Picture: GCIS
By Prof Bonke Dumisa
When President Cyril Matamela Ramaphosa assumed office as the president of the Republic of South Africa in 2018, one of the areas he prioritised for his flagship projects was to launch the South African Investment Conference for South African investors as well as global investors to annually meet and make pledges on how much they commit themselves to invest in the South African economy.
So enthusiastic were the organisers of this investment conference that they set a very ambitious investment drive to attract at least R1.2 trillion over a period of five years. Little did they know at that time that the whole world, including South Africa, was going to be plunged into at least almost two years of economic disruptions and lockdowns due to the unforeseen Covid-19 pandemic.
On April 13, the 5th South African Investment Conference will be held at the Sandton Convention Centre, which will mark the final leg of this R1.2 trillion investment drive. The good news is that, despite the two years of Covid-19 business disruptions and lockdowns, this investment initiative has been able to raise at least R1.14 trillion since 2018, which represents a 95% success rate on the R1.2 trillion investment target.
Last year when the country was still barely out of the Covid-19 pandemic, the 4th investment conference was held where at least R367 billion investments were pledged. This means these investment conferences have been able to raise an average of at least R290bn per year since 2018, not including the year(s) when the investment conference was not held due to the stringent Covid-19 pandemic restrictions on meetings.
The year 2023 has a different type of pandemic: Eskom’s load shedding, which has become so intense in ravaging businesses, especially since last year, is estimated to have already cost the South African gross domestic product (GDP) at least 20% per year over the past two years; and it is getting worse by the day. It is against this background that some sceptics are wondering if this year’s investment conference will yield any possible positive results.
My answer is yes, this year’s investment conference will be successful despite all the prevailing economic gloom and doom being predicted, including the wild speculations that the country may even face the possibility of a total collapse of the Eskom systems. You must remember that we just need only R60bn more in order to achieve the R1.2 trillion investment target. What is R60bn when we were able to raise at least R367bn last year when we were still limping from Covid-19 lockdown conditions?
What is more encouraging about the nature of the South African Investment Conference (SAIC) investment pledges is that it is not necessarily confined to new green-fields investments, it also includes business expansions and other business growth strategies. It was in this spirit that in my last article on this topic I wrote about the impressive business expansions of well-established companies like South African Breweries, Toyota South Africa, the Ford Motor Corporation, and others.
While the South African real GDP growth rate is expected to even contract by 0.1% in 2023, mainly due to Eskom’s load shedding, the country’s gross fixed capital formation is predicted at least at R664bn by the end of the first quarter of 2023. These figures clearly indicate that the economic hard times predicted for 2023 do not equate to significantly lower investments compared to sizeable investments achieved in previous years under severe Covid-19 pandemic business conditions.
Most businesses usually choose the periods of economic downturn to repurpose and reposition themselves. The many tax-deductible incentives offered by the government, as announced at the last annual Budget speech 2023, will encourage most businesses to partially move to less Eskom power reliance, and move to more alternative energy sources. This becomes a good opportunity for both global and domestic investors to invest more in this area. For example, the Western Cape provincial government has already announced that it will be significantly moving away from reliance on the Eskom grid, specifically to cut down on the incidents of load shedding. This presents an excellent investment opportunity for those global and domestic investors who are not wary of the public-private business partnerships.
Some of the economic sectors that previously significantly benefited from such SAIC pledges include mining, manufacturing, agriculture, and the digital economy. The serious damage to the South African economy and the significant increase in the unemployment rates in South Africa create an opportunity for smart investors to see how they can strategically introduce some import-substitution investments that will not be prone to our sometimes very hostile and less productive industrial labour relations, which are part of the reasons why many South African manufactured products have been mostly replaced by imported substitutes.
Expect far more than R60bn worth of bankable investments pledges at the SAIC on April 13.
*Prof. Bonke Dumisa is an independent economic analyst