SA is short of ‘bankable projects’

South African lenders have more than enough resources to meet President Cyril Ramaphosa’s efforts to bolster economic growth and lure more investment into the country. The challenge is finding bankable projects.

“From a banking perspective there’s plenty of capital and plenty of appetite for growth,” said James Formby, Rand Merchant Bank CEO. “The shortage is the projects and the opportunities to lend against.”

Ramaphosa pushed off his drive to attract $100 billion in new investments over the next five years into a higher gear on Friday at a conference in Johannesburg. Since announcing the programme in April, Ramaphosa has secured pledges from Saudi Arabia, China, the United Arab Emirates and Daimler AG’s Mercedes-Benz unit totalling $35.5 billion. Another $8 billion was pledged on Friday.

“Whether it’s a silver bullet or not, I think there are many things we are going to do inch-by-inch to get the economy moving. It’s a start,” Formby said.

With elections due next year and support for the ANC waning, Ramaphosa needs to show he is delivering on pledges to revive an economy mired in recession and create jobs for the 27% of the workforce that is unemployed.

“South Africans will be motivated to commit to projects they have probably been sitting on the fence on,” said Stephen Koseff, former CEO of Investec.

Ramaphosa’s administration has brought clarity to the mining laws and pledged to protect property rights as part of its land reform project, which gives investors comfort, he said.

“As you create policy certainty and you become a business enabler you will see the economy start growing. There’s no point growing at 3%. We have to grow at 5% or 6% to make a meaningful difference. That’s our challenge.”

Ramaphosa’s five-point economic stimulus and recovery plan announced in September hinges on rejigging spending, starting an infrastructure fund, improving the education and health sectors and investing in municipal social infrastructure.

Finance Minister Tito Mboweni plans to move around R32.4 billion of expenditure over the next three years to projects aimed at igniting growth.

Telecommunications and agriculture are other areas where “SA can certainly do more than it has”, said RMB’s Formby. Koseff also sees tourism as another way of stimulating the economy if the country creates a user-friendly tourism culture. – Bloomberg