It felt good, but feel-good alone does not create jobs and growth
The feel-good factor was formidable, the president was fabulous and even the cynics among the more than 1,000 participants at President Cyril Ramaphosa’s investment conference came away feeling upbeat. But will it help to prompt the massive surge in productive investment that Ramaphosa hopes will drive meaningful growth and job creation in coming years? It’s early days but judged purely on the numbers and on the explicit objective of attracting new investment, local and foreign, it’s not clear how much was achieved. The R290bn in new investment pledges included some exciting projects, in new-economy sectors as well as the old — Amazon’s cloud computing hub, Rain’s data network, Aspen’s anaesthetics plant, along with some big investments in mining, forestry and other sectors. But not that much was new. Most were projects already on the drawing board and many had already been announced. A good few were stay-inbusiness capital spending, rather than genuine expansion projects. And some may never happen.
Even assuming they all do, the private sector routinely invests about R550bn a year in productive assets, more than two-thirds of total investment in SA, so though R290bn over the next five years would be a meaningful boost, it wouldn’t shoot the lights out in terms of growth. But that doesn’t mean the conference won’t make a difference.
Showcasing what companies are doing is an important statement, especially when it’s Ramaphosa telling the story as part of a “new narrative” about the economy. It’s important, first, because almost all of these projects (and about 80% of the participants at the conference) were South African companies, or multinationals with a long-standing
South African presence. That makes a statement to the foreign direct investors who don’t see SA as an attractive long-term investment destination but might at least put it on their radar if locals are investing.
Crucially, however, Ramaphosa was talking not just to investors in the Sandton Convention Centre. Showcasing what the private sector is doing is also a way of driving home the point, to the populists or those pushing radical economic transformation or attacking corporate SA, that the private sector is the leading agent of job creation and growth — and must be welcomed and worked with.
“The investment strike is over,” Ramaphosa delighted as he totalled the pledges, while at the dinner he explicitly dismissed the “white monopoly capital” notion.
As important, he was talking to his own people inside government. As several participants noted, he made sure the key cabinet ministers were there and that they sat in the panel discussions. They had to answer in public to investors talking about the impediments government put in their way, but equally they had the chance to share in the feel-good factor and discover for themselves how keen business is to work with the government, if the government would work with business instead of being obstructionist.
Those in the Ramaphosa camp are beginning to realise just how much of a barrier to new investment is the state itself — not just the ever-expanding set of rules and regulations, or the corruption, but even more so the inefficiency, empire-building and obstructionism.
The conference was a learning experience in that sense — one official, for example, recounted how, in trying to facilitate a foreign investment project to get it pledge-ready for the conference, they discovered how much of a nightmare it is to get “equity equivalence” recognition under the BEE codes.
All the pledges and projects, and all the feel-good, will come to naught if Ramaphosa cannot start to fix the state of the state and get government and other political leaders to start buying into the growth project. Whether the conference will ultimately prove to have been a success could depend as much on how it played with those constituencies as on what it did for investor perceptions.
Ramaphosa’s camp is realising how much of a barrier the state is to new investment