SA political risk worse today than under Zuma; Sakeliga conducts international tour

8 September 2019

Political risk in South Africa is worse today than three years ago under president Jacob Zuma. International diversification to hedge against local political risk is becoming the norm. This, according to a poll among Sakeliga members and subscribers in August 2019.

Sakeliga’s poll under members and subscribers were conducted in the run-up to Sakeliga’s upcoming tour to business destinations in Europe. Highlights from the poll include:

84% of respondents consider current political risk in South Africa worse than three years ago

25% of respondents have completed or begun to diversify operations internationally because of local political risk. Another 24% of respondents intend to diversify operations internationally within the next three years

21% of respondents have completed or begun registering parts of their companies in foreign jurisdictions because of local political risk. Another 25% of respondents intend to do so within the next three years

Piet le Roux, CEO of Sakeliga, says the internationalisation of South African businesses is, given the circumstances, to be welcomed: ‘Hedging against political risk in South Africa is eminently sensible. “State-proofing” enables businesses to continue local operations and protects the economy against an intensifying political storm. Without it, the South African economy would be in much worse shape soon.’

‘While true that some businesses and executives are exiting South Africa altogether, we do not yet find evidence of a wholesale exodus. Rather, we see numerous signs of healthy strategic hedging against political risk,’ Le Roux continues.

Le Roux says that, despite much hope, planning and rhetoric, the Cyril Ramaphosa presidency is not delivering the goods: ‘The scoreboard says president Ramaphosa’s term has seen increasing social instability, riots and disruptions, worsening business conditions, weakening property rights, doubling-down on race-discriminating policies such as Black Economic Empowerment, continued fiscal profligacy, and any number of other harmful interventions. It comes therefore as no surprise that businesspeople are deciding to mitigate their exposure to political risk, rather than wait on unkept promises of better business conditions.’

‘Keeping an economy’s engines of growth far away from the hands of politicians is not only good business, but most importantly a public service,’ Le Roux says. ‘As such, we welcome the increasing internationalisation of businesses in South Africa as something that improves local economic conditions, given the circumstances of political risk. No doubt, the trend will reverse once president Ramaphosa delivers on his promise of a new dawn. Until then businesses in South Africa are going to do the responsible thing by hedging themselves, their employees and their clients and customers against political risk.’

The poll had 261 respondents. For more information on the poll, click here.

Issued by Piet le Roux, CEO, Sakeliga, 8 September 2019