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South Africa: Investment conference rustles up $13.5bn

By Xolisa Phillip, in Johannesburg
Posted on Thursday, 7 November 2019 16:19

South African President Cyril Ramaphosa is hoping the investment conference will re-kindle 'Ramaphoria' REUTERS/Siphiwe Sibeko/

The second instalment of the Investment Conference is taking place not only to attract investment, but also to ensure South Africa remains on the radar.

This is according to businesswoman Phumzile Langeni, one of the original four investment envoys appointed by President Cyril Ramaphosa in April 2018.

  • Langeni was hired, together with Trevor Manuel, Mcebisi Jonas and Jacko Maree, to mobilise both international and domestic investment.

President Ramaphosa set a $100bn investment target over the next five years.

  • “South Africa is not the only country, be it in Africa or the rest of the world, seeking investors. What we have all learned with investors – current, potential and those who are being courted – is if you disappear when they make asset allocations, they will look elsewhere,” according to Langeni.

To pledge or not to pledge

President Ramaphosa announced the inaugural Investment Conference during his maiden state of the nation address in February last year. This was met with much enthusiasm and buoyed by “Ramaphoria”.

In October 2018, the first edition of the Investment Conference attracted R300bn in pledges from major South African corporates and multinationals. Several projects have entered into planning phase. There is consensus the event was a success and helped boost confidence.

However, a year down the line, against the backdrop of weak economic growth projections and a dire medium-term budget policy statement (MTBPS), the mood this time around is decidedly less effusive.

“The downside with all these things is fatigue and how people respond to a conference so soon after the first one. [But] coming from where we have come from, where we have seen our FDI [foreign direct investment] dropping significantly over many years, it is paramount South Africa is out there telling its story,” explains Langeni.

The Investment Conference is also crucial for South Africa to be relevant in a continent that has been identified as the world’s growth frontier.

  • “Over and above it being a South African story, I think the issue of us as Africans looking to increase trade and investment among ourselves, […] calls[s] for South Africa to be seen and be out there engaging with our counterparts in business and the public sector, and visiting the various territories across the rest of the continent.
  • “It is also a good opportunity for South African corporates as they look to expand outside of South Africa, the rest of the continent also becomes one of their stomping grounds,” says the investment envoy.

A growing order book

Nevertheless, this edition of the conference has wrung out a few more promises. The highlights:

  • New Development Bank (R23 billion)
  • Transnet (R22 billion)
  • Toyota (R2.43 billion)
  • VM Auto (R426 million)

Envoys on a mission

Some of the success has to be laid at the doors of the envoys. Their mandate includes criss-crossing the globe and engaging with domestic investors, selling South Africa as a viable and attractive investment prospect. Their appointment runs for five years and coincides with President Ramaphosa’s term in office.

The Investment Conference gives investors the opportunity to “mingle with leaders in government [and the] private sector”. “They leave with a different impression”, explains Langeni. “People who make investments do not always come for business reasons, they could [also] potentially see South Africa as a tourist destination,” she says.

The beginning of their journey as investment envoys was characterised by “attacking our political story, speaking about the corruption and all of the things that happened historically”, she says.

During this early stage, economic and policy uncertainty were major themes expressed by both local and international investors. In addition, investors underscored rapid changes in regulations, South Africa’s visa regime and an operating environment where private players felt “there wasn’t alignment within the government sphere itself”.

This has now shifted to highlighting South Africa’s positioning as a highly diversified economy, its command within the financial sector and its infrastructure as good selling points to the investment community.

Areas of improvement

More work needs to be done around tourism, “given the offering South Africa has”. “And also agro-processing and the potential export market and opportunities that South Africa can enjoy,” says Langeni.

According to agricultural economist Wandile Sihlobo the sector is in recession and an anticipated drier season “adds to a confluence of negative factors already constraining growth”. Between 2015 and 2016, when South Africa experienced drought, agricultural GDP contacted for both years because of lower harvests.

During the pre-MTBPS presentation last Wednesday, minister Tito Mboweni said climate change posed a risk to the economy.

  • In its review report on South Africa, Moody’s Investors Service agrees with this assessment, saying: “South Africa is subject to frequent climate-related shocks such as droughts, which undermine the agricultural sector’s performance.”

Local perspective

Gina Schoeman, the South Africa economist for the Citibank Global Economics team, says it will be interesting to compare the amounts pledged last year versus this year. “I think it is the local corporates and what they say this year that will give us a true indication of confidence.”

A major concern for Isaah Mhlanga, the chief economist at Alexander Forbes, is the uncertainty around energy availability and security of energy supply.

Mhlanga views this as a constraint “because you can attract businesses to invest, but as long as you can’t supply them with electricity, it becomes difficult for them to operate. I think it should have been given more concerted effort than any other issue that we have.”

He also points out that, by design, the investment mobilisation will take some time, “it is not all going to accrue in one year”. He also notes the Investment Conference has brought in successes to the economy.

Ambition burns brightly

Langeni says although the envoys have fielded more questions around energy of late, it is important to adopt a holistic perspective on issues around certainty. While she can appreciate that pace might be an issue, as an insider, she has been witness to major strides on this front.

As for this week’s event, “I am very optimistic,” enthuses Langeni.

“I am hopeful we can overperform [our targets]. I see no reason [why South Africa will not be able to attract] $100bn in the president’s term of office,” according to Langeni.

 

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