Analyst warns of confidence loss in SA

Johannesburg - Increased strike action, union-led opposition to the R16.5bn Walmart’s takeover of Massmart Holdings [JSE:MSM] and calls for nationalisation of mines have painted a gloomy picture of South Africa as an investment destination, a UK-based analyst confirmed on Friday.

Tom Wilson, a senior analyst at London-based independent risk consultancy Control Risks, said investor confidence in one of South Africa’s major trading partners, the United Kingdom, had been “rattled”.

This could mean that South Africa’s foreign direct investment (FDI) this year could easily be ­shattered again, after dropping 70% last year.

Wilson told City Press the trend towards violent protest by communities and labour was perhaps one of the most concerning for international investors.

“This is how South Africa looks from London. It looks like these are real grievances with the failure of government. If unchecked, they could really scare investors away,” Wilson said.

But Patrick Craven, spokesperson for labour federation Cosatu, rejected this argument, saying workers’ demands were justified.

“We are a healthy democracy and government policy cannot be dictated to by the moods of international ­investors.

“Issues should be debated on their merits. It is a fact that South Africa’s workers are paid low wages,” Craven said.

Wilson said: “While deteriorating relations in the tripartite alliance... poverty and unemployment are fostering a radicalisation of organised labour, people (investors) forget that this is nothing new.”

This week, the United Nations Conference on Trade and Development report said South Africa’s share of FDI had sagged 70% last year from the previous year.

The country’s inflows fell to $1.6bn (about R11bn) which is a level amounting to only one-sixth of the peak recorded in South Africa in 2008.

South Africa came lagging behind Nigeria, Angola and Rwanda.

Wilson said South Africa was no longer the only reliable investment destination in sub-Saharan Africa.

“While there have always been extractive opportunities elsewhere on the continent, now infrastructure, ICT, construction and energy investment opportunities are also available,” Wilson said.

“Countries like Rwanda and Angola have shaken off a troubled past and been effective at courting new investment.”

But investors still saw great opportunities in South Africa and were willing to account for days lost due to strike action in their business plans.

In the past two weeks, South Africa saw wildcat strikes in the mining and petroleum sectors, bringing the country’s productivity to a standstill in some sectors.

“The problem will be if government fails to act now and we see a continued, protracted deterioration in labour relations for another three years,” he said.

This week, government’s attempt to attach conditions to the Walmart/Massmart deal was rejected by some businesspeople.

- City Press
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