstart the economy.

This is the key for potential emigrants to watch.

As long as the ANC’s unity project continues, the country will stagnate.

If so why does PepsiCo want to buy Pioneer?
Why is Amazon investing billions in data centres in Cape town?
Yes, the ANC has egg on their face but lets face it, the rest of the world is over ridden and Africa is the last frontier.

Exactly ……..!!! Plenty of money going into war torn countries to exploit the resources there. And this bull about BEE destroying this country can only come from one who benefited from apartheid. Back then the colour of your skin also got you jobs and privilege…No complaints back then. BEE is not what created this environment. Apartheid is…..A child born in SA will have totally different life expectancies, opportunities, access to education and medicines depending on the colour of their skin. Did BEE do that? NO …. BEE is there to ensure that a child born of colour today will have more opportunities and a better quality of life than their parents did. BEE didn’t say to corporates go out an appoint incompetent people. It said you need to balance your work force. Some corporates have gotten it right and some have gotten it very wrong because they pay peanuts and spend precious nothing on training. Compare a Woolies cashier to a PNP one. Where is the difference?

Plenty of money in SA terms. In first world terms its peanuts.

BEE should not be about the emotion it is about the reality. Does it encourage investment or does it deter investment.

There are people of colour all over the world, right? There are “previously disadvantaged” people in every single country on earth. Some people are wealthier than others because some had more opportunities, or simply worked harder than others. Some are born with above-average intelligence and others may be intellectually constrained. The most successful countries have people of colour who are also the poorer and “deprived” part of society. Those countries do not implement BEE though. No successful country on earth has a BEE policy. Do you know why? BEE incentivises the slave complex, remunerates the sense of entitlement and feeds the victim mentality while it destroys the warrior spirit.

The ANC turned, what once was a proud warrior people, into a nation of self-pitying victims with the slave mentality.

What bull….it’s pointless comparing us to other countries in the world. Which other countries in the world had apartheid? Which other countries in the world created the massive social disaster that we now sit with? It’s easy to sit back and criticise …… The only ones complaining about BEE are the previously advantaged!!! 10% of the population decided the 90% would live in substandard crime infested areas, that the only Decent jobs we were “entitled” to were nurses, teachers and policemen, that we didn’t deserve to use the same beaches, busses, or parks that you could use, that ours kids growing up shouldn’t aspire to become actuaries or surgeons, because universities allowed a tiny % of people of color in, and they would decide what degree they would allow you to study….. When you complain about BEE. 90% of the country doesn’t agree or want to hear your pain…. Coz you didn’t hear ours…..!! Crime so bad these days ? It was always bad in the areas we grew up in….. Now it’s in the suburbs too so you too can feel what’s it’s like ….

Jay, you are basically confirming what I just said. So, we are in agreement then.

This is BS. If there’s money to be made companies will invest. Companies are investing in Nigeria and DR Congo.

End of comments.





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