The president addressing the media and public at the Investment Conference Photo FoodForMzansi
South Africa – According to President Cyril Ramaphosa the country attracted R1.51 trillion of new investment pledges over the past five years. This is 26% more than the target which was set in 2018. While the figures of investment are high, it is up to South Africa to now use it correctly.
In the past four years R263 billion has been invested in infrastructure development in South Africa. However, on the ground level, it is hard to see exactly where that money has been invested, said economist, Reezwana Sumad. In fact, one can argue that infrastructure has actually deteriorated which is why it is hard to see how this investment will benefit South Africa.
“It is very difficult to say how this R1.5 trillion will drive improvement in infrastructure and broad development and growth in South Africa over the next five years given that GDP has actually gone the opposite way. So it’s not simple to say whether the increases in the pledges will actually result in better job creation or more growth in the next five years.”
In an ideal world these investments will be used correctly
In the perfect world the pledges made by Hive Energy (R105 billion), Vodacom (R60 billion) and New Development Bank (R25.9 billion) will be used to benefit the country. However, South Africa is not an ideal world and these funds are not always used as they are intended to.
“In South Africa what we are faced with is a crumbling ageing public sector infrastructure but even worse is the criminality that private businesses have had to face in the last few years. It has gotten worse. So we don’t think that all of those commitments will actually flow from a fund perspective and from a business expansion perspective over the next five years. Purely because of the challenges that the country has and in terms of addressing these.”
The reason for the R1.51 trillion investment
Attracting R1.51 trillion in investments is not an easy task especially given the current situation South Africa is in. Facing high levels of criminality and loadshedding, we have still managed to gain investments due to a few strong selling points.
“South Africa has a couple of strengths. One being our very deep and liquid financial market. They have a very strong banking system and an excellent Reserve Bank and even from our fiscal policy perspective. We have a relatively strong judiciary related to the rest of Africa. Those are where some of our key strengths are.”
South Africa is also seen as a gateway to the rest of Africa given how underdeveloped the rest of Africa is.
While these investments are a step in the right direction, South Africa is well behind their rate for fixed capital investment in terms of GDP. The target was to reach 30% of GDP in terms of investment by 2030, South Africa is currently 17%. For the current emerging number, that should be around 25%, said Sumad. What we can take hope from is that businesses are no longer alone in growing themselves. Government has taken a stance to help businesses along which could see more businesses grow, open up and increase investment in the country.
To hear more from Reezwana Sumad about the investment conference, listen to the podcast here:
