They still want to invest, but this is what worries foreign investors.
Over the last few days, I have been meeting with foreign investors in the United Kingdom. It’s been good to see that there is still much interest left in South Africa. Investors were well informed and asked thought-provoking, challenging questions. I always find it interesting and worthwhile to get feedback from them on what their concerns are about the future in South Africa.
So here are some of the major insights I’ve gleaned:
Investors are significantly more negative about the economic outlook than they were 3 years ago, when I did my last pre-COVID roadshow. This is not surprising, given the challenges the country is facing both economically and politically. However, many relayed the extreme negativity that they are hearing from South Africans and the mainstream media as one of the major reasons for their own negativity.
The upcoming election is of great interest (and in some corners, concern) to them. Being keen readers of South African media, they were of course concerned about possible coalition agreements. There seemed to be an understanding and acceptance that the ANC will almost certainly still be the majority party after next year’s elections. Interestingly, a number of investors indicated that they were aware that a coalition with the EFF was not the ANC’s preferred choice. (If only South Africans were as well informed). In addition, concerns about the willingness of the DA to play “big politics” and do what is best for the country were also frequently expressed.
As in South Africa, I was frequently asked how long President Ramaphosa is likely to stay in his post. Some who had listened to one of our former Ministers of Finance- who was a guest of Goldman Sacks in London recently- were convinced that he would leave before the election, something I do not agree with. However, whereas until recently any early departure of Ramaphosa would have been seen as disastrous by these investors, there is now a general acceptance that this is likely to happen at some stage after the elections. Their concerns has more to do with how the transition would take place (i.e. a peaceful handover or through a political battle), rather than whether it would happen.
Although President Ramaphosa’s (almost certain) successor, Paul Mashatile, remains a bit of an unknown to them (and I would strongly suggest that he does a foreign roadshow soon), they don’t seem to have major concerns about Mashatile taking over the helm.
On the other hand, our relationship with Russia was one of major concerns. Every single person I spoke to (and there were many) raised this as a confusing and troubling issue. The ANC’s historical relations with Russia were well understood, but why the South African government would risk severe economic repercussions including putting the continued existence of the Agoa agreement at risk, baffled them. This issue was without doubt one of the most pressing raised by investors. Needless to say there were also many questions raised around whether the August BRICS summit will still take place in South Africa and if President Putin would attend.
Of course, it has come as no surprise that the ongoing energy crisis and its impact not only on the economy, but also on the welfare of ordinary citizens was also top of mind. The negative role played by Min. Mantashe in relation to the speedy roll out of alternative energy was also raised repeatedly.
The good news is that investors in general are still keen to invest in South Africa as one of the major EMEA markets. The bad news is that they are troubled about how the elections will play out and being keen readers of South African media, find some of the utterances by especially opposition politicians (such as John Steenhuisen’s interview with BBC’s Hardtalk) very troubling.
They are also concerned about continued policy uncertainty as well as capacity to deliver.
We desperately need more foreign direct investment. The willingness is there, but we need to stop shooting ourselves in the foot.
Political stability, policy certainty, and prudent economic decisions are important, but equally so is what and how we communicate. Politicians should remember that foreign investors closely follow what they say and don’t say. The government needs to think more carefully about how their communications (or lack thereof) affect the confidence of foreign investors in the country. So should the opposition - especially in the run up to the election when the temptation to revert to negative politics is oh, so seductive.