Old Mutual chair Trevor Manuel says the more than R1-trillion withdrawn from SA Inc in the past decade points to an uncertain regulatory environment and lax implementation, which has hurt the country’s competitiveness.
Writing in the financial services group’s annual report, the former finance minister said authorities needed to put in place clear regulations and long-term regulatory certainty to attract and retain investment.
“Foreign investors disinvested more than R1-trillion from SA equities and bonds over the past decade, primarily due to regulatory uncertainty and execution stasis. This money is being redirected to competing markets that appear to be on a more sound governance and regulatory footing,” Manuel said.
“This is a stark reminder that Africa, particularly SA, has to compete to attract and retain investment.
“This is an ongoing challenge, and Old Mutual stands ready to collaborate with regulatory authorities and government stakeholders to create an environment conducive to business growth and investment.”
European countries such as the UK and Germany are traditionally active investors in SA, alongside the US, China, Japan and Australia.
Business Day reported in February that according to data from asset management firm Stanlib, foreign investors have withdrawn about R1-trillion from SA’s equity and bond markets over the past 10 years.
Foreign investment was negative in 2023, with offshore investors withdrawing about $7.2bn in the equities market.
Old Mutual CEO Iain Williamson said: “In recent years, investor trust and confidence in Africa has eroded, and decisive action is needed to rebuild and reposition it as a leading emerging-market destination. In SA, the ongoing energy crisis, logistical challenges across our ports and railways, and service delivery challenges remain key constraints to economic growth.
“While we have a collective responsibility — partnering across the private sector, public sector and civil society — our ability to successfully unlock Africa’s full potential requires policy certainty and stability.”
UK high street lender Lloyds Bank said most of foreign investment in SA went to the financial services sector, mining, transport, manufacturing and retail. The bank said a lot of factors still made SA an attractive investment destination, such as abundant natural resources, a transparent legal system and growing consumer market.
“Despite its attractive features, SA also faces several challenges that could deter [foreign direct investment], including widespread corruption, inefficient bureaucracy, labour unrest and a shortage of skilled workers in certain sectors, such as engineering and IT,” said Lloyds.
“Moreover, persistent load-shedding poses a significant challenge to investment. In 2022, the country endured over 200 days of load-shedding, a trend that continued almost daily into 2023. Unreliable power access severely hampers economic growth and remains a primary worry for investors.”
SA ranked 59 among the 132 economies on the global innovation index 2023 and 111 out of 184 countries on the 2023 index of economic freedom. The country scored 43/100 in the latest corruption perception index and 72 out of 180 countries.
Manuel said SA has yet to exorcise the demons of state capture and the effects of this period continue to be felt.
“While there has been an effort to restore the institutions and rebuild the economy, more work is necessary to eradicate corruption completely and regain institutional strength.
Pragmatic approach
“Against this backdrop, it is crucial that regulators adopt a pragmatic approach, striking a balance between fiscal requirements and providing clear regulations and long-term regulatory certainty,” said Manuel.
Old Mutual said in the annual report that high inflation and interest rates and an ongoing confidence crisis continue to affect consumers. However, this was alleviated by recovering employment rates after the pandemic and the July 2021 unrest, with 2.2-million jobs having been created in 2022 and 2023.
The group expects inflation to ease to 4.5% in April, opening the door to interest rate cuts.
“The current repo rate is restrictive, slowing demand and placing downward pressure on prices.
“Credit growth slowed to 4.9% year on year by December, largely because of lower demand from corporate borrowers. Lower inflation and interest rates, along with the ongoing recovery in employment, should ease demand on consumers in 2024,” it said.
“The recent increase in effective personal income tax will burden higher-income groups more than lower- to middle-income groups ... The rand is weaker than fundamentals suggest, likely pricing in more risk than needed.”
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