BRYAN SILKE: Bold reforms required to restore Gauteng’s investment case ahead of G20

A collaborative programme involving national, provincial and local leadership is necessary to unlock Gauteng’s potential and restore its global standing as SA’s leading business hub.

Gauteng has long functioned as the beating heart of SA’s economy. Home to Johannesburg, Africa’s wealthiest city, and Pretoria, the country’s administrative capital, the province is today at a crossroads. Beset by political instability and decaying infrastructure, Gauteng’s position as an economically relevant region is at risk.

Downward spiral

SA is ranked 84th among 190 economies in the World Bank’s ease of doing business index — a decline from 32nd position in 2008. To arrest this downward slide officials need to focus on addressing infrastructure deficits, restoring political stability, accelerating policy reforms and fostering investor confidence.

As a corporate financier recently stated at a breakfast panel discussion at the Gordon Institute of Business Science, we only have an 18-month window before Johannesburg hosts the Group of 20 (G20) summit, to align our messaging and take decisive action to attract investment.

Investor confidence is deeply intertwined with political stability. It is clear that without stability the flow of investment capital will dry up. Both Johannesburg and Tshwane’s recent cycles of political infighting and shifting coalitions provide a front-row seat to the rinse-and-repeat cycle of politics first, good governance second.

International investors eye SA with interest, but they seek certainty and predictability. When political turbulence is high, investment decisions are delayed, jobs are not created and infrastructure projects languish.

By contrast, regions with consistent and stable leadership send a clear message to investors: this is a safe and predictable place to grow your business. As other African cities such as Kigali, Lagos and Nairobi enhance their attractiveness to global investors, SA cannot afford to be complacent.

Global lessons

Should Gauteng be able to achieve an economic resurgence it would not be without precedent. Around the world other global emerging market cities have faced similar crises and successfully reclaimed their status as economic hubs through targeted, strategic action.

Singapore, for instance, was beset in the 1960s with high unemployment, political instability and virtually no natural resources. Yet through focused leadership, a commitment to infrastructure development and a clear long-term strategy, the region was transformed into one of the world’s leading financial centres.

Its Economic Development Board, established in 1961, worked with both the public and private sectors to attract foreign investment and simplify the business environment. Today Singapore ranks second in the ease of doing business index, having transformed from an unstable city-state to a global powerhouse. Gauteng can draw lessons from Singapore’s ability to stabilise politically, invest in human capital and streamline business operations.

Istanbul’s rise as a regional business hub is also instructive for Gauteng. Like Johannesburg, Istanbul once struggled with ageing infrastructure and bureaucratic bottlenecks. However, in the 2000s the city underwent a renaissance, fuelled by huge infrastructure projects such as the construction of the Marmaray rail tunnel and the expansion of Istanbul Airport, which has become one of the largest in the world.

These infrastructure upgrades were complemented by sweeping regulatory reforms designed to improve business conditions, including simplifying procedures for setting up businesses and granting permits. Today Istanbul plays a vital role in Turkey’s economy, serving as a bridge between Europe and Asia.

Infrastructure development

Crucially, restoring Johannesburg’s international credibility is contingent on fixing its crumbling infrastructure. From pothole-riddled roads to water shortages and failing sanitation systems, Gauteng’s infrastructure is not equipped to support a thriving economy. This extends to critical sectors such as telecommunication and public transport, which are essential to creating a seamless business environment.

Strategic infrastructure development, particularly in under-serviced areas, is the key to unlocking broader economic participation. Extending and expanding existing infrastructure projects can drive economic growth.

Energy security also remains an achilles heel. A stable, reliable energy supply is the non-negotiable foundation for any investment case in the province. While some progress has been made with independent power producers, this must be scaled rapidly to meet demand.

Gauteng’s government must also accelerate efforts to simplify doing business in the province. Red tape, excessive bureaucracy and delays in business registration and licensing processes are choking entrepreneurship. A more streamlined regulatory environment would stimulate competition, encourage innovation and unlock opportunities for small, medium and micro enterprises. These businesses are the backbone of Gauteng’s economy, yet they often find themselves suffocated by unnecessary hurdles.

Investor perception

SA’s decline in ease of doing business rankings over the past 15 years reflects more than just bureaucratic inefficiencies — it highlights the erosion of trust between the government and investors. A crucial part of rebuilding this trust lies in sending the right message to both local and international investors. This requires a clear, cohesive narrative that highlights the steps being taken to restore stability, infrastructure and ease of business operations.

No discussion on Gauteng’s future can ignore the corrosive impact effect of corruption. Investors are wary of markets where graft is rife, and SA’s image in this regard has been tarnished. Anti-corruption initiatives must be intensified with a clear commitment to holding officials accountable. Transparency International’s corruption perceptions index, which ranked SA 43rd out of 180 countries in 2022, highlights the urgency of this challenge. Only by rooting out corruption can we begin to restore investor confidence.

With global attention fixed on the country as SA prepares to take centre stage as president and host of the G20 summit as well as the B20 global business forum, the urgency for action from the national government and the business community to apply consistent, co-ordinated pressure on provincial and local government is crucial. The collective focus must be on halting the escalating instability and restoring Gauteng's position as the driving force of the country’s economic recovery.

This moment presents a critical opportunity to showcase SA’s potential, but it requires decisive leadership and bold reforms to ensure the province’s resurgence.

• Silke is associate partner at Hudson Sandler Invicomm.