Ramaphosa’s investment emissaries may find it tough going

IT HAS now been two months since Cyril Ramaphosa occupied the presidential seat and it would seem as though his desire to attempt a turnaround of the domestic economy is gaining momentum.

While the land expropriation debate awaits parliamentary dissection – and continues to cast a pall over regulatory certainty – Ramaphosa’s move to appoint four fixed investment ‘emissaries’ to trawl the world’s financial capitals in search of R1.2trn in fresh foreign direct investment is a step along a more macro-orientated path.

With Trevor Manuel, Mcebisi Jonas, Phumzile Langeni and Jacko Maree probing their way through New York, Zurich and Beijing, investors will be encouraged to find South Africa again. They will be promised security. They will be cajoled with the prospect of structural reforms.

Their fears of a populist policy drift will be placated.

But it is a pretty long crawl back for South Africa to be a really inviting destination. The domestic economy is in a somewhat tepid recovery. Even the IMF’s revised upwards projection for GDP growth this year to 1.5% is hardly exciting. And even more lacklustre was their projection for the outlying years between 2020 and 2023 at around 1.8%.

But as we have seen in recent months, GDP figures can surprise just as much on the downside as on the upside. And investors will be told that with a target of at least 5%, government is serious about the critical structural reforms needed – including the resurrection of a more capable state, together with a positive private sector and labour input towards policy formulation and unemployment alleviation.

While one can commend an initiative to scour the capital markets of the world, ultimately it will all boil down to the domestic performance of the economy based on meaningful policy shifts.

Investors will want to see more evidence of this rather than just rely on rhetoric. And the short-term political insecurities – and possible risks – evident in a more racially polarised, populist and increasingly hostile domestic environment make things a lot tougher.

It has also always been said that a foreign investor will only be likely to invest when he/she senses that local South Africans are equally enthused.

Indeed, the four eminent emissaries are also likely to extend their brief to fostering a greater degree of domestic commitment from South Africans who have long held their capital on the sidelines as a result of a variety of policy and political concerns.

The problem for the emissaries is largely political. They don’t quite have a mandate yet to extend guarantees on policy to potential investors. With the details around Ramaphosa’s presidential economic advisory panel and jobs summit yet to be confirmed, there is little meat on the bones thrown to desirable investors.

Beyond this, both the ANC and President Ramaphosa are in for a very volatile year leading to elections in 2019. With policy clarity remaining illusive, battle lines within the ruling party can spill over into public spats.

And as our politics gets even more robust week by week, global investors will be asking many questions about just what type of government the country will have by mid-2019.

These concerns are not confined to land expropriation.

Strike season is last thing SA needs

Issues surrounding the minimum wage and broader public sector wage negotiations threaten to turn nasty. The last thing the country needs is a renewed strike season or "winter of discontent" which can potentially scupper the attractiveness of the new Ramaphosa administration.

How Ramaphosa handles the plethora of wage negotiations within the context of a cash-strapped Treasury, with nervous bureaucrats to boot, will affect the domestic political milieu.

And if this is not enough, the early signs of business euphoria following the demise of the Zuma era have hit a reality check. After an initial uptick, ABSA’s Purchasing Managers' Index has recently dipped.

The same applies to Sacci’s Business Confidence Index. Although the currency has strengthened, global risk pressures may create some downside pressure in the months to come.

Coupled with higher oil prices and consumer pressures as a result of fuel levies and a VAT increase, the domestic economy is far from buoyant.

Add a slower agriculture sector into the mix and the threat of protectionist battles between the USA and China, and South Africa’s economy is vulnerable to all sorts of domestic and international strains.

Having expressed a more cautious view, this is also a time for Ramaphosa to capitalise on the broader goodwill and more positive sentiment towards his administration.

And therefore, a credible PR campaign for investment certainly cannot do any harm.

In fact, striking while the proverbial iron is hot is needed.

Still, South Africa is too much of a work in progress over the next year to elicit the type of massive investments we all would ideally want. It may just be that the emissaries return with promises of commitments, but that these are contingent upon the much-vaunted structural shifts needed to enhance our attractiveness. 

With the outcome of 2019’s elections more unpredictable than ever, investors will be looking for President Ramaphosa to come away with a strong mandate rather than a weak victory leaving him vulnerable not only on policy, but also in his role as leader.

Ramaphosa needs strong support at polls

They will be asking questions about the rise of populism and its effect on the political and economic discourse. Their reassurance might only come from a favourable political result for the Ramaphosa centrists at the ballot box next year. Now, that might be the real catalyst for renewed interest in our economy.

One positive going forward is the appointment of Trudi Makhaya as Ramaphosa's just-announced economic adviser.

Her public pronouncements on kickstarting policy interventions will be well received by both the domestic and global investor community.

Indeed, she presents a very different profile from those economic advisers who spent most of last year attached to the Malusi Gigaba tenure in office.

If this is an indication of more business-friendly and best-practice style shifts, the medium- to longer term attractiveness of the country will be enhanced.

Still, Ramaphosa's challenge will be to integrate a fresh approach with the somewhat stifling and often moribund existing ideological constraints within the ANC.

The real attractiveness of investing in South Africa will only bear fruit if he can achieve this.

  • Daniel Silke is director of the Political Futures Consultancy and is a noted keynote speaker and commentator. Views expressed are his own. Follow him on Twitter at @DanielSilke or visit his website.

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