There’s long been something of a habit in government of thinking you can talk up investor confidence — that a charm offensive might persuade those dollars to flow, even when you haven’t done the hard work or made the hard decisions to make SA an easy or attractive place to do business.
President Cyril Ramaphosa’s annual investment conferences did much to charm. But they did nothing to halt the long decline in fixed investment in an economy with very low growth and no electricity.
So it was hard not to be sceptical about this week’s London Investment Week jamboree. Deputy president Paul Mashatile led a large delegation of new unity government ministers on a round of gala dinners, speeches, panel discussions, visits to investment banks, and bilaterals with businesses and UK government ministers.
Some were on their way from the UN General Assembly in New York, where they also met investors. Mashatile was on his way back from a summit in Ireland. Even so, the timing of the London week was puzzling, as was the process. The Treasury is already in a closed period before the October 30 medium-term budget, so it couldn’t talk to investors as it would normally do on its investor roadshows. And perhaps coincidentally, while Mashatile and Co were charming the markets in London, back home Ramaphosa was meeting Business for SA to decide the next steps for their partnership to fix the real economy and get it to grow.
Nor was it clear how much alignment there was within government’s efforts — the London week’s organisers don’t seem to have drawn much on the Treasury or presidency’s expertise in arranging investor roadshows.
Create jobs
However, it is often the financial market investors that government talks to on those roadshows. Those investors drive portfolio flows in and out of SA equities, bonds and the currency, and that’s important. But they don’t drive investment into the real economy through foreign direct investment.
Financial market sentiment has turned hugely in SA’s favour since the GNU’s formation, with the rand outperforming its emerging-markets peers, the equity market roaring ahead to outperform other emerging markets by a wide margin, and bond yields coming right down. All of this is good for confidence and for the cost of capital. But it has yet to translate into capital flowing into investment in the real economy to create jobs and growth.
Mashatile’s delegation did meet financial market players this week. That may have been helpful to cement the sentiment. The London week quite clearly was a platform to profile the deputy president himself. His future presidential ambitions are clear, and many investors were keen to meet him for that reason. Likewise international relations & co-operation minister Ronald Lamola, who was also part of the delegation and is also seen as a possible future president. Investors were even more keen to get a sense of the GNU in action. The mix of DA and ANC ministers singing the GNU song and pitching for investment provided some of that.
Wake-up call
The real test is whether it reached corporates and multinationals that can bring new fixed investment into the economy — not just existing multinationals with an SA presence but also those that aren’t invested and haven’t wanted to be. Bankers and lawyers say there has been a surge of international interest in doing deals or making investments into SA. But this has yet to feed through to hard commitments. The London week delegation did ask the banks to be introduced to multinationals and corporate clients, not just fund managers. How far this succeeded in persuading, or even reaching, new potential investors is unclear. The public sessions seemed to preach largely to the converted.
But perhaps these roadshows are as important as a platform for listening as for preaching. Politicians need to hear how the world views SA; they need to hear what investors really think about the economy, about why the environment for doing business is so unattractive and what they should be doing about it. Sadly, business people at these showy events often fall back on platitudes and don’t tell cabinet ministers what they really think. But to the extent that the London outing was a wake-up call for a clutch of new GNU ministers, a case could be made for it.
Arguably too, the political roadshow in this case was as important for SA’s investment prospects as the economic roadshow. The ministerial delegation to London was the largest and highest-level delegation to visit the UK for some time. Mashatile, Lamola and their colleagues met some of the heavy hitters in UK Prime Minister Keir Starmer’s new cabinet. After a few years in which SA’s perceived anti-Western sympathies have been one of the idiosyncrasies deterring investors, a visit such as this is a meaningful signal, and provides support to Lamola’s view that SA’s foreign policy should be one of economic diplomacy. It follows political (and investor) meetings by some of the ministers in the US last week on the sidelines of the General Assembly.
It’s too early to tell whether the ministerial outings abroad will yield returns for SA. But the latest research from the Bureau for Economic Research has made clear what needs to be done at home. The bureau worked with the business-government partnership on an update to its earlier economic scenarios. It now finds that economic growth can be “jump-started” to more than 3% as early as next year, with a sustained increase to 2029, if SA prioritises reforms in four areas that will bring the biggest returns in the shortest time.
No surprises for guessing these are electricity reform; port and rail; water; and crime, corruption and governance, including local government. But the point can’t be made too often that, as one London panellist put it this week, “build and they will come”. If SA does what it takes to turn around its economy and get growth going, those investors will be there.
• Joffe is editor at large.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.