South Africa’s Investment Crisis: Urgent Action Needed to Salvage Economy

President Ramaphosa
  1. South Africa faces the risk of losing major domestic and foreign investments due to its failing infrastructure, specifically issues with load shedding and Transnet, which could force investors to look elsewhere.
  2. President Cyril Ramaphosa remains optimistic about the country’s path to recovery, aiming to attract further investments to meet a new target of an additional R2 trillion for the next five-year cycle.
  3. Busi Mavuso, CEO of Business Leadership South Africa, criticized the government’s communication blunders and decisions that have damaged its reputation with investors, emphasizing the need for urgent action to address infrastructure problems and improve communication.

South Africa is facing a significant risk of losing major domestic and foreign investments unless urgent actions are taken to address the country’s failing infrastructure, specifically the ongoing issues with load shedding and Transnet. As reported by TimesLive, Duncan Wanblad, CEO of the Anglo American group, expressed the concerns of investors and business leaders at South Africa’s fifth Investment Conference, warning that the lack of initiative to resolve these problems may drive investors to seek alternatives.

Wanblad elaborated on the implications of this inaction, stating, “I’m talking about the people who invest in companies like Anglo American; they have choices… and they demand a certain return for their investment. To the extent that the way we operate is uncompetitive with the other sets of options they have, that makes investment difficult.” While South Africa is not in a desperate situation, international investment is becoming increasingly challenging due to the nation’s diminishing competitiveness.

Logistical issues have cost Anglo American billions of rands, with instances like Kumba’s iron ore not reaching ports on time. Furthermore, the recent greylisting of South Africa by the Financial Action Task Force signals a loss of faith from the international community in the country’s ability to combat financial crime. Although this greylisting does not directly affect Anglo American, Wanblad acknowledged that the group could suffer if South Africa’s investment ratings were to decline.

During the investment conference, President Cyril Ramaphosa presented a more optimistic outlook, acknowledging the challenges that have concerned investors but asserting that the country is on the path to recovery. “We are on a long journey to rebuild our country and recover the ground we have lost. Our recovery is a mission that will take time to accomplish. We are on the recovery path; we refuse to be daunted by the challenges we face, we are confident that we will recover,” Ramaphosa stated.

The president’s goal is to attract further billions of rands worth of investment to meet his five-year plan of drawing R1.2 trillion in investment to the country. South Africa has secured R1.5 trillion in investment pledges since 2018, surpassing the initial target. For the next five-year cycle, President Ramaphosa has set a new investment target of an additional R2 trillion, despite the challenging global economic environment.

However, Busi Mavuso, CEO of Business Leadership South Africa (BLSA), has previously criticized the government for not making the country more attractive to investors. Mavuso highlighted several blunders in the government’s communication with the market, such as the exemption granted to Eskom by the National Treasury that allowed the embattled power utility to avoid reporting irregular, fruitless, and wasteful expenditure.

Finance Minister Eoch retracted the exemption shortly after, claiming it was intended to protect Eskom’s credit rating and audit opinion, but the move sparked public outcry over concerns that it could enable further corruption within the entity. Mavuso argued that the government’s decision damaged its reputation as an honest counterpart to investors.

Another misstep by the government, according to Mavuso, was electricity minister Kgosientso Ramokgopa’s comments prioritizing South Africa’s aging coal power fleet, potentially diverting attention from the country’s transition to renewable energy sources. Mavuso warned that the minister’s statements could be poorly received by investors looking to invest billions in South Africa’s shift away from coal.

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