From the editor
in his new book Africa’s Billionaires, the editor of Forbes Africa, Chris Bishop, writes about Stephen Saad, the founder and CEO of Aspen Pharmacare. In the chapter on Saad, Bishop quotes from a speech the Durban-based businessman delivered late last year: “You know, my peers are saying that they are not investing because the political climate is not right; because the economic climate is not right. They are going to wait until Jesus comes!” Truth be told, Saad is right: the business climate will never be perfect, regardless of the market in which you operate. Successful entrepreneurs are the ones like Saad who find opportunity amid the uncertainty and manage to earn returns that exceed the cost (including the risk premium) of capital.
Despite the perception that South African businesses are sitting on their cash piles, waiting for better days, this is not entirely the case, data compiled by Stanlib chief economist Kevin Lings and published by Moneyweb shows. Lings writes that the private sector continues to invest hundreds of billions of rand in SA – despite the weak economy and policy uncertainty. In the first quarter of 2017, fixed investment spending by government and the private sector accounted for 19.5% of GDP, in line with the previous seven to eight years since the global financial crisis.
However, this doesn’t mean all is well – Lings highlights that we need fixed investment to be a minimum of 25% to 30% of GDP for at least a decade to meet economic growth, job creation and development targets. (This translates into a current shortfall of between R250bn and R450bn a year, Lings says – the equivalent of building between four and eight shopping centres the size of Mall of Africa every single month for the next 10 years.) In addition, the private sector’s contribution to total fixed investment has fallen to 60%, the lowest level since 1994, and has declined in seven of the past nine quarters.
But there is good news too. Large companies mostly remain in reasonably good financial shape, with very low gearing, Lings says. In addition, the reduced levels of fixed investment we currently see remain more than 100% higher than the average achieved in the eight years between 1994 and 2002, adjusted for inflation.
“Under these circumstances, it is highly likely that the introduction of consistent and supportive economic, political and social policies would be accompanied by a substantial uplift in private sector investment […] in order to help develop vital infrastructure,” he concludes.
Is it too much to hope for a politician or two who can spot the value for all of us in creating an enabling environment for investors? ■