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Yesterday South Africa hosted an investment summit, aimed at luring investments into the South African economy to assist in reviving South Africa's economic growth and to reduce South Africa's stubbornly high unemployment rate which is hovering around 27%.
The summit was announced a while ago by President Cyril Ramaphosa. And it follows hot on the heels of the "Jobs summit", which we covered too. |
Caricature of President Cyril Ramaphosa
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Bloomberg summary of investment summit
According to reports from Bloomberg, various companies pledged investments in South Africa. Bloomberg reported the following "With elections due to take place next year, Ramaphosa needs to show he’s delivering on pledges to revive an economy mired in recession and create jobs for the 27 percent of the workforce that’s unemployed. Since announcing the investment drive in April, China, the U.K., the U.A.E., Saudi Arabia and Daimler AG’s Mercedes-Benz unit have pledged $35.5 billion. Companies pledged to invest almost $20 billion on Friday, including a $6 billion commitment from Anglo American Plc, although not all that money is new and some of it will come from state institutions.
“We are making enormous progress,” Ramaphosa said in an interview with Bloomberg Television at the investment conference in Johannesburg, which attracted more than 1,000 delegates. “I think we are ahead of the track, we are way ahead, and I am overwhelmed by the level of interest in the South African economy.” The summit comes two days after Finance Minister Tito Mboweni unveiled a mid-term budget that slashed economic-growth forecasts and showed government debt peaking later and at higher levels than previously anticipated. The gloomy outlook triggered a sell-off in the rand and the nation’s bonds, and raised fears the country could lose its sole investment-grade credit rating from Moody’s Investors Service.
‘Winning Path’“After this, things get better because we know we are able to wrap our arms around what needs to be done,” said Ramaphosa, who expressed confidence that another ratings downgrade could be avoided. “We are repositioning our economy and beyond this, I am confident that we will have done a pretty good job to put South Africa on a winning path once again.”
Ramaphosa, a 65-year-old lawyer and former labor-union leader, took office in February, after the ruling party forced Jacob Zuma to step down following an almost nine-year tenure that was marred by scandal, policy missteps and inappropriate appointments. “We now know how serious and how deep the problem was,” Ramaphosa said. “We now know what needs to be corrected. We now know the type of skills that we need and the type of people that we have to put in place to repair the damage that has been done in the past nine years, and it is huge damage, but we are repairing it.”
The original article from Bloomberg can be found here
“We are making enormous progress,” Ramaphosa said in an interview with Bloomberg Television at the investment conference in Johannesburg, which attracted more than 1,000 delegates. “I think we are ahead of the track, we are way ahead, and I am overwhelmed by the level of interest in the South African economy.” The summit comes two days after Finance Minister Tito Mboweni unveiled a mid-term budget that slashed economic-growth forecasts and showed government debt peaking later and at higher levels than previously anticipated. The gloomy outlook triggered a sell-off in the rand and the nation’s bonds, and raised fears the country could lose its sole investment-grade credit rating from Moody’s Investors Service.
‘Winning Path’“After this, things get better because we know we are able to wrap our arms around what needs to be done,” said Ramaphosa, who expressed confidence that another ratings downgrade could be avoided. “We are repositioning our economy and beyond this, I am confident that we will have done a pretty good job to put South Africa on a winning path once again.”
Ramaphosa, a 65-year-old lawyer and former labor-union leader, took office in February, after the ruling party forced Jacob Zuma to step down following an almost nine-year tenure that was marred by scandal, policy missteps and inappropriate appointments. “We now know how serious and how deep the problem was,” Ramaphosa said. “We now know what needs to be corrected. We now know the type of skills that we need and the type of people that we have to put in place to repair the damage that has been done in the past nine years, and it is huge damage, but we are repairing it.”
The original article from Bloomberg can be found here
Now while it all sounds very positive, the fact is South Africa needs a lot more to get the economy that has been spinning wheels for years to gain any form of traction and to get positive momentum going. While it will help, SA's economy needs a massive kick start to get it heading in the right direction and to keep the momentum going. Political instability, poor policies (think expropriation of land without compensation), inefficient and ineffective government spending, high corporate taxes, restrictive labour laws, unreliable power grid (thanks ESKOM), corruption in government are all factors that are keeping potential investors at by, and these issues are not resolved over night, and to resolve them requires strong political will and leadership, and before the elections in 2019, we cant see the ruling party implementing any policies or make any changes that will be interpreted by the poor or populists as negative for the poor (i.e letting go of the whole expropriation without compensation policy). So we do believe the Jobs and Investment summit hosted by government is just window dressing. They doing these things to show business they are trying to do things to stimulate the economy, but at the same time not upsetting the populist part of South Africa by doing away with some of the policies actually keeping business away. And this will get South Africa's economy nowhere. We need to see real changes in economic policy and proper implementation thereof. Otherwise in 5 years time we will be sitting in the exact same position while other Sub-saharan economies are steaming ahead.