David Masondo emphasises the upsides as he woos US investors

Deputy finance minister David Masondo has appealed to investors to look beyond the immediate challenges facing SA, such as load-shedding, and to focus on the benefits that will stem from the economic reforms under way.

“SA has always rewarded those investors who see its potential. While many have predicted its demise over the years, it has proven them wrong every time,” Masondo said on Wednesday in a speech in New York at the  launch of Rand Merchant Bank’s US operation.

He said the government has embarked on a structural reform agenda “that is aimed at liberalising the network industries dominated by inefficient state-owned companies. This would contribute to economic growth.

“There are real domestic challenges and some are exacerbated by the global disruptions, but the steps we are taking will result in material improvements and vindicate the confidence of investors.”

Masondo conceded that SA is grappling with real challenges such as a weaker economic growth outlook this year and rising national debt.

“Despite these challenges, we remain committed to a prudent monetary and fiscal policy framework. We are on track to narrow the budget deficit, produce a primary budget surplus and stabilise our debt in the coming years. This means that we cannot turn to monetary policy, which is constrained due to high inflation, or to fiscal stimulus to fuel economic growth.

“As we implement this strategy, we are clear that achieving price stability in an environment of high inflation involves short-term trade-offs. But it is necessary to firmly anchor inflation expectations and ensure lower interest rates and higher economic growth in the longer run.

“While higher interest rates have implications for sovereign debt service costs, very high inflation is bad for growth and public revenue. It is thus critical that the right balance is struck to support the economic recovery in the short to medium term. This highlights the importance of co-ordination between fiscal and monetary policy in this challenging economic environment. This has been and continues to be a key part of our macroeconomic framework.”

Masondo said the government, through its economic reform programme Operation Vulindlela, is driving a “far-reaching reform agenda to modernise and transform SA’s economy. A key objective of the programme is to liberalise and enable private sector participation in network industries which had historically been dominated by state-owned monopolies like Eskom or Transnet.”

He was confident the severity and frequency of load-shedding would be reduced by the end of the year.

“In the logistics sector, we are implementing reforms to open access to the freight rail network, so that private rail operators can compete with Transnet. This includes establishing an independent infrastructure manager, which we expect to be in place by October this year, to maintain the network and provide access to public and private operators.

“Transnet is also partnering with international terminal operators at our two largest container terminals in the ports of Durban and Ngqura, which will crowd in private investment and management expertise to bring our ports up to world-class standards. Reforms in the telecommunications sector aim to increase network speed and quality, expand broadband access and reduce costs.”

A visa regime to attract skilled immigration will be introduced which will include a points-based system for skilled applicants and a trusted employer scheme to make it easier for companies to recruit the talent they need and to establish regional offices in SA.

“These structural reforms will propel economic growth over the next decade, with significant upside for investors,” Masondo said.

He did not expect the greylisting of SA by the Financial Action Task Force to have a significant effect on the country’s financial stability and the cost of doing business.

The deputy minister repeated SA’s non-aligned stance on the Russia/Ukraine conflict and the government’s position on the alleged loading of arms and ammunition onto the Russian ship Lady R.

“We have seen the negative impact that this allegation has had on our currency and bond market. While the US dollar strength (resulting from robust economic performance, favourable interest rates and slowing inflation) has contributed to some weakness in the rand/dollar exchange rate, the uncertainty caused by this matter has exacerbated this. Therefore, it is crucial that we urgently close the matter to ensure certainty in the market,” he said.

ensorl@businesslive.co.za