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The South African government has embarked on a charm offensive as it aims to attract $100bn (around R1.3tr) in foreign direct investment (FDI) over the next five years, a goal set by President Cyril Ramaphosa in April.
Ramaphosa has appointed a heavyweight team, including former finance minister Trevor Manuel, former Standard Bank CEO Jacko Maree and former deputy finance minister Mcebisi Jonas, as “investment envoys”. Government departments and agencies – both provincial and local – have also been tasked with luring and assisting investors.
“Because of the size of our economy and where we are located, Gauteng has a huge role to play,” said Lebogang Maile, member of the executive committee (MEC) of economic development, environment, agriculture and rural development in Gauteng. Speaking at a trade and investment business breakfast in May, Maile said government is working to encourage domestic and foreign direct investment (FDI) in the economy “in order to promote and stimulate economic growth and development with the aim of improving the quality of life and living conditions of our people”.
While investor and business confidence have improved markedly since the election of Ramaphosa as the ANC’s new president, much work remains to increase investment in the economy. Total fixed investment in South Africa declined to about 19% of GDP in 2017, from 24% in 2008, according to government data. In order to reach Ramaphosa’s goal, the investment rate will have to increase to 30% of GDP. FDI declined to R17.6bn in 2017 from R76bn in 2008, Bloomberg reported.
The decline in investment has been attributed to a number of factors, including a decline in commodity prices following the global financial crisis, corruption, state capture, policy uncertainty and the increasing debt levels of state-owned enterprises (SOEs).
Following the appointment of Ramaphosa as the nation’s president, Maile said there is evidence of “significant investor interest in the country, stemming from the raised hopes of higher economic growth, restoration of good government, improvements at SOEs and public finances, among other things”.
The Gauteng provincial government is doing everything in its power to promote the province as an investment destination, and to facilitate export-led growth, he said. Various initiatives are underway to improve the business environment, including reducing red tape, transaction costs and bureaucracy; speeding up the issuing of permits and payment of invoices; and increasing transparency and reducing corruption related to tenders.
This has helped to reduce irregular spending in the province and improve audit outcomes, Maile said.
Alfred Tau, deputy director general of the Gauteng department of economic development, said a lot of time is being spent on tracking and understanding investment into the province. “The nature of the investments that we get has a direct impact on the type of growth, the type of jobs, and the type of development you’ll get,” he says. A better understanding will also allow government to come up with “appropriate industrial and investment policies to ensure that the impact of the investments is maximised for the greater good”.
While Gauteng has been very successful relative to other provinces to attract investment, sub-regions like the West Rand, Sedibeng and Ekurhuleni have struggled to secure major projects, with most of the money flowing into the central Johannesburg region.
In addition to finding ways to lure investors to the unloved regions, more should also be done to attract investors into specific sectors, such as manufacturing, Tau said.
Gauteng can also learn from some of the world’s city regions that have been doing “quite well in positioning themselves around services”, Tau said. “Think, for example, about what Dubai is doing to position itself not just as a global transport hub, but as a significant centre for medical services.”
There is a “chunk of work” that remains to be done, Tau said. “We need to upscale our work on investment promotion and facilitation; we need to do more work to cover strategic projects and go globally to aggressively look at opportunities.”
Powering Gauteng’s economy
Accounting for more than a third of South Africa’s GDP, Gauteng remains the country’s biggest employer and richest province.
The province enjoys many advantages that should be leveraged to attract further investment, including the region’s economic activity density, world-class infrastructure, strong institutions and developed financial markets, placing it as a gateway to the African continent, says Jameel Chand, acting group CEO of the Gauteng Growth and Development Agency (GGDA).
The GGDA is tasked to be a catalyst for growth and socio-economic development in the African region, achieving this by “creating an enabling environment for growth through targeted trade and investment promotion and facilitation”, Chand says. “Sound investment facilitation reduces the cost and increases the ease of doing business, allowing the private sector and entrepreneurs to thrive.”
In the 2017/18 financial year, the GGDA facilitated a total of R4.1bn worth of investment into the Gauteng City Region, with 15 foreign direct investment (FDI) projects accounting for R2.6bn. Domestic investors accounted for R1.5bn that was invested in 51 projects. The GGDA also helped facilitate in excess of R1bn of trade through targeted export development projects, Chand says.
The GGDA is also in charge of the InvestSA One Stop Shop (OSS) Gauteng, which forms part of national government’s efforts to help address key problems facing investors. The OSS coordinates and facilitates the relevant government departments involved in regulatory roles, registration, permits and licensing. This includes, for example, assistance with permits, company registrations and tax matters.
During the 2017/18 financial year, InvestSA OSS Gauteng received 3?856 clients and assisted to resolve 2?571 queries. One Stop Shops have also been rolled out in the Western Cape and KwaZulu-Natal to date.
“However, in light of the size of the Gauteng economy and particularly the volume of trade and investment that occurs annually in the province, one intuitively senses that there is a lot more that we, as the provincial government along with agencies such as the GGDA, as well as the private sector, can coordinately achieve to improve the economic prospects of our province,” Chand says.
‘Davos of Africa’ to lure investors
Johannesburg will play host to the first-ever Africa Investment Forum (AIF), dubbed the “Davos of Africa”, from 7 to 9 November 2018.
The AIF is the brainchild of the African Development Bank (AfDB), which estimates Africa’s infrastructure requirements to amount to $130-$170bn a year. To address these challenges, the AfDB is championing the AIF as a platform to “actively engage the private sector and to facilitate projects that have the capacity to transform the continent”. The AIF is designed to enhance private sector cooperation and drive investment in sectors of strategic interest within Africa, it said.
“This is not a talk shop. There will be no political speeches. The AIF provides an open platform to organise efforts among multilateral institutions, governments and the private sector to improve a pipeline of projects capable of transforming the continent,” said Akinwumi Adesina, president of the AfDB.
For more information, visit www.africainvestmentforum.com.
This article originally appeared in the 21 June edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
