Picture: Timothy Bernard / Independent Newspapers / January 11, 2024 – Finance Minister Enoch Godongwana today hosted a business breakfast in Sandton to give the media an opportunity to ask questions to the team that he has led to the Davos Business forum.
By Kim Heller
In the magical wonderland of Davos, it was a matter of make-belief for South Africa. The famous UK fictional author of children’s tales, Enid Blyton once wrote, “The sun has drowned itself in the sea.” The once bright investment ray of the Rainbow Nation is no longer. The light of hope has drowned in a torrid wave of titanic economic fail. And investors are sceptical.
The World Economic Forum (WEF) held its 54th Annual Meeting, in Davos, Switzerland, from January 15 to January 19, 2024. The WEF 2024’s focus on building trust and global co-operation could not have been more relevant given the fraught and friction of the contemporary geo-politics.
South Africa’s delegation was led by the Minister of Finance, Enoch Godongwana. The finance minister took the opportunity “to remind our partners around the world that South Africa has made tremendous progress in the past 30 years since we achieved democracy”. Godongwana also reassured potential investors that despite the obstacles that the country is facing in terms of “balancing fiscal sustainability, growth-accelerating reforms, and targeted spending on social services and infrastructure”, progress is being made. “We are forging ahead and making good progress.””
The government reported that the WEF trip was tough but productive. It is unlikely that the same old spell of promises presented at this and previous World Economic Forums, in the pristine slopes of Switzerland, will draw the necessary investment allure. With an energy crisis that shows little promise of resolution, the threat of water shedding, the impending collapse of Transnet, a general climate of corruption and crime, the possibility of election turmoil and the ever-lingering spice of Phala Phala, South Africa is a risky investment.
The theme of this year’s WEF was ‘Restoring Trust.’ It did not help that President Cyril Ramaphosa was absent, for the second consecutive year. Or that Godongwana’s presence was notably underwhelming. This is not the hardy work required in the worldly art of confidence building.
South Africa’s call for investment was the same old song. Of endless reports of progress on problems rather than of tangible solutions reached. The ‘Please Be Patient’ investment ring tone of South Africa is becoming increasingly dull and mute in the garnering of strong investment support.
Godongwana made a grand song and dance about the fast-expanding BRICS block. Demeke Mekonnen Hassen, Deputy Prime Minister and Minister of Foreign Affairs of Ethiopia also spoke of the power of BRICS. He said, “The establishment of BRICS is a good opportunity to strengthen multilateralism and create access for partnerships between developed, developing and underdeveloped countries.”
But even with its new African and Arab state members, BRICS is unlikely to bring about a significant shift in the global power dynamics in the immediate or short-term. This despite it constituting close to 45 percent of the world population and boasting a combined economy of $28.5tn (just under 30 percent of the global economy), according to World Bank data.
While the BRICS power block may be positioning as a significant agenda setter in the increasingly fluid geo-political terrain of global power relations, this is not imminent. For now, economic control lies with the US, China Japan, India, and Germany. World Bank research, conducted in 2022, on the percentage Share of the Global Economy, shows that the US has a 25.32 percent of the pie, followed by China at 17. 86 percent. Japan, Germany, and India all hover around 4 percent.
According to African Economic Outlook 2023, Africa’s real GDP growth fell from 4.8 percent in 2021 to 3.8 percent in 2022. This decline can be attributed to a multitude of factors, including internal conflict, the lingering aftershock of Covid-19, and global supply chain challenges due to international wars. Nonetheless, the African Economic Outlook points to the resilience of African economies and forecasts an average growth of 4.1 percent in 2023 to 2024.
Africa is likely to continues to get a measly slice of the investment pie. With elevated levels of civil unrest and uncertainty around electoral outcomes as eighteen countries are expected to go to the polls in 2024, Africa remains a perilous investment.
Kashim Shettima, Nigeria’s vice-president said “Africa holds the promise, but we need partnership. I don’t subscribe to the idea of begging. We can carry our poverty with dignity.”
While Africa is trying hard to move away from the chains of international foreign aid, the Continent is yet to emerge as a top investment destination. While it is increasingly attracting developmental funding, this is a world away from the nirvana of strong and sustainable global investment.
For Africa, the 2024 World Economic Forum, bore small fruit. A project comprised of forty global companies. spearheaded by the WEF, in tandem with the African Continental Free Trade Area (AfCFTA) Secretariat, is expected to boost investment on the Continent.
Timbuktoo, a United Nation’s start-up fund is set to support entrepreneurial startups in Africa. While this may well impact positively on the spirit and wellbeing of enterprise in select countries, it is unlikely to touch the true levers of economic sustainability; namely sustained job creation and infrastructural enrichment, or perhaps most important of all, self-sufficiency.
FirstRand Ltd’s Mary Vilakazi spoke of the critical need for African countries to access capital. She advocated for banks to prioritise businesses which create employment and build the requisite infrastructure to drive economic capital.
The President of the World Bank president Ajay Banga said, “People are beginning to understand the importance of Africa’s place in history going forward over the next 10, 20 years”. UNDP administrator Achim Steiner said, “Africa is increasingly going to emerge as an investment destination.” But this optimism is still not translating into large scale international investment.
WEF is seeking and invested in building a new growth model based on four key pillars: innovation, inclusion, sustainability, and resilience. Africa may walk away from WEF 2024 with a larger slice of pie. But in the end, it is still the crumbs of global investment.
Kim Heller is a political analyst and author of ‘No White Lies: Black Politics and White Power in South Africa’.