{"id":792024,"date":"2024-09-24T07:00:00","date_gmt":"2024-09-24T05:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=792024"},"modified":"2024-09-23T17:16:38","modified_gmt":"2024-09-23T15:16:38","slug":"south-africa-goes-from-zero-to-hero","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/792024\/south-africa-goes-from-zero-to-hero\/","title":{"rendered":"South Africa goes from zero to hero"},"content":{"rendered":"\n

The formation of South Africa\u2019s business-friendly coalition government has triggered a wave of investment announcements and positive sentiment not seen in years, spurring hope that Africa\u2019s biggest economy may finally be finding its footing after a lost decade and a half.<\/p>\n\n\n\n

Within days of the coalition agreement in early July, ArcelorMittal SA reversed a decision to shutter two steel plants that support 80,000 jobs. Soon after, Qatar Airways bought a stake in South African airline SA Airlink Pty Ltd. A $70 million auto-parts facility to supply Toyota Motor Corp., which just three years ago said it might leave the country, has since opened and Anglo American Plc announced a $625 million iron-ore investment.<\/p>\n\n\n\n

\u201cThis has been a difficult 10 to 15 years, but there\u2019s a much more positive outlook,\u201d Kobus Verster, chief executive officer of the steelmaker\u2019s local unit, said in an interview at Vanderbijlpark Works, Africa\u2019s biggest steel mill that opened in 1952 south of Johannesburg. \u201cWe\u2019ve got a great shot at this to make it sustainable,\u201d he said of the construction steel facilities in Vereeniging and Newcastle.<\/p>\n\n\n\n

Since the 2008 financial crisis, rampant corruption, erratic lawmaking and hostile relations between business and the state deterred investors \u2014 and in the May election, helped cost the African National Congress its majority for the first time since the end of Whites-only rule in 1994. Economic expansion averaged less than 1% over the past decade, outpaced by population growth.<\/p>\n\n\n\n

Now, the new government, the sudden end to years of crippling power outages and a decision to allow private participation in the country\u2019s electricity, freight rail and ports are seen as a chance to reignite growth in Africa\u2019s most industrialised economy. A backlog in work permit applications has been halved; key climate and energy legislation has been passed.<\/p>\n\n\n\n

\u201cWe are in a significantly better space,\u201d said Cumesh Moodliar, CEO of Investec South Africa. The country has a chance to become \u201cmore economically inclusive and potentially better placed to seize some of the opportunities,\u201d he said.<\/p>\n\n\n

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Still, while the mass power outages that have plagued the country since 2008 ceased more than five months ago, rail tonnages remain a third lower than in 2018, limiting exports. Crime is rampant and there have been few prosecutions of politicians involved in corruption.<\/p>\n\n\n\n

The country has a full house of junk credit ratings and is on a dirty money list. Government debt that the Treasury expects to stabilize at 75.3% of gross domestic product in 2026 is unsustainable. The economy grew just 0.7% last year, and a third of the workforce is unemployed.<\/p>\n\n\n\n

When President Cyril Ramaphosa took office in 2018, he rode a wave of investor enthusiasm dubbed \u201cRamaphoria.\u201d But he moved too slowly on economic reforms and tackling corruption \u2014 growth stagnated, businesses limited investment, crime worsened and infrastructure deteriorated.<\/p>\n\n\n\n

Business leaders expect the coalition government \u2014 stocked with opposition members in the cabinet \u2014 to perform better because of increased competition and as a chastened ANC will need successes to bolster waning support.<\/p>\n\n\n\n

\u201cThe fear of failure is going to be an important asset for us as South Africans, because we are going to benefit from politicians who want to get things done so they can go back and say, \u2018we made the right decisions, you can trust us,\u2019\u201d said Khulekani Mathe, the incoming CEO of Business Unity South Africa, the country\u2019s biggest business-lobby group. \u201cIt\u2019s providing this enormous opportunity for the country to really pull itself up.\u201d<\/p>\n\n\n\n

Markets have reacted positively. The rand has rallied since the government\u2019s formation, the benchmark stock index hit a record, government bonds are offering world-beating returns and the premium investors demand for holding South African debt instead of US Treasuries dropped to a five-year low in early September.<\/p>\n\n\n\n

\u201cThere\u2019s rising optimism,\u201d said Simone Pohl, CEO of the Southern African-German Chamber of Commerce and Industry, which represents 600 German companies operating in South Africa employing 100,000 people.<\/p>\n\n\n

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Pohl is receiving more inquiries from companies seeking to invest, but \u201cthe economy still needs to deliver, we need stronger GDP growth,\u201d she said.<\/p>\n\n\n\n

A big part of ArcelorMittal\u2019s decision \u2014 which saved 3,500 steel jobs and bolstered employment security at the company\u2019s 2,500 suppliers and 550 customers \u2014 is the newly stable power situation. This year, the company has been asked maybe twice to reduce its electricity consumption by the state power utility, compared with as many as 60 times annually in recent years, Verster said. Rail service, to bring ore to plants and take products to market, has also improved.<\/p>\n\n\n\n

That\u2019s because relations between the government and business have improved, said Mpumi Zikalala, the CEO of Anglo unit Kumba Iron Ore Ltd. Last year, the company fired workers because the state rail company couldn\u2019t keep pace with its production. It ran out of space to store 8 million tons of ore stranded 535 miles from a port.<\/p>\n\n\n\n

\u201cEverybody acknowledges the challenges,\u201d she said of talks with the government, which is negotiating allowing Kumba and other companies to contract their own trains on its rail. \u201cWhat I do like is that all parties understand that we need to do this together.\u201d<\/p>\n\n\n\n

The company is tripling the quantity of high-quality iron ore it can produce, with a project due for completion in 2028.<\/p>\n\n\n\n

In a 12 August speech in Johannesburg to Business Unity South Africa, Ramaphosa praised the deeper relationship between business and government and said it was \u201cfar too important to fail.\u201d<\/p>\n\n\n\n

It could have been very different.<\/p>\n\n\n\n

Following the collapse of the ANC\u2019s vote share, it considered teaming up with populist parties advocating nationalization. Instead, it formed a broader coalition in which its biggest partner is the market-oriented Democratic Alliance.<\/p>\n\n\n\n

\u201cWe would have immediately seen the rand weaken quite significantly, foreigners would have dumped our bonds, our debt repayments would have rocketed,\u201d Jeremy Gardiner, a director at Ninety One Ltd., the country\u2019s largest private investment firm, told clients last month. \u201cInvestment would have collapsed, jobs would have been lost.\u201d<\/p>\n\n\n\n

The rosy relations between business and the state and the privatization pledges need to be translated into action if the positive sentiment is to last.<\/p>\n\n\n\n

\u201cIt\u2019s really pleasing, the sense of urgency, priority in turning things around,\u201d but concrete results are now needed, said Kuseni Dlamini, chairman of Walmart Inc.\u2019s local unit and the American Chamber of Commerce in South Africa, which says its members account for 10% of national economic output. \u201cWe are in a competitive race with other nations to attract and retain the investment needed for the economy.\u201d<\/p>\n\n\n\n

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Read: How much you\u2019re saving on your car loan in South Africa following the latest interest rate cut<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

The formation of the Government of National Unity has triggered a wave of investment in South Africa, driving positive sentiment not seen in years.<\/p>\n","protected":false},"author":59,"featured_media":780269,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-792024","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/792024","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=792024"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/792024\/revisions"}],"predecessor-version":[{"id":792027,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/792024\/revisions\/792027"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/780269"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=792024"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=792024"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=792024"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}