It has been very disconcerting to hear big business representatives and some economists praising the government’s investment drive in radio interviews. They see ‘green shoots’ in South Africa’s economic scorched earth.

For reasons which include ideology and patronage, investment has been actively discouraged by the government, in deed if not in word.

The IRR has opposed deterrents to local and foreign investment ad nauseam, but has also repeatedly put forward policy options that would really grow the economy. If local pleas don’t help to convince government, maybe foreign ones will.

In an article in BusinessLIVE on 17 November, Raul De Luzenberger, the European Union Chargé d’Affaires, listed the obstacles to investing in South Africa for EU businesses.

De Luzenberger reminds us, and we need reminding, that the EU is South Africa’s largest investor (40% of total investment stock) and it is also our main trading partner (25% of SA’s overall trade flows).

He then highlights the significant bars to further investment by the EU, and echoes the concerns of NGOs and many economists.

BEE tops the list of impediments. De Luzenberger advises that only ‘policy recalibration’ will overcome firms’ concerns and allow them to contribute to economic transformation.

‘The ownership target is particularly problematic, as many EU enterprises are family-owned and therefore unable or unwilling to transfer shares to external parties.’ The insecurity that this induces requires a ‘recalibration’ of B-BBEE policy

The IRR has been implacably opposed to BEE for a number of reasons, including that it discourages investment. Together with cadre deployment, it is a spur to corruption, and often enriches a few who bring nothing to the table, thus benefiting only a handful of the politically connected.

The EU believes that the government should rather reward skills development and reduce the emphasis on ownership, ‘thus making SA significantly more attractive, particularly to foreign small, medium-sized and micro enterprises (SMMEs)’.

Internationally uncompetitive

The second prohibiting factor for the EU is public procurement, which has made local production internationally uncompetitive. De Luzenberger refers to the Draft Public Procurement Bill which sets out a single regulatory framework for all tiers of government and state-owned enterprises. It is silent on how B-BBEE – the preference point system and local content regulations – will be applied.

Meeting localisation requirements in the renewable energy sector is particularly difficult, because of the significant costs of establishing production facilities, the additional skills development requirements for renewable energy bids, and the unavailability of certain inputs, particularly for power producers.

Employment equity allows the labour minister to set and regulate sector-specific targets for companies with more than 50 employees and to require an ‘equity compliance certificate’ in order to access state contracts.

The penalty for non-compliance will be absolute. The labour minister has great discretion in defining an economic sector and setting targets. This is a significant risk for investors in government infrastructure and energy investment projects. Ramaphosa’s recovery plan is premised first and foremost on infrastructure development.

A further impediment is the lack of skills locally, due to the poor education system, labour legislation, and difficulties in obtaining visas and work permits for foreigners.

To ensure that SA’s investment drive meets its objectives, De Luzenberger says that the government must tackle ‘key obstacles to investment that dissuade and in effect prevent companies from contributing meaningfully to economic transformation’.

For most EU investors, the overlapping and cumulative requirements of these multiple and changing policy frameworks make investment or expansion decisions particularly complex and, in some cases, prohibitive.

Unambiguous admonition

This is a surprisingly clear and unambiguous admonition to government from a keen and supportive investment partner, and a plea to make real structural changes and not the ‘structural changes’ to which the president keeps referring.

Strengthening B-BBEE, implementing expropriation without compensation, nationalising the Reserve Bank, hindering communications development, threatening to appropriate retirement savings and so on are not what the EU – and certainly not the IRR – have in mind as the ‘structural changes’ the country needs.

If the government won’t even take heed of its major foreign investor, South Africa is going to go to the back of the queue in the competition for foreign investment.

Mr. President, if you won’t listen to your patriotic detractors, please listen to one of your closest friends.

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4 COMMENTS

  1. CR remains a loyal cadre dedicated to the survival of his collective. The prosperity of the country is a side issue.

  2. ANC bases their beliefs on a scriptures of a man that refused to work and demanded that his family must share their wealth with him.
    Asking them to give up on those scriptures is like asking a Christian to give up on the 1st commandment.

  3. It is unfortunately true that the corporate business are in fact in cahoots with the ANC.

    It was once a hidden secret but we have all seen how willingly they accept the Diktats imposed by Government on their business. In fact many are quite willing to contribute to ANC policies. We saw that with the Rupert and Oppenheimer contribution disguised as donations for Covid19 relief. Of Course CR was glad to announce that.
    Even the SAB Foundation was happily promoting the Government and Corporate affection for Small business and entrepreneurs while their customers and their employees were at the mercy of them. None of these “Great” corporates said anything about the fact that State employees were unaffected by the diktats, they remained on full pay and entitlement of paid sick leave due to do covid under the guise of essential operation of the state . Wasn’t it wonderful!!!

    There is most probably the promise of a reward of some sort for their compliance. We see the MSM as part of both Government & Corporate and they are there as the loudhailers of the ” PPP Good News”. We are quickly becoming a Facist state where, the government controls the means of production, but leaves ownership in private hands.(Provided that what is agreed in Nedlac meetings is complied with).

    It was clear that there was no challenge with the Covid19 diktat by the big Corporate companies while the Government destroyed the economy. They were quite happy to oblige while their competitors were destroyed so they could monopolise and pursue larger profits. Its a disgrace to say the least.

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