President Ramaphosa’s drive to address South Africa’s need for investment

SOUTH AFRICA - Report 24 Nov 2020 by Iraj Abedian

Since assuming office back in 2018, President Ramaphosa has been on a mission to raise capital for the SA economy’s growth recovery. From a demand perspective, three things that make up GDP can determine the quantity and direction of economic growth: domestic consumption, investment and the trade surplus. Investment by the private sector in particular, has been known to have positive multiplier effects in an economy. Over the past decade, economic torpidity in South Africa has seen a dearth of private sector investments. A number of factors have contributed to this, chief among them the fact that the private sector has been on an “investment strike” due to political concerns, and has as a result sat on a hoard of cash. In its glory years, South Africa has seen private sector investment translate at about 23% of GDP, even at a time when the world was hit by a financial crisis.

Today, private sector investment is approximately 20% lower than levels before the 2008/09 Financial Crisis, with the International Monetary Fund (IMF) noting that investment in South Africa has been lower than most of its BRICS counterparts between 1994-2017. It is against this background that President Cyril Ramaphosa initiated a drive to promote the country as an investment destination – a move that resulted in the annual South Africa Investment Conference, the inaugural one being held in 2018. The Conference aimed at increasing Foreign Direct Investment and is a vehicle targeted to raise R1.2 trillion in investments to stimulate economic growth.

This note reflects on the outcomes of the various Investment Conferences and their implications for the current state of the South African economy.

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