Lower pledges for investment drive
The third investment conference was hit by the pandemic, but the president believes the country is on track for R1.2-trillion by 2022
The first inaugural Investment Conference in 2018 took place with the aim and prospect of boosting South Africa’s weak economy. Fast forward to 2020, and the third such conference happened virtually, in a pandemic, and not to further boost growth, but in order to help recover an economy that has been battered by mitigation measures put in place to curb Covid-19.
South Africa’s economy is forecast to contract by 10% this year, and the country’s unemployment rate is at an unprecedented high of 30.8%, but President Cyril Ramaphosa is adamant to rebuild the economy so that the country can rise up from the ashes like a phoenix.
In its first year, the conference managed to secure a whopping R290-billion in investments. During the second investment conference, commitments amounting to R363- billion were made. But this year, investors were not so giving. Pledges from at least 50 companies accumulated only to R109.6-billion.
This recent commitment brings overall investment in the last three years to R773.6-billion, which represents about 64% of the conference’s five-year target of R1.2-trillion worth of pledges by 2020.
Pledges came from various companies, but some were only furthering financial commitments made from previous years’ contributions. Naspers gave R45-million for the online learning platform The Student Hub. This is on track for the R4.6-billion investment commitment it made in the first investment conference to grow South Africa’s tech sector.
Telkom committed R8-billion in order to expand its infrastructure across the country. Sundale Dairy said it will contribute R101-million towards its cheese and dairy production in the Eastern Cape. Fuchs
Lubricants committed to give R260-million to expand its lubricants operation in Gauteng. Sasol is giving a minimum of R5.4-billion towards clean fuels at its Secunda plant in Mpumalanga. Food company Pepsico will give R5.5-billion to expand its manufacturing capacity across its Pioneer Food Group operations. Google is investing R2.2-billion in fibre-optic submarine cables in the Western Cape, which will provide high-speed internet connectivity across South Africa.
The list goes on, with pledges made in various sectors, including the information and communications technology sector, the automotive sector, property, hospitality, infrastructure and financial services.
Beyond the additional pledges, Ramaphosa said that this year’s conference will focus on the implementation of investment commitments that have already been made. The government has been tracking the actualisation of 102 projects that were announced in the previous conferences. He said at least R170-billion of the committed amount had been spent on projects to date. This translates to just over a quarter of the commitments made in 2018 and 2019.
“These projects alone portray an
economy with exciting opportunities for growth across a wide diversity of industries,” said Ramaphosa. The sector that has seen the most significant investment from these commitments is mining and mineral beneficiation, with just more than R63.6-billion spent to date.
So far, 19 investment projects from the past two years have been completed. Forty-four projects, representing 57% of the total investment commitment, are under construction. Another 12 projects are in the early stages of implementation.
This update accounts for developments since last year’s 31 projects announced by Ramaphosa. At that stage, eight projects were realised and 17 were in construction or at the implementation stage.
Those projects represented R238-billion of the investments that were announced in 2018.
To bolster the economy, last year
the president announced the establishment of 10 special economic zones in strategic locations around the country where investors were able to produce and export valueadded products.
This included a partnership between the department of trade and industry, the Gauteng provincial government, the City of Tshwane and the Ford Motor Company of Southern Africa.
According to Ford’s website, this project is still ongoing. The company said that the Covid-19 pandemic had delayed the project by several months, and also impacted the disbursement of the initial funds for clearing of the site and the commencement of the bulk infrastructure implementation.
But work was still being done to make sure the project materialises. This economic zone will create more than 8 700 jobs during the construction of the first phase of the project, with around 2 100 permanent jobs for operations.
Last year, the president announced the signing of master plans for the poultry sector. One of the plans, by poultry processing company Astral Foods, has reached commercial operation and new facilities are now expanding even further as part of these commitments.
Other master plans exist in the clothing, textiles and footwear sector. Ramaphosa said that these plans, together with the automotive sector plan, have resulted in real progress and reignited the growth prospects of these sectors.
In 2018, Ramaphosa initiated the release of the high-demand broadband spectrum, which is expected to bring down data costs and encourage investment. He said that a policy framework has been gazetted and the regulator has published its proposals. This project was supposed to be finalised this year, but it will now take place in March 2021.
Ramaphosa said that the completion of the allocation of high-demand spectrum will enable new investment in our telecommunications infrastructure and open the way for a digital economy.
Although some progress has been made, such as with the Ford Motor Company project, 21 projects, which represent about 10% of total commitments, have been delayed or are on hold as a result of the pandemic.
But independent economist Duma Gqubule says the conference is just smoke and mirrors. Answering a question about the decline in investment this year, Gqubule said: “We are declining by 9% this year. You cannot invest in an economy that is collapsing. It does not add up. Investment does not happen in a collapsing economy, so until we return to a positive growth trend, there won’t be investment.”
He said that Ramaphosa cannot be pleading for investment while the government investment is decreasing in line with its never-ending austerity budgets.
Lumkile Mondi, a senior lecturer at the school of economics and business science at the University of the Witwatersrand said that the outlook for South Africa is very bleak. Many investors are pledging despite the fact that they know nothing will happen in South Africa: “It’s going to be the same old stories of promises.”
But he said this sentiment would change if the government actually delivered on its promises and turned the economy around.
‘You cannot invest in an economy that is collapsing. It does not add up’