SURE KAMHUNGA: Ramaphosa needs to sow the seeds of the future

President Cyril Ramaphosa hosts his fifth international investment conference later in the week to drum up support for his drive to create jobs, boost SA’s competitiveness and demonstrate the country’s economic potential.

Ramaphosa is basing the investment drive on his “New Dawn” campaign promise that his administration is a departure from the past of policy and regulatory uncertainty. Investors have responded with enthusiasm to the previous four investment conferences, with much publicised announcements of intentions to invest.

The president has promised a more transparent, favourable, supportive and accommodating policy and regulatory environment. He rightly recognises that SA has yet to make a dent on poverty and unemployment that are among the highest in the world and remain a legacy of the apartheid era.

He famously referred to the previous administration’s tenure as “nine wasted years”, an embarrassing but necessary admission of policy, political and economic failure by the governing party.

After Ramaphosa's inauguration, organised business saw a glimmer of light in someone who appeared to understand their language; someone who had the courage to embrace private sector initiatives to reverse the economic and social inequalities of apartheid.

From optimism to angst

But that optimism and nascent support has been replaced steadily by angst and disappointment as the promises of a new dawn have failed to materialise. The government has been successful at consulting and engagement, but it has failed abysmally to speedily respond to business concerns, and adopt and implement policy decisions.

Organisations such as Business Leadership SA (BLSA), Business Unity SA (Busa) and the Consumer Goods Council of SA (CGCSA) gave their support to the government’s investment initiatives and offered assistance to promote SA as an investment destination. They even offered technical support to ensure the country attracts big investments.

The past four investment conferences have seen a flurry of announcements by both local and foreign companies, though most have have been reinvestment and expansion plans rather than new projects. Whether it is investing in existing businesses or new businesses is not really important. More interesting is how many direct jobs have been created, and especially in which industries and geographic locations.

Expanding an existing business without incremental employment opportunities is vastly different from creating additional jobs or starting a greenfield business that creates hundreds or thousands of jobs. What's required is an inventory of how many jobs were created as a result of the investments announced at conferences and, equally importantly, how many of those investments were new.

A company announcing plans to expand an existing business without additional job creation isn’t  necessarily be a celebratory event. SA needs new investment that creates jobs and helps reduce one of the world’s highest unemployment rates, especially among those aged under 25.

Investors on strike

We can’t hide from the reality that there is an investor strike in SA. By some estimates there is more than R1-trillion in cash and near cash reserves available for investment, but corporates would rather have idle balance sheets than use shareholder funds to speculate on new investments whose returns are uncertain. This is an opportunity cost the country cannot afford, especially when faced with a potentially restive unemployed population of more than 9-million educated young people. 

As Ramaphosa welcomes local and international investors on April 13 he has the unenviable task of assuring them that SA is a compelling investment destination despite the electricity crisis, poor and declining infrastructure, crime and poor public sector response to structural reforms.

Yet SA is Africa's most industrialised and sophisticated economy, and it one of the best-regulated financial markets among emerging economies. It is also one of the top 10 minerals producers globally, has vast tourism facilities, a strong agricultural sector and cash-flush corporates with balance sheets that have little or no debt. It also has a young educated population that can be upskilled to provide labour in various industries, from construction to mining, manufacturing, retail and services.

Low-hanging fruit

Those are the low-hanging fruit, while the deregulation of the electricity sector is going to spawn a wave of private sector and household investment in renewable and solar energy. Already SA’s just energy transition (JET) has received pledges of $8.5bn to kick-start the country’s gradual transition from fossil fuels to renewable energy sources.

The government has also opened opportunities for private sector investment and involvement in supporting Transnet, which domestic and export markets depend on for transport and logistics. In the telecommunications sector, the auction of more bandwidth spectrum will increase investment, significantly reducing data costs and increasing internet access, to the benefit of the SME sector and opening a market for fintech.

There is opportunity for accelerated public-private sector participation in infrastructure projects on a build-own-transfer model, particularly in roads and water. Private sector participation in assisting dysfunctional municipal authorities is another opportunity to explore.

In conclusion, SA is a compelling investment destination and has the potential to catapult itself past Nigeria and Egypt and reclaim its position as the continent’s biggest economy. Moreover, the African Continental Free Trade Area (AfCFTA) further enhances the opportunities for SA to leverage its competitive advantage. The country remains the gateway to regional and global markets, and the most attractive destination for capital and investments.

Ramaphosa has an opportunity to secure his legacy as the president who translated the hope of the legion of unemployed and more than 30-million people who live in poverty into a life of prosperity and success. It is a legacy worth fighting for. But intent must be translated into action.

• Kamhunga is a former financial journalist now working in corporate communications.