Investors fear SA may resort to exchange rate controls similar to Zimbabwe – analyst

Increasing corruption and rising government spending has seen South Africa pushed to the bottom of investment firm Franklin Templeton’s list of emerging economies, with the country falling off investors’ radar.

“China is obviously at the top of our list. Then India, which is growing very fast. I’d say South Africa is probably down at the bottom in terms of us wanting to put in more money,” the firm’s executive chairman Mark Mobius told Reuters on Tuesday.

Mobius said that there was even a fear that the country may eventually resort to exchange rate controls similar to those in Zimbabwe and Nigeria.

“When you read about all of the corruption and the inability of government to move ahead on infrastructure, that’s a real problem,” he said.

“The first thing we think of when we go into a country is can we get out. If we put money in can we get it out,” Mobius, whose firm manages over $740 billion in assets globally, told Reuters.

“If the foreign exchange situation in South Africa is getting worse, and if government is spending too much, you may see foreign exchange controls.”

“A lot will depend on what happens at the end of the year with the ANC elections,” Mobius said.

Meanwhile, CEO of Business Leadership SA Bonang Mohale, said that the bailout of state owned entities has hampered growth.

“We have spent R50 billion on SAA since 1999. If we had not done that‚ we would have bought Emirates Airlines. We would have in 23 years at least had four CEOs that are being head-hunted for being effective and efficient knowing how to run an award-winning airline‚” said Mohale at a panel discussion on Tuesday‚ Times Live reported.

“Post-December 20‚ I think we will be confronted with two challenges. The first will be a fiscal cliff where this government will run out of money at the rate that we are bailing out state-owned enterprises. Secondly‚ I think that most of us are beginning to think about an emergency economy recovery plan‚” he said.

Read: Corruption costs SA GDP at least R27 billion annually, and 76 000 jobs

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