The boss of the local arm of Citi is very encouraged that SA is beginning to move in the right direction, but says there is a long way to go before the country passes the litmus test with investors in the form of rising foreign direct investment.
Peter Taylor, Citi’s chief country officer, said the announcements about the partial privatisation of power generation and the national airline bode well for further reforms that will resuscitate the country’s ailing economy.
“The real proof is going to be a jump in foreign direct investment. So, can we pick up some economic momentum that will see actual investment into the ground? Similarly, will local corporates begin allocating capital and reinvesting in SA? This remains to be seen, but a more stable regulatory framework will be encouraging,” said Taylor.
He was speaking to Business Day earlier this week after the SA Tomorrow investor conference that the US banking giant cosponsored with the JSE and Absa last week.
It came just days after President Cyril Ramaphosa surprised the market with a change in direction regarding the partial privatisation of power generation and the national airline.
Taylor said the battle over economic policy and ideology regarding the state’s role in the economy does not have to be a zero-sum game.
“These announcements are significant because it sends a message that [the] government is prepared to relinquish control, and I think there will be more opportunities that arise from it. As is the case with Eskom, there were concerns about privatisation, but with Eskom set to retain ownership of the grid, it becomes a much more palatable plan,” said Taylor.
Even Eskom’s dilapidated and failing power generation network can be a huge opportunity for the country if the right regulatory framework is put in place that will build on public-private partnerships that encourage investment and play into the emerging themes of climate change and the rise of environmental social & governance (ESG) investing, said Taylor.
“Globally, there are lots of investment dollars looking for ESG opportunities, and SA presents numerous possibilities as our coal power stations come to the end of their lives and can be replaced with renewables,” he said.
Ramaphosa appeared to have taken another step to improve the efficiency of the nation’s neglected ports on Tuesday by announcing the establishment of an independent ports authority that will fall under Transnet but will have its own board and strategy.
The World Bank rates the country’s ports as some of the world’s most inefficient.
Like one of its largest competitors, Goldman Sachs, Citi is convinced enough by events to embark on organic growth in SA. The bank is increasing headcount and is investing in technology to enhance its existing offering.
“I am pleased to say we are increasing our balance sheet and hiring in SA. We have identified another 150 to 200 clients to bring on board comprising top-tier local corporates and multinationals who are all becoming more pan-African in their scope,” said Taylor.
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