SA's banks have cash to invest - what they need is bankable projects | Fin24

SA's banks have cash to invest - what they need is bankable projects

Oct 26 2018 16:47
Roxanne Henderson, Bloomberg

South African lenders have more than enough resources to meet President Cyril Ramaphosa’s efforts to bolster economic growth and lure more investment into the country. The challenge is finding bankable projects.

"From a banking perspective there’s plenty of capital and plenty of appetite for growth," said James Formby, the chief executive officer of FirstRand’s [JSE: FSR] investment-banking unit Rand Merchant Bank. "The shortage is the projects and the opportunities to lend against."

Ramaphosa kicked his drive to attract $100bn in new investments over the next five years into higher gear on Friday with a conference in Johannesburg that attracted more than 1 000 delegates. Since announcing the program in April, the president has secured pledges from Saudi Arabia, China, the United Arab Emirates and Daimler’s Mercedes-Benz unit totalling $35.5bn. Another $8bn was pledged on Friday, although not all of it new.

"It’s a great opportunity for South Africa to showcase business opportunities," Formby said on the sidelines of the summit.

"It’s unusual to get such a large business and government community together so in itself that’s very valuable. Whether it’s a silver bullet or not, I think there are many things we are going to do inch-by-inch to get the economy moving. It’s a start."

With elections due to take place next year and support for the ruling African National Congress waning, Ramaphosa needs to show he’s delivering on pledges to revive an economy mired in recession and create jobs for the 27% of the workforce that’s unemployed.

The 65-year-old lawyer and former labour-union leader took office in February, after the ANC forced Jacob Zuma to step down following an almost nine-year tenure marred by scandal, policy missteps and inappropriate appointments.

"South Africans will be motivated to commit to projects they have probably been sitting on the fence on," said Stephen Koseff, the former CEO of Investec, owner of one of South Africa’s largest money managers and the country’s fifth-biggest bank.

Ramaphosa’s administration has brought clarity to the nation’s mining laws and pledged to protect property rights as part of its land reform project, which gives investors comfort, he said.

"As you create policy certainty and you become a business enabler you will see the economy start growing," he said. "There’s no point growing at 3%. We have to grow at 5% or 6% to make a meaningful difference. That’s our challenge."

Ramaphosa’s five-point economic stimulus and recovery plan announced in September hinges on rejigging spending, starting an infrastructure fund, improving the education and health sectors and investing in municipal social infrastructure.

Newly appointed Finance Minister Tito Mboweni plans to move around R32.4bn of expenditure to target projects aimed at igniting growth.

Apart from mining, telecommunications and agriculture are other areas where "South Africa can certainly do more than it has," said RMB’s Formby. Investec’s Koseff, who stepped down at the beginning of this month, also sees tourism as another way of stimulating the economy as long as the country creates a "culture that is user friendly".

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