BLSA CEO Letter – 24 October 2022
POSTED ON: October 24, 2022 IN by Admin
While investors still see South Africa as an investable destination, they’re becoming impatient with the slow pace of reforms. That message was clearly conveyed at a dinner that BLSA hosted for the 20-20 Investment Association in Johannesburg last Thursday.
The association is a global grouping of economically powerful institutional investors whose members include sovereign wealth funds, family offices, endowments, foundations and money management organisations with headquarters in no less than nine countries. This group of investors is not going to put money into this country because they think we’re nice people. What they want is to invest into a stable environment where they receive solid returns on their investments.
There is a myriad of new investment opportunities available in South Africa such as those in the renewable energy generation and transmission sectors as well as in electric vehicle manufacturing sector and the generation of green hydrogen. Investors should be queuing to be part of these developments.
In addition, the attraction of some other emerging markets like Turkey and Russia have waned, providing a perfect opportunity for South Africa to step in but with our challenges including persistent load shedding, unemployment, labour issues and the lack of implementation of crucial reforms, will we be able to do so?
Another of my observations from Thursday’s dinner is that the members of the 20-20 Investment Association are anything but naïve about our extremely high levels of corruption and they feel that not enough is being done by government to stamp it out.
Some of these investors have just seen the difficulties Mauritius faced when it was grey listed by the Financial Action Task Force (FATF) and are unlikely to want to invest in another country that faces the same fate. According to the FATF, an organisation that oversees compliance with anti-money laundering measures, South Africa is partially compliant or noncompliant with 20 of its 40 recommendations. The FATF’s evaluation found that there SA has enormous flaws that relate to state capture and our inability to prosecute criminals and a decision will be made in February next year on whether South Africa should be grey listed.
BLSA’s recent report on grey listing finds that there is an 85% chance that we’ll be placed on the grey list and as I’ve said before, focus needs to be placed on the 15% chance of us avoiding grey listing altogether because if we are grey listed it will be very difficult for foreign investors like the members of the 20-20 Investment Association to do business with us.
The consequences could be grim. Our report estimates that the economic impact of grey listing could be limited or severe depending on how South Africa reacts to grey listing. They estimate the impact at under 1% of GDP if we act with alacrity to 3% of GDP if South Africa is perceived to be slow and unwilling to meet the standards set by FATF.
It’s clear from conversations with members of the association that we are not the worst investment destination in the world – but we need to do much more to build an investment-friendly environment by implementing wide-ranging structural reforms to make our economy more competitive and by implementing our resolution to do away with red tape. We also need to prosecute all those responsible for state capture.
It’s important to remember that whatever is broken can be fixed and global investors need to be assured that we’re working on creating a desirable investment environment.
The profound economic damage caused by the Transnet strike requires a “big bang’’ response to fix the inefficiencies in our transport and logistics systems, I write in News24 Business. The Economic Regulation of Transport Bill, which enables reforms to ports and rail systems, was tabled only in January 2020 while many of its key elements have been official government policy since 2005. It is still making its way through parliament. And while its reforms are important, they are too restrictive and don’t go far enough. We must remove our state-owned enterprises from this doomsday loop where they repeatedly return to the state for bailouts while the measures to fix them never seem to get implemented.
BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. In 2017, BLSA signed a contract with South Africa, committing business to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.
Have your say.
Share your opinion