South Africa keeps scoring own goals – and investors are taking note

Going into the Investment Conference this week, South Africa needs to put its best foot forward; however, it has done little to make itself look attractive to foreign and domestic investors, says Busi Mavuso, the CEO of Business Leadership South Africa (BLSA).

The fifth and final South African Investment Conference (SAIC) will be held in Johannesburg on 13 April and forms part of the government’s plans to attract R1.2 trillion in investment over five years.

SAIC brings delegates from around the world to South Africa, and last year’s event raised R367 billion in investment commitments – putting the country closer to its five-year goal. Since the first conference in 2018, South Africa has attracted R1.14 trillion in investment commitments.

To ensure that investment into the country keeps flowing, constant care needs to be taken regarding the ‘brand’ of South Africa shown to investors.

Mavuo said that if the government wants to ensure that trillions of dollars are invested in the country, government communications should draw focus to the progress in ending load shedding, commitment to the national energy plan and renewables, not exempting Eskom from disclosure requirements, the importance of coal, and clearing up confusion over the national state of disaster.

According to the CEO, last week’s debacles involving the recall of the national state of disaster as well as Eskom’s exemption from reporting certain financials, made the runup to the conference very weak.

“There were several blunders in how government communicates to the market,” said Mavuso.

One of the most notable blunders was around the exemption given to Eskom, allowing it to skip reporting irregular, fruitless and wasteful expenditure in its annual financial statements.

On 5 April, finance minister Enoch Godongwana withdrew the exemption. Treasury initially said that the exemption was instated primarily to protect the embattled power utility’s credit rating and audit opinion – this, however, was met with mass public outcries over it being abused for further corruption at the company.

Mavuso said: “The way it (the exemption) was communicated to the market (created the impression) that the exemption was to enable withholding of information from rating agencies (and this) was a serious blunder. It damages the government’s reputation as an honest counterpart to investors.”

Despite the exemption being withdrawn, Godongwana has made it clear that it is only a temporary withdrawal, and that the exemption will be reinstated at some point. Thus the anxiety around the move persists.

A further blunder was made by the electricity minister Kgosientso Ramokgopa who told journalists last week that South Africa’s ageing coal power fleet needs to become a priority again – diverting attention away from the overall transition of South Africa’s energy sector to more renewable power supplies.

“While it is completely right that the stations should be managed to improve performance, the minister was widely quoted saying that their lives should be extended through greater government investment while more should be invested in coal mines to produce more coal,” Mavuso said.

“This would not be about running the stations better, but about breaking with the plan set out by the National Electricity Crisis Committee (NECOM) based on the existing decommissioning schedule for Eskom plants.”

Mavuso said that while the minister himself may not have intended to imply a swing away from renewable, his comments risk being interpreted poorly by foreign investors who are planning to pour billions into the country’s transition away from coal.

Ramping up renewables should be the focal point of the minster of electricity if investment is to flood into the country, Mavuso said.

“One of the PR opportunities was that Nersa released data showing 1.2GW of new electricity production was registered in March, bringing the total for the quarter to 2.4GW. That is half the nameplate capacity of Medupi, registered in a single quarter…That is quite some achievement, yet there was no press release and no comment on it from the minister,” said Mavuso.

She said that if ever there was an opportunity to tell a credible story of progress toward resolving load shedding, the minister should have outlined this.

South Africa’s bad PR continued with the sudden withdrawal of the state of disaster on the energy crisis. The state of disaster was already under intense scrutiny from businesses, politicians and citizens for ultimately being meaningless. The sudden termination essentially cemented this view.

“The unavoidable impression is that government did not have good grounds for announcing a state of disaster and that it was completely unnecessary in dealing with the electricity crisis,” Mavuso said.

Going into the Investment Conference this week, Mavuso said that government needs to signal to the world that it is committed to the transition to renewables.

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