Interventions for fostering growth

Suggestions to enhance investor confidence

South Africa should build on its strengths, in addition to trying to overcome its weaknesses. Money flows where there is a competitive advantage.

Build on strengths and focus on competitive advantages Instead of entering industries in which South Africa may not be competitive, the country should focus on industries where it has a competitive advantage such as agriculture, mining and the automotive industry. For instance, efforts should be directed to ensure that the automotive industry and supply base are even more internationally competitive.

Create a geopolitical alternative

Incentivise youth employment and training The country is already competitive in agriculture and should focus on related industries such as food processing. By ensuring the quality, and improved marketing and branding, of locally produced food products, we could compete globally. The world is in for a bumpy ride, from a political and economic perspective, in the next couple of years. South Africa should establish itself as a geopolitical alternative if manufacturing, supply chains or trade routes are disrupted in other jurisdictions. Disruptions caused by the global Covid-19 pandemic highlighted the role that South Africa could play as a geopolitical alternative for global companies. The Broad-Based Black Economic Empowerment scorecard could be reconfigured to incentivise businesses to invest more in youth employment and training. It is suggested that the Youth Employment Service (YES), started by President Cyril Ramaphosa, be extended to allow for three years of employment. Currently, businesses that participate in the YES programme create one-year positions for youth aged between 18 and 35. Many young people who completed only a one-year internship still end up without a job. It is suggested that this be extended to three years, offering those who received the internship a better chance of finding permanent employment.

Interventions for fostering growth

Suggestions to enhance investor confidence – continued

Pursue sustainable energy investments South Africa is in a prime position to pursue sustainable energy investments and invest locally in ‘green’ hydrogen in a big way, with key resources readily available. These investments would come at a time when there is a global shift to advancing an environmental, social and governance mindset.

Should South Africa manage to deliver cheap and sustainable energy, it could attract industries that are no longer viable in the West, owing to space constraints or the higher cost of electricity.

Sustainable energy investments will also assist South Africa to deal with its electricity supply issues. This is also of particular importance, considering the automotive industry’s impending shift to electric vehicles.

Selective priorities for implementation success

Speed up privatisation A suggestion for sustainable energy investment is that companies with big warehouses, for instance, be incentivised to install solar panels on their roofs for own use and to feed excess electricity back into the grid. South Africa must curtail its ambitions, focus on a smaller number of deliverables, and ensure that they are implemented effectively. Succeeding in three to five policy areas, rather than spreading the efforts across a broad spectrum of areas without the means or capacity to implement them, will yield more positive results. Priorities that would bolster the economy most are education, infrastructure and digital connectivity.

Strengthening the capacity of the State is needed to ensure the successful implementation of polices and plans. Technical skills at national, provincial and local levels must be reinforced to deliver on plans.

Fast-tracking the privatisation of certain State-owned enterprises (SoE) will improve the efficiency of service delivery, freeing up funding that government can use to focus elsewhere. Government has announced the sale of 51% of South African Airways to a private consortium, marking a shift from the State’s stance on SoE control and ownership.

Interventions for fostering growth

Suggestions to enhance investor confidence – continued

Support foreign investors and rebuild trust

Rebuild the education system Government should be prepared to support manufacturers of large machinery and equipment if it is to attract investment. Currently, South Africa lacks the volumes required for multinationals to view the country as an attractive investment destination. Investors must feel there is a ‘reward’ justifying the ‘risk’ that they take investing in a country.

There is also little trust between government and business, specifically long-term investors. A concerted effort is needed to build trust between government, authorities, and businesses. Unless trust is restored, business may view South Africa as being ‘too risky’.

South Africa cannot solve its unemployment problem without also solving its education problem. More emphasis should be placed on the first 12 to 15 years of life, ensuring that young people are properly educated, with a stronger focus on effectively teaching science, technology, engineering, and mathematics. This will benefit not only the labour force, but also make people more employable, chipping away at the country’s high unemployment rate.

However, government cannot solve the education issues on its own and more private-sector involvement is encouraged, although private-sector participation should not compromise access to education, which the State makes available on a fee-free basis.

Use transformation funding more effectively

Weed out corruption The private sector could also collaborate, pooling together funds to address pressing needs at schools in their region.

The automotive industry’s collaboration on transformation funding is an example for other industries to emulate. The Automotive Industry Transformation Fund was established as a collective equity-equivalent investment programme, as defined in the Broad-Based Black Economic Empowerment Codes. It aims to facilitate transformation in the automotive sector’s value chain through the provision of access to developmental funding, access to market and access to capacity development for qualifying black-owned entities. Pooling resources together could amplify the impact. The same could be done with corporate social investment funding, where several large corporates pool their funds together for a bigger impact than smaller initiatives. Law enforcement capacity must be strengthened to deal decisively with corruption in the private and public sectors. Holding government more accountable will assist in fighting the scourge of corruption.