Africa-Press – South-Africa. South Africa’s problem securing investment isn’t due to a ‘liquidity crunch’ among investors – but rather a growing confidence crisis in the government.
However, major policy shifts—albeit slow—are beginning to re-entice potential investors.
“The relationship between government and the private sector muddied during the Zuma years (2009 – 2018),” said Nedbank senior economist, Isaac Matshego, presenting at a pre-election roundtable this week (April 24).
However, the proliferation of corruption, even after the so-called “9 wasted years,” with little to no consequences, the breakdown of service delivery, particularly seen in energy, transport, and security, and a subsequent decrease in confidence in the government have not done any good in rebuilding those burnt bridges between potential investors and the government.
This does not mean that the money to make a difference is not there.
Matshego said that speaking to a wide array of asset managers—from Ninety One to Old Mutual to within the Nedgroup—the desire to invest is there.
“We don’t have a liquidity crunch; we have a confidence crunch,” said the economist
“[Fellow asset managers] always say that we’re looking for investment opportunities in South Africa, investable projects at the right risk, and the moment those come along, we will put money into that,” said Matshego.
“So local asset managers want to partner, for instance, with the infrastructure fund to develop public infrastructure in South Africa [but they are hesitant to because] it’s more of a confidence issue, not a liquidity crutch,” as a result of the abovementioned factors, he added.
Is the wheel turning?
Matshego said that if South Africa is to reverse souring investor sentiment, South Africa needs to urgently fix its energy, transport and security issues while subsequently cleaning up its ailing image, which is partly resulting from corrupt activities.
Positively, Matshego said that despite these numerous prevailing issues, like low trust in government due to the abovementioned reasons, President Cyril Ramaphosa’s administration has implemented some reforms to restore investor confidence.
This is specifically seen in the shifting of government policy towards a hybrid state model through the promotion of public-private partnerships.
These policies have resulted in changes which include increased investment in renewable energy by private companies, a new management team at Transnet, and the awarding of the Durban Pier 2 container terminal to a private firm.
Last year, President Cyril Ramaphosa said that he is targeting R2 trillion in new investments over the next five years.
While the money is there, if numerous issues that have contributed to investor scepticism over the past several years are not improved, their purse strings may remain tightened.
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