EWC or investment, not both – IRR

19 November 2020

Much fanfare attended this week’s South Africa Investment Conference (SAIC), but any hope of painting the country as a prime investment destination is contradicted by data on investor sentiment, and undermined by the government’s own determination to press ahead with expropriation without compensation (EWC).

The new Expropriation Bill, which, if enacted, would deepen the steady erosion of property rights under the ANC, is a red flag to the investment on which growth and job-creation depend.

It would add to an already hostile regulatory environment which – whatever the pledges at fancy conferences like SAIC in Sandton this week – has led to a steady withdrawal of investment in recent years.

Consider that

From January to October 2020, some R121,8 billion worth of private equities were sold by foreigners on the JSE;

In only two of the last ten years (2010 and 2014) were there net positive purchases of equities on the JSE by foreigners, with the remainder seeing foreign investors abandoning the JSE;

Over the same period, R82.3 billion in bonds were sold off by foreigners (vastly higher than any year since 1994); and

Gross Fixed Capital Formation as a proportion of GDP has been decreasing since 2013. In 2019, it was just 17.9% – lower the average for southern Africa and lower even than many developed nations.

South Africa’s “lost decade” under Jacob Zuma has continued under President Cyril Ramaphosa; at the heart of investor anxiety is his government’s commitment to EWC, heedless of the risks and the warnings.

We can host the most amazing investment conferences the world has ever seen, and talk about our beautiful wildlife in perpetuity, but these are not what attract investment. What does attract investment is low taxes, a liberal labour market, and, most important of all, rock solid property rights, which are fundamental to every successful economy.

These are all things which South Africa lacks. We will not attract investment without being able to assure investors that their property rights are protected.

Said IRR Head of Strategic Initiatives Hermann Pretorius: “The government’s lack of political will to reform means that it will continue to shoot itself in the foot on investment, resorting to marketing South Africa as a charity case rather than as a competitive economy on the world stage.

 “The government begs businesspeople to invest in South Africa while simultaneously pressing for a law that will risk exposing their investments to the whims of municipal cadres around the country. South Africa can either have EWC or investment, but not both.”

Issued by Hermann Pretorius, IRR Head of Strategic Initiatives, 19 November 2020