Publications
Partners
I have said this before and I’ll say it again: There was no one better positioned to break the investment strike that has gripped our country over the past few years than Cyril Ramaphosa.
The businessman-turned-president delivered a very positive State of the Nation Address (Sona) at the beginning of February that has potential to pave the way for re-igniting our sluggish economy, which has struggled to attract growth-inducing inward investment.
As we count the costs of nine years of corruption and economic ruin under the leadership of former president Jacob Zuma, Ramaphosa is providing the spark that has been missing after investors turned their backs on our country – often arguing that their complaints about policy uncertainty were falling on deaf ears.
In his speech, Ramaphosa gave an update that shows that his mission to mobilise R1.2tr worth of inward investment over the next five years is bearing fruit. The Investment Summit hosted in October last year netted around R300bn in investment pledges from South African and international companies, he announced. Roughly R187bn worth of deals stemming from the conference are being implemented, while projects worth another R26bn are in pre-implementation phase.
It appears that investors are getting on Ramaphosa’s investment bandwagon as foreign direct investment (FDI) is responding positively to his crusade. Our country netted an inflow of R70bn in the first three quarters of 2018, compared with FDI inflow amounting to R17.6bn in 2017.
Although it is still early days, this turnaround is encouraging, considering where we have come from in the last decade.
Prior to the recession that hit the global economy in 2009, total fixed investment in the SA economy stood at 24% of gross domestic product (GDP) in 2008. Over the years, it has declined to around 19% of GDP in 2017. (In 2008, FDI was about R76bn, compared with 2017’s R17.6bn mentioned above.)
The FDI attracted in the first three quarters of 2018 is almost equal in value to the FDI that we netted in 12 months of 2008 – a sure sign that we are on a road to recovery. This recovery in investment performance will probably make it possible to realise Ramaphosa’s vision of generating 275 000 jobs annually.
There were two other important announcements made in the Sona by Ramaphosa that I believe will have a positive impact on the economy. The first relates to the unbundling of the debt-laden power utility Eskom and the second to the establishment of an investigative directorate within the National Prosecuting Authority (NPA) that strikingly resembles the defunct corruption-busting Scorpions.
The setting up of the directorate – which will report directly to the new NPA boss, Advocate Shamila Batohi – will deter corrupt government officials and their private sector puppet masters from rigging allocation of tenders behind the scenes, as we have seen in the Bosasa scandal. With Bosasa, executives were writing specifications for tenders that were later awarded to the facilities management company and its subsidiaries. Suppliers going up against Bosasa-earmarked tenders had no chance of ever clinching the contracts, no matter how compelling their bids were.
If Batohi manages to clean up state procurement and nail bad guys whenever she catches them, she could single-handedly be responsible for levelling the playing field for bidders locked out of government tenders by corrupt gatekeepers who have hijacked the tendering system for their own enrichment.
Ramaphosa indicated in the Sona that the envisaged investigative unit, made up of prosecutors and investigators, will focus on the evidence that has been emerging from the Zondo Commission of Inquiry into State Capture, and other commissions and disciplinary inquiries probing cases of corruption and maladministration.
The Scorpions should never have been disbanded in 2009. They had a high conviction rate and were not scared of going after high-profile politicians. Zuma himself felt their sting when they investigated him for corruption. The charges were later dropped, but re-introduced.
Let me deal with the second Sona announcement, which no doubt must be very exciting to investors who are ready to pounce on investment opportunities. The announcement of a Presidential state-owned enterprise (SOE) Council to provide political oversight and strategic management of SOEs such as Eskom, Denel, Transnet, SAFCOL, Prasa, SA Airways and SA Express, signals that privatisation is on the horizon.
I expect some form of partial privatisation to introduce private capital in poorly performing SOEs, but blanket sell-offs of state assets will be fiercely opposed by public sector trade unions. Whatever the case, a major shake-up in SOEs is coming and it will start with Eskom.
Eskom will be unbundled into three separate entities – Generation, Transmission and Distribution – under Eskom Holdings. The restructuring of the state-owned power generator and distributor should result in the trimming down of its R420bn debt and bloated workforce. From the consumers’ perspective, they will be hoping that the restructuring will make load shedding something of the past and that electricity will be delivered to their homes and businesses at affordable prices.
Andile Ntingi is the chief executive and co-founder of GetBiz, an e-procurement and tender notification service.
This article originally appeared in the 21 February edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
