Foreign and local investors have a strong appetite for investing in South Africa, with more than 50 companies having pledged new investments to accelerate economic reconstruction and recovery
“The South African Government will need to play a key role in ensuring the country is an attractive investment destination through building trust with potential investees.”
The COVID-19 pandemic has had a major impact on investment in South Africa, with both government and companies being forced to reconsider their current operating models. Prior to the pandemic, the South African government was already dealing with systemic challenges, including massive unemployment, and increasing levels of inequality. These challenges have now been exacerbated with business confidence, which is key to employment, at its lowest levels in 15 years, and the major rating agencies downgrading South Africa to below investment grade.
At the third SA Investment Conference, which took place in November 2020, more than 50 companies pledged new investments to accelerate economic reconstruction and recovery and build on the successes of investment attraction. Government is on a drive to attract more than R1.2-trillion over the next five years, with companies already pledging R664-billion in 2018 and 2019. The key struggle for the government is the materialisation of the pledges and ensuring that investment in the country actually takes place. The key takeaway from this event, which was hosted virtually, is that foreign and local investors still have a strong appetite for investing in South Africa.
In the recent State of the Nation Address, President Cyril Ramaphosa highlighted initiatives of the state’s Reconstruction and Recovery Plan, which was initially tabled in October 2020 and includes infrastructure plans and an employment drive. There has been a drive to ensure that sectors in the South African economy such as mining, agriculture and services are key pillars for investment by government and companies. ”All social partners who participated in the development of the Economic Reconstruction and Recovery Plan as part of our social compact have agreed to work together to reduce our reliance on imports by 20% over the next five years,” said the President.
The above illustrates the government’s commitment to bolster the country’s economic growth through investment in key sectors, in partnership with companies that have pledged to invest. The state of the country’s public finances is a key factor in attracting foreign investment. Correlation analysis has shown that foreign direct investment is highly correlated with the indicator ‘quality of governance’. Trust in government and its institutions, by businesses and citizens, is, therefore, an essential prerequisite for creating an environment that is conducive to investment and the economic inclusion of the majority of South Africans.
It is evident then that even during a global pandemic South Africa is open for business and seeking investment, not only from local companies but also foreign direct investment. The South African government will need to play a key role in ensuring that the country is an attractive investment destination through the building of trust with potential investees. As one of the most developed African countries, South Africa is still considered to be the destination for many foreign investors because of its advanced services and rich minerals sectors. Hopefully, implementation of the Reconstruction and Recovery Plan will take place and the plan will be a success, compared to all the other economic plans of government that have barely gotten off the ground.