Despite the decision by Standard & Poor\u2019s (S&P) to downgrade South Africa\u2019s sovereign credit rating, the country could continue to improve its attractiveness as a Foreign Direct Investment (FDI) destination.<\/p>\n
This was the consensus among leaders of some of the country\u2019s most respected companies, who participated in a panel discussion hosted by Sanlam Private Wealth and Financial Mail on Thursday evening.<\/p>\n
Naspers Group CEO Bob van Dijk, Lonmin CEO Ben Magara, and Sigma Capital executive chairperson Phuti Mahanyele emphasised that apart from a country\u2019s sovereign credit rating, investors look at a basket of factors, including whether or not the regulatory regime can provide reliable long-term protection on investments.<\/p>\n
Investors look beyond a country\u2019s credit rating<\/strong><\/p>\n During the discussion \u2014 moderated by Dani\u00ebl Kriel, CEO of Sanlam Private Wealth \u2014 Van Dijk indicated that Naspers invests in companies with the potential of substantial growth over the next few years, including those in \u2018challenging\u2019 markets.<\/p>\n \u201cWe\u2019ve invested a lot of capital in Brazil, for example, which has also been downgraded to junk status. But we don\u2019t look only at a country\u2019s credit rating. For us, the main question is around the business opportunity, but it\u2019s also about being comfortable that an investment will be protected over the long term.\u201d<\/p>\n Van Dijk cited India as another example of a \u2018highly investor friendly\u2019 emerging market. \u201cThe regime in India is committed to creating a stable and predictable environment for investment, and the country has enjoyed strong economic growth for a number of years.<\/p>\n “Also, India has invested heavily in technology infrastructure and has now overtaken the US in terms of the number of internet users. Three years ago, around 100 million people had internet access, but this number has now increased to 500 million. All these factors are very compelling from an investment perspective,” the CEO said.<\/p>\n Be aware of politics, but focus on policies<\/strong><\/p>\n Lonmin\u2019s Magara stressed the need to embrace complexity. \u201cWe ignore politics at our peril, because politicians make the policies that we need to grow our businesses.<\/p>\n “Consistency of policy and stability are crucial, and we hope that the new finance minister will realise the value of collaborative efforts such as the CEO Initiative in ensuring that we address the issues our country is grappling with,” Magara said.<\/p>\n Active corporate and individual citizens required<\/strong><\/p>\n Sigma Capital\u2019s Mahanyele – formerly CEO of Shanduka Group –\u00a0 said the only way the country can pull itself out of the current quagmire is through the actions of ordinary citizens.<\/p>\n \u201cWe can no longer sit back and wait for the politicians to act. We all need to get involved. If South Africans stand up and show the world they want change, this will go a long way towards encouraging investor confidence.\u201d<\/p>\n Constructive engagement and encouraging perspectives<\/strong><\/p>\n Kriel told the panel that one positive development after the shock of Nenegate in December 2015 was increased collaboration between business, organised labour and Treasury, primarily to avert a sovereign credit downgrade.<\/p>\n \u201cBusiness leaders are now speaking with one voice, as evidenced by the strong statement by the CEO Initiative over the weekend following Zuma\u2019s Cabinet reshuffle.\u201d<\/p>\n Asked what could be done to realise \u2018radical economic transformation\u2019, all three business leaders agreed that education and skills development were crucial.<\/p>\n \u201cTransformation has to be about education, all the way down to primary school level. Our main task as a nation should be to empower our youth, and this can only happen through quality education, and access to jobs which can provide skills development,\u201d said Mahanyele.<\/p>\n SA challenges remain<\/strong><\/p>\n Van Dijk noted that in order to improve South Africa\u2019s productivity, there must be concomitant skills training and education. \u201cFor example, South Africa has a huge shortage of software engineers. If we can encourage the development of maths skills at an early age, youngsters with these skills will be able to obtain well-paying jobs and add significant value to the economy.\u201d<\/p>\n Kriel said the role of big business as responsible corporate citizens involves a more holistic view of investing, which includes supporting education initiatives and the skills development of potential future employees \u2013 as well as encouraging South Africa\u2019s entrepreneurial culture.<\/p>\n Not all doom and gloom<\/strong><\/p>\n \u201cThe situation in South Africa is not all doom and gloom,\u201d Kriel said. \u201cThree highly respected business leaders have made it clear that a credit downgrade is not the end of the world. We have work to do to improve South Africa\u2019s attractiveness as a FDI destination, and this involves being more active corporate and individual citizens, as well as ensuring that a level of trust and reliability remains in our various institutions.\u201d<\/p>\n In the context of the current policy and regulatory environment, Kriel asked the three panelists for their top tips for South Africa\u2019s new finance minister, Malusi Gigaba:<\/p>\n\n
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