Investors vote with their feet: CEO

 ·13 May 2024

Foreign investment will come and go in South Africa – but at the moment, there is a sense that businesses are heading for the exit, says Business Leadership South Africa (BLSA) chief executive Busi Mavuso – and the government isn’t helping.

“While (investment) decisions are inevitably going to happen both ways, the more attractive our country is, the more often you can expect investment to be made than withdrawn. It feels now that the withdrawal of investment is dominating,” she said.

Mavuso said that two major indicators of this sentiment have reverberated through the country in recent weeks:

First, the announcement last week that Shell will exit its downstream business in South Africa; and second, news that BHP is keen to buy Anglo American, provided it first unbundles most of its South African assets.

The BLSA lead said both these moves make it clear that “global giants have lost appetite” for South Africa.

“People vote with their feet, capital has many addresses, and if we’re not going to make it easy to invest here, it is going to land somewhere else,” she said.

Making matters worse, Mavuso said that the political response to these moves has also damaged the investment environment. Mineral resources and energy minister Gwede Mantashe, in particular, has taken a decidedly antagonistic stance.

Last week, he threatened Shell over future exploration licenses for its upstream business, saying, “We should be more reluctant” to grant permits and licenses to the company because of its decision.

He also described BHP as “not positive” for South Africa and that he would vote against its bid for Anglo if he could.

This kind of rhetoric is obviously going to be noticed in global boardrooms. It says the South Africa government is not one to respect the business decisions of companies,” Mavuso said.

“While it may legally have little discretion to intervene on companies’ licenses and to block transactions, that doesn’t mean it doesn’t want to. Any company must pause and consider whether the legal position may change in the future, given that the government seems to be signalling that it is not so keen on companies acting in their own commercial interests.”

The flip side

Despite the negative sentiment created by these moves, South Africa is still drawing investment, Mavuso said, highlighting Amazon Web Services still choosing to pump billions of rands into the country, and Amazon South Africa launching its marketplace last week.

The BLSA CEO said that this highlights the “background” reality in South Africa, in which certain business sectors are waning (mining and manufacturing) while others are opening up.

The key, though, is that South Africa needs to make itself as appealing as possible as an investment destination to take advantage of those sectors that are growing.

“If we want to attract companies that must make big long-term investments…we must create an investor-friendly environment. Investors are aiming to maximise their returns, full stop. If we make clear that South Africa is a good place to be able to do that, companies will come,” Mavuso said.

A big step in getting this right would be to instil confidence that the government respects the commercial realities facing companies.

“I can tell you that having a minister (Mantashe) who loudly proclaims displeasure and threatens investors with consequences, is only going to confirm what investors fear.

“The better approach is to signal regret, but respect commercial decisions, and redouble efforts to make South Africa attractive to investors so that next time the decision is different,” she said.

Read: Mantashe wants to ‘punish’ Shell over South Africa exit

Show comments
Subscribe to our daily newsletter