Expectations abound within the government (and apparently among observers too) that this week’s investment conference will help to attract the flow of capital without which SA’s future cannot be assured. Is this realistic?
SA’s economy has underperformed for at least a decade, and arguably much longer. The past two years have seen GDP growth come in at less than 1%. This is worse than the record of the Zuma presidency, which failed to match those of most other emerging markets.
Understand that the underlying problem was not the incumbent head of state, nor the Covid-19 pandemic, however damaging this may have been. Rather, successive governments have refused to deal with mounting problems that have made SA an ever less attractive investment destination; or they have pursued policies that have had this effect.
The government’s commitment to a policy of expropriation without compensation has been a unique disincentive. We have repeatedly been told by businesspeople that until this is taken off the table, the country is essentially uninvestable.
We would also suggest that the government itself does not have much confidence in the prospects for investment inflows and accelerated growth. The medium-term budget policy statement estimated a contraction of 7.8% this year, followed by growth of 3.3% in 2021, and around 1.5% in the two years thereafter.
The solution is proper policy change to make SA an enticing place in which to invest and do business. No amount of explanation or appeal will be a substitute for this.
COO, Centre for Risk Analysis
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