The decline in the South African economy in recent years has been the result of a range of factors, including slow growth, chronic unemployment and policy uncertainty. The recent news of downgrades to junk status by ratings agencies have further added to the woes faced by South Africa. Following these downgrades as well the sacking of former Finance Minister Pravin Gordhan by President Jacob Zuma, the markets reacted negatively, with foreign investors withdrawing. At a time where factions in the ruling party, the African National Congress (ANC) have led to uncertainty, foreign investors have been weary of investing in South Africa.
According to ratings agencies, policy uncertainties are impacting on growth. This bodes the pertinent question: how will South Africa restore the confidence of foreign investors?
How South Africa will target international investment:
A change in political leadership
The election of new ANC President Cyril Ramaphosa bodes well for the South African economy. Ramaphosa, who is also a well-known multimillionaire businessman, faces the challenge of having to restore confidence in the South African economy and to find ways of attracting foreign investment.
The ANC leader has promised to address record unemployment and a sluggish economy.
“We must have an economy that offers policy certainty and addresses areas that inhibit investment growth as well as social inclusion,” Ramaphosa said.
It’s become evident that one of the key ways in which South Africa will target international investment and stimulate growth is the development of stronger relationships between government and business.
Government accountability and consistent growth-appropriate policy
Government needs to become accountable for policy decisions made as well as the impact on the South African economy. Spending on programmes must have clear and transparent accountability from government officials in order to ensure that taxpayers’ funds are not misused.
Reforms of state-owned enterprises
Corruption in SOEs has been rife and has been instrumental in foreign investor apprehension. Higher growth depends on the country’s ability to address governance matters, poor procurement practices and operational inefficiencies.
At least a quarter of Gross Domestic Product (GDP) needs to be reinvested in the economy via fixed investment.