Business still uncertain as investment summit nears
Moody’s finds lack of confidence despite Team Cyril’s efforts
● The government has been told to get its house in order ahead of its investment summit later this year — a move necessary if it hopes to convince local businesses to provide at least half of the targeted $100-billion (R1.4-trillion) sought.
While Mercedes-Benz this week announced a R10-billion expansion of its East London plant, international credit ratings agency Moody’s flagged “tepid business confidence” and land reform as stumbling blocks to investment in the short term.
The continuation of subdued investment, a phenomenon that had plagued the economy, highlighted the business community’s “continued caution in anticipating effective change”, Moody’s said.
Relations between the government and business have improved under President Cyril Ramaphosa’s administration. But Tanya Cohen, CEO of Business Unity South Africa, said the “dual challenges of poor policy co-ordination and the lack of implementation play out and reinforce the uncomfortable reality of policy uncertainty”.
Cohen was addressing Ramaphosa’s economic adviser, Trudi Makhaya, special investment envoys Phumzile Langeni and Jacko Maree, and business leaders in Sandton on Wednesday during the Johannesburg leg of the envoys’ road show. Makhaya and the envoys have also met business and other investors in Cape Town and Durban to drum up local investment.
Ramaphosa appointed Maree, Langeni, former finance minister Trevor Manuel and former deputy finance minister Mcebisi Jonas to raise investment domestically and abroad, and in October the government will host an investment summit.
The World Economic Forum has thrown its weight behind Ramaphosa.
Elsie Kanza, head of Africa at the WEF, told media at a roundtable event on Thursday with government and business leaders that the gathering was not an investment conference but “about bringing together global and business leaders to advise the government on how to create the correct environment to further investment, accelerate growth and create jobs, particularly for youth”.
For example, the discussion about the manufacturing industry had to be as much about robotics and big data as it was about addressing low wages and access to global value chains, she said. “Turning this challenge into an opportunity must rank as a high priority for government.”
The elephant in the room, however, would continue to be low economic growth, while troubles at Eskom threatened South Africa’s investment strategy, said Finance Minister Nhlanhla Nene, speaking alongside Kanza. “But we’ve begun to address the challenges . . . we may need to look at the business model itself. Whether the Eskom we have is the Eskom we require?”
The state would have to play a balancing act between reform and seducing business.
Maree told business leaders on Wednesday “the only source is private sector”, given the government and consumers’ inability to spend to stimulate the economy. At its simplest, private sector investment could be increased capital expenditure. Feedback from international investors was that they preferred local business to take the lead. “They want to benefit from South Africa’s growth, not create it.”
Cohen highlighted four areas the government should address: corruption; identifying and addressing policy and implementation hurdles to investment; developing a “cogent and concise narrative” to address these; and propagating success stories.
She said solutions included identifying specific investment problems and establishing public-private teams to solve them, sequencing big policy framework debates, and adopting Singapore’s model of repealing legislation overtaken by newer legislation, to avoid contradictions.
Other issues were the need to strengthen the socioeconomic impact assessment system to include specific assessment of the effect of new and existing legislation on foreign and domestic investment and on SMEs and start-ups.
Cohen also suggested focused engagement with investors to identify barriers and concerns, with a particular focus on sectors, small and emerging businesses, and for the government to commit to electronic tracking systems for all authorisations and approvals of businesses’ applications for licences or registration.
Makhaya said the government would prioritise four or five areas of economic policy that had stalled. This process would be led by departments in the economic cluster. But, she added, “we are not coming up with a new policy framework”. The National Development Plan remained the country’s blueprint, she said.
A neglected area had been the follow-up on past suggestions and policy feedback from the private sector. The government would strengthen its investor relations, she said. “We need investment that takes us to the apex of value chains, builds expert capability, invests in SMME ecosystems, and investment for social capacity.”
The dual challenges of poor policy co-ordination and the lack of implementation play out and reinforce the uncomfortable reality of policy uncertainty
Tanya Cohen
CEO of Business Unity South Africa