Foreign investors are likely to sit on the sidelines and watch how local companies and government respond to the last week of violence and looting, says Jacko Maree, special envoy on investment to president Cyril Ramaphosa.
Maree, who served as Standard Bank Group chief executive for 13 years, told 702 that South African companies are likely to move quickly to restore what they have lost and that this is what will decide whether international investors put their money back in South Africa.
“That is what foreign investors will look at primarily because when you’re looking at building a factory, or a mine or renewable energy plant clearly the destruction of physical property will be your highest concern,” he said.
KZN and Gauteng this week were swept by waves of protests that escalated in violence and the looting and destruction of businesses and public infrastructure, Maree said, adding that things are “going to be focused on local fixed investors on improving what they have on the ground here”.
Maree said that it was critically important that government reopen vital trade routes such as the N3 highway which connects Gauteng to Durban.
“As investment envoys, we have been talking to the relevant people in government to push this ahead, as obviously, this is the most important artery in the country, for the movement of goods in particular,” he said.
This was echoed by Fitch ratings, which said that investors will be tracking the aftermath and the government’s response on how it intends to get the economy back on track.
Fitch Ratings believes that the direct economic impact of riots in South Africa following the arrest of former president Jacob Zuma will be limited for the sovereign’s creditworthiness.
“However, the violence highlights tail risks to social and political stability and could affect fiscal policy, including public-sector wage negotiations, complicating efforts to stabilise the level of government debt/GDP,” it said.
The ongoing unrest is affecting critical sectors such as transport, but Fitch noted that this is expected to fade soon with only transitory macroeconomic effects.
“Even if it escalates, the effects on the economy should be temporary and are unlikely to affect South Africa’s rating which we affirmed at ‘BB-’ with a Negative Outlook in May 2021.
“In fact, the economy has performed better than expected – we revised our forecast for economic growth in 2021 to 4.9% in June, from 4.3% in our May review,” the ratings group said.
Ramaphosa to assess damage in KZN
Ramaphosa will undertake an oversight visit to eThekwini, KwaZulu-Natal on Friday (16 July) to assess the impact of recent public violence and the deployment of security forces.
The president will interact with the provincial government and security forces during the visit, the presidency said in a statement.
The visit follows government engagements throughout this week with different sectors of society, including organised business, interfaith leaders and leaders of political parties.
Ramaphosa deployed 25,000 members of the South African National Defence Force to assist members of the South Africa Police Services and metro police to restore order.
While relative calm has returned in Gauteng, with community and government-led mop-up operations underway, KZN remains volatile.