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Johannesburg - Brazil, Russia, India, China and the Middle Eastern countries all prefer to invest in African countries other than South Africa.
The so-called Brics countries regard investments in other African countries as more viable and sustainable than in South Africa. Countries that the Brics nations favour as investment destinations above South Africa include Kenya, Tanzania, Mozambique and Botswana.
The catalogue of problems scaring off potential investors in South Africa includes irresponsible pronouncements on nationalisation.
Robert Appelbaum, head of trade with India at Webber Wentzel, said an Indian strategist hurriedly left for home last week – having been persuaded with difficulty to return later if nationalisation is not on the agenda.
For 20 years Appelbaum has been involved in trade relations between South Africa and India, and he said India is increasingly aware of the benefits of investing in Africa.
But South Africa is no longer the preferred gateway to Africa, he said.
The eyes of the world are on South Africa and pronouncements on nationalisation are a big problem.
South Africa does not appear to realise that countries south of the Sahara are strong competitors as investment destinations, he added.
In what was described as the “second scramble for Africa” at the African Union summit in Ethiopia earlier this month, South Africa was overlooked as an investment destination for several reasons.
Appelbaum said if South Africa wanted to attract more investments from India and its Brics partners it would rapidly have to upgrade its ports and rail lines.
Indian companies are descending on the Waterberg coal deposits, and the big question is how to export the coal.
Unfortunately for South Africa, the export route will be via Mozambique rather than Richards Bay.
Appelbaum said Mozambique is establishing active rail corridors and is making huge investments to attract exports to its ports.
It's critical for South Africa to upgrade its ports and rail systems. They are currently inadequate and hampering export.
Prospective investors from India and other Brics countries are also daunted by the high cost of labour in South Africa relative to costs in their own countries. They find insufficient incentives to establish their companies here and to train the local population in the necessary skills.
Foreign investors find it a problem that the requisite skills are not available here and that incentives to train staff are scarce and complicated.
Black economic empowerment also frightens off foreign investors. Appelbaum said companies regard it as a big expense because funding is scarce and empowerment partners do not themselves come with the required finance.
He said the companies are not unwilling to comply with empowerment requirements, but they regard them as an additional expense which handicaps investment.
Safiyya Patel, a partner for mergers and acquisitions at Webber Wentzel, said a pact between South Africa and India was necessary to handle legal decisions. India does not currently accept decisions by South African courts and it can take up to 15 years for legal disputes to be resolved.
Appelbaum said that as a consequence South African companies invest in India through intermediaries in countries that do have legal agreements with South Africa, and the converse.
Foreign investment could help to start solving the unemployment problem. Appelbaum said Indian companies had already created thousands of jobs in this country.
The investments by the Mahindra and Tata automobile companies have led to Indian component manufacturers taking an interest in investing here. But the lack of incentives puts them off.
- Sake24
For business news in Afrikaans, go to Sake24.com.
The so-called Brics countries regard investments in other African countries as more viable and sustainable than in South Africa. Countries that the Brics nations favour as investment destinations above South Africa include Kenya, Tanzania, Mozambique and Botswana.
The catalogue of problems scaring off potential investors in South Africa includes irresponsible pronouncements on nationalisation.
Robert Appelbaum, head of trade with India at Webber Wentzel, said an Indian strategist hurriedly left for home last week – having been persuaded with difficulty to return later if nationalisation is not on the agenda.
For 20 years Appelbaum has been involved in trade relations between South Africa and India, and he said India is increasingly aware of the benefits of investing in Africa.
But South Africa is no longer the preferred gateway to Africa, he said.
The eyes of the world are on South Africa and pronouncements on nationalisation are a big problem.
South Africa does not appear to realise that countries south of the Sahara are strong competitors as investment destinations, he added.
In what was described as the “second scramble for Africa” at the African Union summit in Ethiopia earlier this month, South Africa was overlooked as an investment destination for several reasons.
Appelbaum said if South Africa wanted to attract more investments from India and its Brics partners it would rapidly have to upgrade its ports and rail lines.
Indian companies are descending on the Waterberg coal deposits, and the big question is how to export the coal.
Unfortunately for South Africa, the export route will be via Mozambique rather than Richards Bay.
Appelbaum said Mozambique is establishing active rail corridors and is making huge investments to attract exports to its ports.
It's critical for South Africa to upgrade its ports and rail systems. They are currently inadequate and hampering export.
Prospective investors from India and other Brics countries are also daunted by the high cost of labour in South Africa relative to costs in their own countries. They find insufficient incentives to establish their companies here and to train the local population in the necessary skills.
Foreign investors find it a problem that the requisite skills are not available here and that incentives to train staff are scarce and complicated.
Black economic empowerment also frightens off foreign investors. Appelbaum said companies regard it as a big expense because funding is scarce and empowerment partners do not themselves come with the required finance.
He said the companies are not unwilling to comply with empowerment requirements, but they regard them as an additional expense which handicaps investment.
Safiyya Patel, a partner for mergers and acquisitions at Webber Wentzel, said a pact between South Africa and India was necessary to handle legal decisions. India does not currently accept decisions by South African courts and it can take up to 15 years for legal disputes to be resolved.
Appelbaum said that as a consequence South African companies invest in India through intermediaries in countries that do have legal agreements with South Africa, and the converse.
Foreign investment could help to start solving the unemployment problem. Appelbaum said Indian companies had already created thousands of jobs in this country.
The investments by the Mahindra and Tata automobile companies have led to Indian component manufacturers taking an interest in investing here. But the lack of incentives puts them off.
- Sake24
For business news in Afrikaans, go to Sake24.com.
