Getting firms and entrepreneurs, be they local or foreign, to commit their money to the country will be an indispensable part of building a worthwhile future. This, arguably more than any other single dynamic, has been South Africa’s fatal failing.

The National Development Plan envisaged investment reaching 30% of GDP by 2030, which would be necessary to push annual growth up to 5.4% – but it has never come anywhere close to this in the period after 1994.

This week’s South Africa Investment Conference is the latest iteration of President Cyril Ramaphosa’s drive to turn this around. Two such events have been held previously, and the president has also sent high-powered envoys abroad to spread the word of what South Africa has to offer.

In his weekly newsletter on Monday, the president was optimistic about the prospects: ‘The conference will demonstrate that South Africa remains an attractive investment destination, and will show the progress we are making to improve the business climate. It will build on the positive momentum in investment in the years before the onset of the Covid pandemic.’

This claim is questionable. Investment peaked at 23.5% of GDP in 2008 and has been on an overall decline ever since. In 2015, it stood at 20.3% (not a bad level by South African standards, even if it is below what is needed), falling to 19.4% in 2016, to 18.8% in 2017, to 18.2% in 2018, and to 17.9% in 2019 – not much more than half of what was required.

The figures seem to have been moving in the wrong direction.

This might be said of the conference too, as well as the government’s overall investment strategy. For a start, it fails directly to tackle the reasons why investment flows have been falling. There is no mystery here – investment comes where businesspeople see an opportunity to make money and where the prevailing conditions in the market enable them to do so. Where it fails to come, it’s a safe bet that the target market is not likely to reward investment.

Middling proposition

South Africa is a middling proposition. Its consumer market is small, even if free trade agreements have potential in future. It has a debilitating crime problem. Its infrastructural deficiencies are not only a frustration, but incur massive additional costs. Skills shortages are matched by a hostile immigration regime.

Add to this an extended list of governance pathologies: corruption, bureaucratic incompetence, unstable policy.

But perhaps most damaging to South Africa has been its insistence on a policy agenda poorly aligned to its economic and developmental needs, if not overtly hostile to them.

Thus, as the state wrestles with capacity constraints (in some parts, wholesale dysfunction) to fulfil its most elemental responsibilities, the ruling party maintains a counter-constitutional practice of ‘cadre deployment’ to maintain party political control over a nominally politically neutral state machinery. This guarantees not only corruption but administrative breakdown.

South Africa has also laid no small burden on itself by its insistence on race-based employment and empowerment legislation. Demands for companies to cede tranches of their equity, and to be subject to intrusive inspections to determine whether the racial mix of a company’s employees is acceptable do nothing to make South Africa more attractive.

Indeed, a recently-published study of European firms operating in South Africa flagged empowerment ownership demands as the central disincentive to investing in the country. This mirrors concerns previously expressed by such companies in 2018.

Beyond this, South Africa has since 2018 loudly proclaimed its intention to seize property without compensation. No policy intervention is more likely to dissuade investment than to threaten property rights and the security of assets. Yet doing so is a signature policy. (Economist Azar Jammine remarked that the cost of this was the loss of a potential Ramaphoria windfall. These decisions have consequences.)

Grave concern

The government is well aware of this. The impact of the Expropriation without Compensation push was noted by its investment envoys as a matter of grave concern. Responding to this, the president’s economic advisor, Trudi Makhaya, said that the government just needed to ‘be frank’ with investors. Explain it, and people would be put at ease.

This week’s conference was probably intended to carry this logic forward. This is not really possible, since the endgame of EWC has never been set out. All we’ve had is a vague plea for trust and an even more vacuous assurance that it won’t be damaging. The government has promised that everything will be done within the constitution and the law – a dreadfully misleading argument, since both the constitution and the law will be changed to accommodate the policy. The current Expropriation Bill goes a considerable distance in removing the courts from expropriation processes – and before the pandemic hit, the ANC indicated that it wanted the constitution amended to ensure that the executive rather than the courts were dominant here.

Besides, not all policies lend themselves to being ‘explained’. (This, by the way, was a mistake that the National Party made, assuming that if only it could set out its case, international opposition would die down.) EWC is inherently and intrinsically hostile to investment. It is in this respect a bad policy.

All of this makes the country a difficult sell. This is especially the case in a capital-hungry world where any number of alternatives are available: rapidly growing markets in Asia and Africa, for example. To be sure, they all have their own challenges, but they offer promises of exciting returns. This appeals to both foreign and South African businesspeople.

Investors are aware of this. Their decisions will be based on the extent to which a good business environment with profitable opportunities exists. South Africa’s official path has been to push ahead with policies that make this unlikely if not impossible. And to hope that clever words and dazzling presentation can obscure this.

‘Right environment’

Martin Kingston of Business for South Africa said of the conference: ‘South Africa is going to have to move fast to demonstrate that we are the right environment for people to be able to put long-term investment.’

Just so. This will be a matter of actions rather than words. Make the necessary changes first, then promote them through conferences and envoy missions. Alter the basis on which businesspeople make their decisions. Investment can be enticed into a market. But it will not be persuaded into it. What is being done now is back to front. The sooner the government accepts this and takes a new policy path, the sooner South Africa can realistically hope for the investment it needs.

[Picture: Jason Goh from Pixabay]

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Terence Corrigan
Terence Corrigan is the Project Manager at the Institute, where he specialises in work on property rights, as well as land and mining policy. A native of KwaZulu-Natal, he is a graduate of the University of KwaZulu-Natal (Pietermaritzburg). He has held various positions at the IRR, South African Institute of International Affairs, SBP (formerly the Small Business Project) and the Gauteng Legislature – as well as having taught English in Taiwan. He is a regular commentator in the South African media and his interests include African governance, land and agrarian issues, political culture and political thought, corporate governance, enterprise and business policy.


  1. EWC and BEE/BBBEE are such draconian policies running counter to normal business and economic principles that no person aware of the implications could reasonably consider risking investment in such an environment.

    • Dougie Brown, if it’s such “ridiculous propaganda”, as you put it, can you please tell us why (nobody) wants to invest in South Africa. And while you’re about it, please also explain why so many people (not just whites), are leaving the country.

    • Dougie you must be an idiot. Firstly you do not know how to remove caps lock. Then you criticise without offering any reason. You are clearly affected by some other article. This one makes a lot of sense and is logical and correct.

  2. “…and will show the progress we are making to improve the business climate. It will build on the positive momentum in investment in the years before the onset of the Covid pandemic.”

    In what fairy tale country did this man live in the years before Covid? And how many years is he talking about? It definitely cannot be the last 27 years, or even just the last 17 years.

    Maybe South Africa would be better off if he and his cronies and all their extended families, those beneficiaries of the BBBEE farce, packed up and moved to that fairy tale place.

    Then the people who understand economics, international trade and investments, can begin to really “demonstrate that South Africa remains an attractive investment destination”.

    The following quote is also true of people believing in the same impractical political ideology:
    “When enough insane people scream in harmony that they really are healthy, they can actually start to believe themselves. Or put even more simply: people with overlapping delusions get along wonderfully.”
    ― Daniel Mackler, Toward truth: A psychological guide to enlightenment

    • I agree 100%. It would be great if there were indicators at the end of articles for readers / commentators to rate / uptick. I would rate this at the top end. The simple cold facts stated simply and without unnecessary emotion-triggers.

  3. Agree with the article. You could add to it the labour laws that make it most difficult for any company to do business in SA.

  4. The prospect of securing a true result of investment in South Africa by Local and International companies and investors is a pipe dream.

    The decline in the outcome of investment targets has been existent for some time.

    I am of the opinion that the results of the next investment conference in raising investment commitments from business and international sources is likely to be maxed at 15% based on the decline since 1999 as reports reflect.

    However dreamers and the ANC by their numbers seem to continue to convince themselves that their targets and value in foreign exchange while their policies and political intentions to be launched by legislation change, is likely to make the targets achievable.

    Any well informed investor would know the conditions of this Country including the depth and height of corruption and maladministration of all government institutions.

  5. Very good piece, thanks Terrence.
    The ball is firmly in the government’s court – but will they do what is necessary to turn the ship back on course? I have my doubts.

  6. Surprised that there is no mention of the disaster of BEE.

    Nobody in their right mind is going to invest in a country where less-than-ideal racial tokens are put into positions of power and influence. Investors go for performance – not window-dressing.

    Why would anyone want to give their money to a business that is forced to employ certain people, and also to give part of the business away to people who contribute nothing to it.

    As a foreign investor, I have several other options that are less stupid.

    As long as the policy of BEE is in place, there is zero chance of achieving net capital inflows into South Africa.

    Sadly it has been explicitly written into many acts over the past 2 decades meaning that it wont be gone any time soon.

    • BEE was certainly mentioned, just not in name.

      “to be subject to intrusive inspections to determine whether the racial mix of a company’s employees is acceptable do nothing to make South Africa more attractive.”

      BEE is not just about emplotment and tenders, it is THE Cornerstone enabler of the ANC’s Patronage Network, whic is central to keeping them in power.

      No BEE = No Cadre Deployment / Patronage = No ANC

      It’s as simple as that.
      Ramaphosa stated that “BEE is here to stay:
      End of story.

  7. The negative factors far outweigh the positive factors for investment in SA. All the issues mentioned in the article plus let us not forget the taxi violence, violence based demonstrations, highway violence and setting alight (privately owned) trucks and..and…by COSATU and other unions.
    The government does absolutely nothing to ensure people’s safety.
    Then the government wants foreign investors?

  8. “…… the conference will demonstrate that SA remains an attractive investment destination”. This claim is not just questionable, it is delusional, patent rubbish.

    What is utterly, infuriatingly exhausting is that the president, the ANC and their followers seem to be living in a completely different universe of make believe. It is a helpless, terrifying feeling to see the massive locomotive which is total economic and social collapse rushing headlong at us, knowing that the people in charge of this country do not have the ability to manage their way out of a wet paper bag.

  9. Dougie dug among the sewage.

    Foreign investors obviously know about the situation, as we all experience it and accurately described by Helen Zille below(shortened version), in South Africa that is why investments decreased from 23.5% – 17.9 of GDP from 2008 to 2019. As they say “bankruptcy started gradually and then suddenly”. We are in for a rough bumpy ride and those who can leave are leaving S.A ASAP.

    Being classified at Junk Status does not make it any easier.

    This is how South Africa became a criminal state
    By Helen Zille• 12August2020
    ANC Secretary-General Ace Magashule. (Photo: Gallo Images / Netwerk24 / Felix Dlangamandla)
    The power struggles in the ANC are so fierce precisely because they mean control of the machinery of cadre deployment to loot on behalf of those connected to the winning faction.
    As Joel Netshitenzhe, a leading ANC intellectual, wrote in the ANC mouthpiece Umrabulo in 1996: The aim of the NDR(National Democratic Revolution) “is extending the power of the ‘National Liberation Movement’ over all levers of power: the army, the police, the bureaucracy, intelligence structures, the judiciary, parastatals, and agencies such as regulatory bodies, the public broadcaster, the central bank and so on”.
    The unparalleled revulsion to the extent of looting in the rest of the country is based in the disbelief that the ANC would actually use a national crisis to milk the state – especially the billions borrowed to deal with Covid-19.
    The ANC’s deployment policy was aimed at achieving party control of the state. And then, through the state, controlling every other sector of society by introducing stricter and stricter B-BBEE and EEA laws that enabled cadre deployment (and the associated corruption and criminalisation) to reach into every money flow – every stream of funding – in the country.

    • Don’t under estimate the influence the EFF’s policies & the manner they handle the race problems. If by any chance Cyril is dreaming about any whites investing in RSA he needs his head read as soon as possible. He is for all purposes not even sure if he influences anybody with his rhetorical speeches, and is hardly sure if he is actually the president of the ANC or the country. Look at Zuma’s performance at the state capture court case on Friday, he just walked out laughing at the judiciary. Now what does that tell investors. Lastly how easy did the so called pastor and his wife slipped out the country, never mind the Guptas.

  10. Who is asking why this problem of non investment exists.

    I would suggest that whoever & it’s not just one person asking, rather it’s the whole government, the opposition parties & anybody who is concerned about the present, never the future!!

    I secondly suggest you contact Sara and request copies of articles covering this economic/ investment subject, for a period dating back about 18 months. There have been countless articles with a multitude of comments.
    Read them, if you can, and all the answers to your question are answered, in fact repeated many times. If you still don’t understand what’s holding investment back I strongly suggest you’re in the wrong line of wek!

  11. The ANC does know how to invest. Within the next few days, the ANC will come up with bail-out money for the SABC. Ace has specifically invested into the SABC news room. The ANC will reap dividends by way of continued votes and the public will reap dividends of an influenced news broadcaster.

  12. An excellent article. Thoughtful, well researched and to the point.
    The further downgrade of South African debt yesterday, deeper into the junk zone, affirms everything Terrence has just said.
    Keep up the excellent journalism!

  13. Spot on article but, why are we pleading with a government to change its policy?
    That will never happen!
    Why don’t we rather change the government to one that has the right policy?
    It’s almost as if we just accept the current regime is in “till Jesus comes home”.
    Time to catch a wake up!

  14. Chances of a new government?
    Where to find a credible opposition?
    Fractured opposition?
    DA election of top brass convincing?
    Opposition policy statements understandable (forget credible) by any but intellectual academics?
    Latest outcomes in local elections points to new government?
    Any logic in politicians other than rhetoric?

  15. Foreign investment in SA with the ANC’s ever increasing socialist/communist policies? What a joke. Ramaphosa’s delusions of investment pouring into the country will remain delusions. Talk is cheap, and as for the ANC’s capability of turning any of their grandiose ‘plans’ into effective action, without corruption, is non-existent. They know they have a brain deficiency problem so all they can do is continue to practice their best skill, corruption and looting.
    Why have the people of SA allowed a bunch of thugs rip the county apart for so long? Time is overdue to remove these greedy self enriched ineffective gangsters.

  16. O not loose the guiding objectives and who drives it, who will be the main beneficiaries.
    Ther dream is sold to the feebleminded voting corps of this country that democracy provided the needs for every citizen to be provided for, prefereable without having to work and labour for the easy life. Those in government are too stupid to understand that the economy will die without real saleable products for the world market, not only export raw minerals. They are powerful enough to demand and enforce the theft of the assets and ge to dictate business from the BEE appointments and their contribution is mat maximum to generate contracts with government and big corporations.
    What they also do not comprehend is that those who put them in power to strip the nation of all wealth have the sole objective to enslave the people through communism and a meager subsistence and control the ones they put in power to strip Africa of all mineral wealth at the lowest cost possible. The industrious minority in this country stand in their way and that is why EFF is so active and shout “Kill the framer Kill the Boer” and all know that he is paid by external powers to do it, reportedly the MI6, CIA and of course Soros, Gates and Rothchilds, and he voices the objectives of cANCer. Woo to those rulers once the objectives are achieved!!!! I see many puppets on the strings.


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