Is SA investment friendly? Unpacking President Ramaphosa’s investment drive.

ANELISA TUSWA looks at the success of President Cyril Ramaphosa’s investment drive

Four years ago, President Cyril Ramaphosa vowed to attract trillions of rands of investments into the South African economy. So far, the investment drive has attracted 95 per cent of its targets. That’s roughly R1.14-trillion worth of investment commitments. “An investment conference is one thing, investment directly into the economy is another,” says Iraj Abedian, economist and founder and chief executive of Pan-African Investment.

Abedian says the conferences have been talkshows, which yielded little to no results for the South African economy. He says most of the investment pledges could only be realised when the challenges facing businesses are addressed. “There are different challenges facing different sectors, but a lack of reliable energy and Eskom is a shared problem,” says Abedian. “For 14 years now, the government has failed to address it, and investors are losing confidence.”

But despite the energy crisis, chief economist at ESG Analytics Sifiso Skenjana says foreign direct investments (FDI) have marginally improved in the past five years. “Most of it has been on the energy front, followed by infrastructure.”

OTHER CHALLENGES

Skenjana adds that the growth of FDIs has been too slow. He says the biggest problem after load shedding is policy instability, driven by the country’s political cycle. “We’ve got local elections, then two years later national, and two years later, back to local. What it means from a political and policy front is that there’s no continuity.”

Skenjana stresses that those in power have 18 months to deliver, and their lack of delivery during that process deters investors’ confidence.

Abedian adds that instead of fixing some of the key problems in the country, there’s a false narrative that investors are being chased away by transformation and empowerment policies.

“Wherever you go in the world, there’ll always be a policy about the inclusion of local people.”

Both Abedian and Sjekana agree that government needs to make the economy an investor-friendly environment. “Investors will always follow value,” says Skenjana, adding that empowerment is not a one-size-fits-all policy. Investors can empower locals through various ways, including shareholding, senior management positions, and even adding them through the supply chain value system.

“There are many avenues to create a sustainable and inclusive economic marketplace with foreign investors,” says Skenjana. “The spirit of transformation is good, but some of the mechanisms used have not necessarily worked.”

SELL IT RIGHT

The National Empowerment Fund (NEF) is an organisation at the core of investment and empowerment. It was established as a driver and thought leader in promoting and facilitating black economic participation by providing financial and nonfinancial support to black-owned and managed businesses.

Andile Stemela, head of the strategic projects fund at the NEF, says how empowerment is sold to both local and international investors is key. “The nature of how we go out there to market the different available instruments for empowerment is very important,” he says.

Stemela maintains that funding and acquiring businesses with an empowerment factor should never come at the cost of the quality of the product or service. “Our responsibility is to make sure that there’s absolutely no compromise in the quality of work produced by our investees.”

One of the NDF’s key roles is to invest or buy a stake in black-owned businesses and equip them with the necessary skills to grow.

Stemela believes that “once there’s certainty around the business and the project is standing up to all masters, it becomes clear to any investor that the empowerment element of it is just an enabling factor, given the realities within South Africa and its past”.

Since its inception in 2005, the NEF has approved over 1 200 transactions worth R12.35-billion countrywide, with a total project value of R21.44-billion. Together, these businesses have supported more than 112 905 jobs, of which 71 874 were new. All the projects mentioned have been in support of previously marginalised groups, including women.

“THERE ARE MANY AVENUES TO CREATE A SUSTAINABLE AND INCLUSIVE ECONOMIC MARKETPLACE WITH FOREIGN INVESTORS.” – SIFISO SKENJANA