GHALEB CACHALIA: No parties are getting granular about investment

It’s common cause across the huge spectrum of parties contesting May’s elections that there is a need for inward investment for growth to dent unemployment and more. So, what are the preconditions to attract investment?

First, you don’t have to be Einstein to understand that it needs to provide a reasonable return, which must be better (risk versus payback) than other locations. Also, the return may be multidimensional. Of course it is primarily focused on monetary value, but maybe there are other aspects in the utility function of potential investors, and if so we must leverage that.

These could include investing in a “rainbow nation”; being part of an important  historical experiment; or extra benefits such as residence permits and residency in a great landscape and among cool people (when they’re not killing each other). But as we’ve already played that card over an opportunity window of some 30 years, let’s focus on monetary return.

Should I bring in money (or keep money) in SA? If so, I would need to track this in a stable currency like the euro  or dollar. Of course, inflation and exchange rates will be an issue, but in rand terms my return rate must cover my currency value loss. Over the past 10 years the rand has gone from R10-R11 to the dollar to R20-R21.

The growth of my rand capital must outstrip this value loss. We all live in hope — it would be great to see a slowing down of currency depreciation, or maybe even a reversal  (disclaimer: I’m an optimist).

Having invested, I must be able to control my investment. Can I securely take money out, including investment and any profits? Are there limits set by the Reserve Bank? In terms of management, are there any BEE conditions that hamper this? Will I be forced to give away equity (the equivalent of which I must also recover as part of the return on my investment) and does it prevent my direct control?

Let’s bring my years at Michael Porter’s Monitor Group to bear with regard to “cluster” and “factor” conditions. Will I find competitors to collaborate with and jointly develop the conditions that will make me successful? Will I find the employees I need; will I find the skills; and what about key inputs such as energy?

In my value chain, in my cluster, will I find good conditions? If SA can’t provide good conditions for all clusters, I will face a country strategic choice. This should be informed by the ability of the cluster to provide employment and keep value in country, and to expand in future.

Now let’s move to “operating investors”, which may be differentiated between investing for production in SA or selling in SA. These are quite different types of businesses, and perhaps attracting production is better than just selling. Still, if an investor is selling, this must still add value for SA by lowering prices of goods and services and keeping some profit in-country.

“Financial investors” are another kettle of fish. They will seek “bargains”. Here the issue of transparency is a key — how can we reduce the transaction costs (and finding costs) of local investor targets (business ideas requiring capital) vis á vis international (and local) investors? Do we have sufficient market-maker capabilities?

Should the “public hand” cover for some of the uncertainties and difficulties for investors and provide tax incentives, co-invest or create market-making instruments? These are all important considerations; alas, I don’t see the granularity  of consideration from any of the parties contesting the election.

It makes me want to weep. Maybe we’re simply all too dumb to bother and instead focus on foreigners, on the wiring instead of where the lights come on, and the “threats” from others offering a different perspective. Caveat emptor, as they say.

• Cachalia is a former DA MP and public enterprises spokesperson.