Making SA an attractive Investment destination
This past weekend, former president Kgalema Motlanthe and the former first lady Gugu Motlanthe, hosted the Drakensberg Inclusive Forum, which is annually championed by the Kgalema Motlanthe foundation.
Dubbed “dialogue among equals”, the forum brings together stakeholders from the private and public sector, academia and civil society. With close to 200 invited delegates, the forum serves as a think-tank among these key stakeholders to identify, diagnose and provide solutions to the problems that South Africa faces.
Some of the key topical areas discussed relate to energy security, the dysfunctional state of local government - exacerbated by the lack of proper coalition frameworks, the quality of education and the importance of skills development, as well as trade and industry. It would be difficult for me to exhaust all these topics on this platform, but the key area I will focus on is trade and commerce, which was the area that I was greatly honoured to Chair the discussions on.
As the MTN chairperson and former deputy minister of finance, Mcebisi Jonas, put it, “bad politics is bad for the economy”. South Africa’s economy faces challenges caused by persistent load shedding and rand volatility despite a better gross domestic product outcome experienced in quarter two.
Slowdowns in a key trade partner like China, the euro zone and US are also affecting exports. This is exacerbated by the port and rail challenges faced in the country. South Africa is heavily reliant on rail infrastructure to transport goods efficiently from Gauteng outwards to other provinces and the coast for export.
The Durban-Johannesburg corridor, which is vital to the economy, has been operating at only about 30% capacity so far in 2023, resulting in billions of rands lost. In 2010, rail passengers completed more than 500 million journeys. This number has since declined to just more than 19 million in 2022.
Is the private sector the solution to all these problems? The answer could be affirmative or negative, as many voiced during the session. Some argued that these institutions have been working, and the main issue is the people deployed to run these institutions.
Others argue that with the ever-changing micro and macro environment, a mixed model of a private and public sector partnership could be feasible and more viable in the long-run.
A case in point was the recent bid awarded to DP World (a private sector company) by the government of Tanzania to run its Dar es Salaam port, where DP World will be committing $250 million (R4.7 billion) to upgrade port facilities, in which during the concession period, the investment could potentially increase to $1bn.
The benefits this would bring to the Tanzanian government and its people include the tripling of its revenue in the next decade to $10.7bn, significantly reducing congestion and average vessel stay from five days to 24 hours, streamlining clearing times from 12 hours to 60 minutes; enhancing Dar es Salaam’s competitiveness as a trade hub in the region - positioning it against the likes of Mombasa and Durban to serve as a gateway for countries, such as Malawi, Zambia, Burundi and Zimbabwe.
Just as Finance Minister Enoch Godongwana echoed at the forum, “for South Africa to remain competitive, it has to reduce its debt”. He maintained that it is not sustainable that every rand South Africa collects, 18 cents goes to servicing debt. He cautioned that South Africa also needs to manage its public sector wage.
According to the Global Infrastructure Hub, the financing gap in South Africa is projected to reach R3trillion by 2040.The greatest opportunity lies in exploiting private sector participation in public infrastructure delivery through public-private partnerships.
To remain a competitive destination South Africa must cut expenditure, invest in infrastructure, have structural reforms in the areas of electricity and logistics, fight crime in order to boost tourism, and build state capacity to deliver services, while supporting the growth of micro and small enterprises.
As Trade, Industry and Competition Minister Ebrahim Patel said at the forum, “We’ve experienced many shocks as an economy, but with these, also come many opportunities which have to be leveraged,”
But all these cannot be achieved without the necessary reforms needed to propel the economy to greater heights.
Kizito Okechukwu is the Executive Head of 22 On Sloane, Africa’s largest startup campus and the co-Chair of the Global Entrepreneurship Network (GEN) Africa.
BUSINESS REPORT