South Africa is on the brink of the abyss and could tip over the edge unless urgent action is taken to rectify the disarray, Anglo American group CEO Duncan Wanblad warned this week.
Investors and business leaders were “tired and frustrated” with such issues as load-shedding and Transnet inefficiency, Wanblad told Business Times on the sidelines of the government-led investment conference in Sandton on Thursday, where he was one of the lead speakers.
The apparent lack of action on fixing the problems could persuade investors to move their money elsewhere, said Wanblad, whose company pledged R29bn in mining investments.
“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.”
I think we’re on a precipice. Where do we go to from here? Because, you know, there are two ways really — it’s down, or we can turn it around and move it up
— Duncan Wanblad
While South Africa was not a basket case, investment was “becoming more and more challenging because the country is becoming less and less competitive”.
Billions were lost because mining companies such as Kumba, in the Anglo American stable, could not get iron ore to the ports on time.
“For instance, every 1Mt of iron ore that we don’t send down to the port and into the market costs nearly R1bn of earnings. Of that R1bn, R300m would have gone into tax and royalties, and that could have been deployed in fixing roads and municipal services and health care and all of those sorts of things,” he said.
The recent greylisting of South Africa by the Financial Action Task Force meant the “world has lost confidence in how the fiscus is controlling funding for bad-actor organisations”. The greylisting did not directly affect Anglo American, but the group could suffer if South African investment ratings sank as a result, Wanblad said.
“There’s a real concern … in everybody’s mind, and I think now is a good time to say: I think we’re on a precipice. Where do we go to from here? Because, you know, there are two ways really — it’s down, or we can turn it around and move it up.
“That’s what happens when you get to a precipice,” Wanblad said. “You can’t see it, you can’t see it, and all of a sudden it’s here today.”
In his speech to the conference, President Cyril Ramaphosa was more upbeat. He said the target of attracting R1.2-trillion in investments over the past five years had been surpassed, and the target for the next five years was R2-trillion.
But members of Ramaphosa’s team of investment ambassadors cited rampant crime, corruption, power cuts and logistical constraints as the top concerns among jittery local and foreign investors who are reluctant to invest more.
One of the envoys, former Standard Bank group CEO Jacko Maree, said attending to the power crisis should be the No 1 priority.
“For almost every industry power is a huge issue because you cannot manufacture things, you cannot mine, you cannot produce anything if you do not have power. That is why you are seeing so much investment in power, because Eskom is not working as it should.
“Therefore, the private sector in a way is starting to fill the vacuum that has been created, and that is why there is so much interest in alternative power generation,” he said.
The investment-to-GDP ratio had to grow beyond the current 15% if the country was to move the dial in terms of economic growth and job creation. “If you really want to get the economy growing, and if you look at what happened in China and many other economies, you have to get investment to GDP above 25%,” Maree said.
More needed to be done to maintain the upward trajectory of total fixed investment, which rose from R756bn in 2020 to R811bn in 2021 and to R933bn in 2022, he said.
“If you want to get the investment levels up to that you need to do even more than the R2-trillion over five years that the president is talking about. If we did R1.2-trillion over five years, you would think that R2-trillion is possible,” Maree said.
“The question is, is that R2-trillion target high enough to change the growth rate of the economy? We have had all the investment, but the growth rate is still low. We have achieved the investment target, but the growth is still low, so you need to do much more.”
As an investment envoy he said he focused on assisting companies that want to continue investing in South Africa or saw the country as a springboard to other markets in Africa.
“As you see from the pledges, many of the companies are local companies. I do not think there has been a lot of point in trying to sell South Africa as a country, that is the job of Brand South Africa, not the investment envoys.”
Maree said the president’s envoys stepped in to help big investment projects get the required government approvals or licences.
The private sector in a way is starting to fill the vacuum that has been created, and that is why there is so much interest in alternative power generation
— Jacko Maree
“I think as envoys we have been able to try and speed up these processes. People had the wrong idea that we were out there trying to be like Brand South Africa and sell South Africa; that is not what we do. It is really to work more with the companies that are trying to invest. That is what we have been busy with, it is much more one on one, and not standing on a stage.”
Derek Hanekom, a former tourism minister who is now the president’s envoy for tourism, said the sector had the potential to drive economic growth.
“At this stage, the indications we are getting from product owners, and people who have lodges, is that their own visitors are indicating that the interest in investing in South Africa has gone sky high,” he said.
Hanekom said when he was minister he worked hard to cut the red tape around visas. “You have got to make it easy for people to come to your country. Because of the visa regime, we were making it really difficult for people — the Chinese and Indians — to come here,” he said.
Former minister in the Presidency Jeff Radebe, also an investment envoy, echoed the point.
“Generally speaking, people are positive about South Africa. Of course, they always cry about the issue of crime, which is bad, and corruption, but more significantly the issue of visas; so I am happy the president touched on the issue of reform in the visa regime,” Radebe said.
At the conference, Ramaphosa announced visa reforms aimed at boosting investment, including the streamlining of application requirements so work visas could be issued more quickly.
He said since the first investment conference in 2018, South Africa had grappled with the impact of the pandemic, social unrest, several natural disasters and a cost-of-living crisis worsened by the war in Ukraine.
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