Business Leadership South Africa CEO Busi Mavuso
A recent uptick in the frequency of meetings between foreign companies and relevant government departments was encouraging because such meetings typically preceded investment in the country, Business Leadership South Africa CEO Busi Mavuso said in her weekly newsletter on April 11.
She said that foreign companies keen on investing in South Africa have typically done comprehensive research into the culture, the history, the legal frameworks and the sociopolitical climate.
“Many make the point that they understand our history and the need for particular policies to redress past injustices. They accept it as part of investing in South Africa and, of course, are already positive about the country because they are here looking to invest,” she added.
Mavuso noted, however, that policy uncertainty remained the biggest point of concern for potential investors. The “heavy-handed bureaucratic requirements” detract from investor confidence and make investment more challenging.
“They have to consider, among numerous other systemic inefficiencies, operating with an unstable electricity supply. The July [2021] unrest is also on their minds, as is corruption,” she lamented.
Mavuso said that, while efforts were being made to address various challenges faced by the country, little progress was being made in terms of improving the country’s poor education system and rigid labour market legislation. She said these two problematic areas were damaging to South Africa’s economic growth prospects.
She noted, on the positive side, that South Africa could be proud of its strong democracy and an independent judiciary, which has withstood the pressures placed on it during and after the State capture era, including numerous attacks on its independence by those implicated.
“More recently, the judiciary has been attacked for more onerous, political purposes and we assure the investors that it will stand firm,” Mavuso said.
She also praised South Africa’s prized freedom of speech and robust media, as well as the strong civil society that held government to account.
“In terms of investments, returns can often be far greater than developed and many developing economies. While the risk here is high, we have many advantages over other developing markets, including a highly efficient private sector with sophisticated financial markets,” Mavuso said.
She also highlighted the country’s important gains in terms of reforms, which she called “substantial”.
“The licensing threshold for embedded generation projects was lifted from 1 MW to 100 MW; the spectrum auction has been completed; a unit within the Presidency aims to cut red tape across all government entities; and [State-owned] Transnet has carved out the National Ports Authority as a separate entity and will soon provide third-party access to its freight rail network,” she listed.
However, Mavuso said she feared discussions on a “new social compact” at the National Economic Development and Labour Council, as a new set of commitments may only serve to deflect attention from the important reforms and the R1-trillion infrastructure programme set out in the Economic Reconstruction and Recovery Plan.