How to attract investment billions to SA

Focal points, on how to tackle SA’s economic woes (especially the toxic unemployment, inequality and poverty trio that seems here to stay) keep changing like the seasons. But there has been no resolution or fundamental change let alone progress.

It’s been about small, medium-size and micro enterprises (SMMEs), prescribed assets, social support and retirement funding structures lots of ideas, lots of PowerPoint presentations, little measurable implementation, no capital inflows. “There is no money,” is the tired refrain.

There’s always money. The solutions lie in infrastructure investment initiatives like the National Development Plan, and similar capital investment ambitions. But they require capital, and it’s not coming here.

If anything, we’re experiencing international investor sales of our government bonds, despite their attractive yields.

There is a lack of confidence and trust locally and internationally, and yet there’s unquestionable vested interest, particularly on the part of taxpaying corporations and individuals. I have no doubt that there are many significant capital projects that can stand on their own merits financially (as Eskom once did), capable of attracting direct, long-term investment capital.

I’m talking project-specific capital, not capital poured into a central pool of discretionary allocation. If anything, central control is a deterrent, even at municipal level, an issue that will have to be circumvented, initially at least, to cross the confidence and trust divides. I doubt many municipalities could raise any capital on their own, no matter how attractive or necessary their projects may be but the actual projects themselves could.

Central government has a vital role to play, and this is not a suggestion that it step aside. It will be required to enable, approve, license, regulate (as is sometimes necessary), encourage and prioritise, but not to intervene beyond that, not until confidence in execution and trust can be restored. The mix can and will change once a successful track record has been established, but not before.

Tax incentives can and should be a big part of the funding solution, for the privatesector contribution. Let’s go way beyond incentives. Our challenges are extraordinary and specific. New thinking is required. What if taxpayers were given the option of investing their taxes (other than VAT) directly into approved infrastructure projects, instead of paying that money to the SA Revenue Service? If ever there was the making of a meaningful public-private partnership, this could be its foundation. The alignment would be overwhelming common cause for the first time since the 2010 Soccer World Cup.

Qualifying projects would have to be approved by the state, to cater for factors beyond just economic viability, and include being in the common good, creating employment and delivering an acceptable level of essential services at an affordable price to the broad population. Government funding would also be required to be part of the mix.

Private-sector capital could see to the rest of the (commercial) selection criteria, as it does normally where the tests, hurdle rates and risk equations are well known. Competent management with specific, evidenced experience and capacity, supply and demand being in equilibrium obvious stuff that’s found in the DNA of business. The cost of capital will plummet.

With local capital already (and enthusiastically) invested, foreign capital will be unstoppable. It will pour in, from the sidelines where it has been waiting for so long for us to come together as a united power-economic force. Where else would you want to invest in these circumstances? What other country has the natural resources and eager, if not desperate, unemployed resources?

Imagine the multiplier effects. Imagine GDP growth way in excess of population growth. Imagine the cultural effect of a universal prospect of economic dignity. Imagine the extra taxes. Business as usual won’t cut it, no matter the promises, no matter who wins what on November 1.

We can do it. It can happen. SA is an investable destination. Don’t be persuaded otherwise.