Why is South Africa an appealing destination for investors?

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By Thandi Tobias

Any nation that dreams of building a fast-growing, employment-generating economy must be attractive to investors.

 

Having identified this important pre-condition for economic growth and wealth creation, President Cyril Ramaphosa launched an investment drive in 2018 to attract R1.2 trillion over a five-year period into the South African economy.

 

To get this ambitious campaign off the ground, the President appointed a team of special envoys to promote our country as an investment destination and followed this up by hosting the inaugural South African Investment Conference (SAIC) to expose investors to opportunities in our economy.

 

Since the successful inaugural SAIC in 2018, South Africa has hosted three conferences and the fourth instalment will be held on 24 March this year in Johannesburg. At the 3rd Investment Conference in 2020, pledges of about R774 billion had been made, moving our country closer to the President’s magic target of R1.2 trillion.

 

SAIC aims to unlock investments to drive growth and job creation and since its inception it has yielded positive economic and job creation impact.

 

As of February 2022, about R314 billion or 40,6% of the investment pledges have been expended. The percentage of expended pledges could have been far higher had it not been for the covid-19 pandemic, which delayed or slowed some of the planned projects.

 

A total of 45 projects have already been rolled out and production has started including investments by pharmaceutical company Aspen and automakers Toyota and Mercedes Benz, to name a few. Aspen has provided Africa with covid-19 vaccine manufacturing capability (for the J&J vaccine) with an estimated 160 million doses that have been produced in South Africa.

 

However, we expect the pace to pick up as government makes progress in implementing the Economic Reconstruction and Recovery Plan (ERRP), which aims to drive infrastructure development, industrial growth, structural reforms, thereby laying the foundation for investment and employment expansion.

 

The structural reforms the government has been undertaking are aimed at drastically improving South Africa’s competitiveness and reducing the cost of doing business, particularly input and logistics costs related to energy, water, telecommunications, ports, and rail.

 

Many investors are probably asking themselves why should they invest in South Africa? Before answering this broad question, I must preface my answer with putting forward three more questions that influence the decisions of investors on whether to take an investment bet on a country.

 

  1. Does a country have a large or fast-growing domestic market to sell goods and services to?
  2. Can the country serve as a springboard from which to export to international markets?
  3. Does the country have a comparative advantage that can be exploited such as abundance of natural resources, arable land for farming, or attractive tourism destinations?

The answer to these questions will be the basis of why investors must come invest in South Africa?

 

In response to:

Question 1;

South Africa is the largest, diversified economy in Africa, accounting for 16% of the continent’s gross domestic product (GDP). It is also home to the Johannesburg Stock Exchange (JSE), the largest stock market in the continent and one of the world’s top 20 exchanges with a market capitalisation of $1.3 trillion. Our country’s economy has rebounded strongly from the negative impact of the covid-19 pandemic and is projected to grow 4.9% in 2021, reversing a 6.4% slump in 2020. To top it all, the country has a population of over 60 million people and a growing middle class.

 

Question 2;

South Africa has over a long period established itself as a location for multi-nationals seeking to spread their tentacles across Africa, taking advantage of our country’s skilled workforce and world-class financial and logistics infrastructure. In addition, the JSE enables companies to raise capital to grow their local and African footprints while investors get exposure to these companies.

 

South Africa’s excellent skills base came into sharp focus last year when it was selected as the winner of the Most Favoured Offshore CX Delivery Location in the Annual Front Office BPO Omnibus Survey.

 

This accolade recognised our country as the top global location for business process services, which encompass call centres, technical support, and back and front office services. In this competition, South Africa was ranked ahead of India, Philippines, Malaysia, Poland, Egypt, and Northern Ireland, claiming the number one spot for the first time.

 

Furthermore, our country has access to global markets, thanks to its strategic trade agreements that give companies preferential access to the European Union (EU) through the EU-SADC Free Trade Agreement and the US market through the Africa Growth and Opportunity Act (AGOA). South Africa is gearing up to benefit from the recently launched African Continental Free Trade Area (AfCFTA), which gives companies access to a market of more than 1 billion people and GDP of $2.2 trillion. These trade agreements have made our country to be one of the most open economies in the world, with imports and exports accounting for more than 58% of GDP.

 

Question 3;

In relation to the third question about South Africa’s comparative advantage, our country is renowned for its abundance of natural resources and has deposits of gold, diamonds, platinum, manganese, copper, coal, uranium, iron ore, silver, titanium, and moderate reserves of natural gas. When it comes to agriculture, we produce a variety of crops ranging from maize, wheat, sugarcane, sunflower, to groundnuts, potatoes, citrus, and grapes.

 

After exploring the three questions, it goes without saying that South Africa is an attractive investment destination that has a potential to give investors sustainable, long-term returns.

 

A lot of work still needs to be done to boost economic growth and President Ramaphosa is alive to this reality. In his State of the Nation Address last month, he appointed business stalwart Mr Sipho Nkosi to lead a team within the Presidency to identify investment bottlenecks and cut red tape to unlock investment into our economy.

 

Mr Nkosi’s team will be instrumental in removing impediments to business growth such as unreliable electricity supply, inefficient network industries, and rising cost of doing business.

 

In conclusion, Brand South Africa fully supports the President’s endeavours to grow the African economy and we are confident that the structural reforms that are underway will put our economy on a strong growth trajectory and bring much needed investment to our country.

 

Ms Thandi Tobias is the Chairperson of Brand South Africa