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Instability imperils Ramaphosa’s R2trillion investment target

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Picture: Phando Jikelo African News Agency (ANA)President Cyril Ramaphosa delivers the 2023 State of the Nation Address. The Budget speech on Wednesday, as well as the skills and/or calibre of the Cabinet that the presidnt appoints in the next few days, weeks or months, will determine whether the R2 trillion investment target will be achievable.

By Bonke Dumisa

President Cyril Ramaphosa publicly set his Presidency an investment target of R1.2 trillion for the first five years of his term. He has now declared that the R1.2 trillion investment target was achieved and exceeded, so he has set his second-term Presidency an even higher investment goal of R2 trillion for the next five years up to 2028.

There are many sceptical people who doubt the figures given by the Presidency, citing mainly the issue of continued unemployment as a reason why they doubt whether there has been so much investment in the past five years. I don’t blame those sceptics for being doubting Thomases, but the reality is that the R1.2 trillion investment target was achieved.

I will briefly deal with the reasons why many people may not have noticed such major investments. In many people’s minds, investment is usually associated with greenfield investments, where totally new investments take place, usually from foreign investors. This was not the case with the R1.2 trillion target for the past five years. There were many investment pledges made by existing businesses, who decided to use this investment opportunity to cement their market leadership.

Two of the obvious examples are the economic development of Prospecton in Durban by South African Breweries, part of the Anheuser Busch multinational corporation, and Toyota Motors SA. At the fourth SA Investment Conference, SAB made a R4.5 billion investment pledge for different purposes.

Part of this investment was the R650million towards the SAB’s Prospecton brewery project, which commenced in October 2022. The investment at the Prospecton plant was meant to create 56 new direct full-time jobs and generate 24,000 jobs through the value chain. For many less well-informed people, the focus, under normal circumstances, would just be on the 56 direct full-time jobs and scarcely on the 24,000 jobs through the value chain.

I was talking only about the SAB Prospecton brewery plant – just imagine the use of the other R3.85bn elsewhere in the country. Calculate the additional taxes – billions of rands – that will accrue to the national coffers owing to these investments.

Toyota Motors SA similarly pledged hundreds of millions of rands to expand its production capacity at its Prospecton plant. The same sentiments come into being here. The same can be said about the Ford Motors investments, which saw the company significantly increase its Ford Ranger production capacity in South Africa.

Now, having shown that the investment drives and campaigns of the past worked, the question is whether the same success can be guaranteed in respect of the R2 trillion new investment target. I cannot guarantee this goal will be reached, but it is possible. While the business climate over the past five years was significantly negatively affected by the Covid-19 pandemic, the advantage that the South African economy had was that there was an element of economic and political certainty, despite all the internal ANC factional battles leading to the December 2022 ANC national elective conference, where Ramaphosa won a clear mandate to lead the ANC.

Under the circumstances, the situation going forward will be much clearer for the investment environment. Eskom’s load-shedding problems are casting a big shadow over future investment decisions by many potential investors. It is highly unlikely that any future major investment will be crucial job-creation, especially because of the widening gap between the expectations of investing businesses and labour. There is a widening trust deficit between labour and business, which is being recklessly created by some business executives and some trade unions.

There is a desperate need for South Africans to fully understand why businesses invest. Businesses will not invest where they are not guaranteed that they will be able to peacefully operate. It is clear that most businesses that were targeted, looted and destroyed during the July 2021 criminal economic sabotage were businesses in geographic areas where they had more possibilities for future growth, and had more capacity for creating more jobs. Paradoxically, these were the businesses that were more severely targeted and destroyed, and most of them have barely been restored to their previous condition.

The global economic situation with many predictions of recession in most countries implies there will, in the short term, be less investment money to come by, especially for suspect investment destinations like South Africa, because of the load-shedding crisis.

The Budget on Wednesday, as well as the skills and/or calibre of the Cabinet Ramaphosa appoints in the next few days, weeks or months, will determine whether the R2 trillion investment target will be achievable.

Prof Bonke Dumisa is an independent economic analyst