Judging by the visit of Deputy President Paul Mashatile and his delegation to Ireland and the UK, it seems that the Government of National Unity (GNU) is on a charm offensive to attract foreign investment, especially for critical infrastructure, just energy transition and technology start-ups and to boost bilateral trade.
Whether this is the dawning dividend for establishing the GNU in the eyes of the Western economies, their investors and credit rating agencies, it might be a bit premature, given the drag for political and economic cycles to set in.
Whether at 79th UN General Assembly in New York or at the engagements with business in the US last week, these days, President Cyril Ramaphosa seems more relaxed. The GNU is brimming with a new-found confidence, but whether burden-sharing is fun and sustainable will depend on the success in translating the positivity into real economy gains.
The thrust of the GNU mantra has been: “Building investor confidence in South Africa and driving foreign direct investment (FDI) into SA”.
At the launch of Phase 2 of the Government-Business Partnership at the IDC HQ in Johannesburg a few days ago, Ramaphosa laid out the challenges “in our freight logistics system (which) continue to undermine economic growth and hinder our competitiveness; the constraints in our transmission network (which) present a risk to much-needed investments in renewable energy, the rate of violent crime remains unacceptably high and our unemployment rate is unsustainable”.
The game-changer, the president said, was that despite the challenges, “we have never been more confident in our ability to overcome them. We have built credibility and trust by turning plans into action”.
A stocktake and impact assessment and measurement of the transformative nature of government policies in such a short GNU gestation period may dispute the government’s line.
At best, the GNU is a work in progress which will take time for any meaningful impact.
When Team GNU indulge in foreign forays, it is vital to avoid the temptation of over-indulging in a rhetoric of aspirations that will put off some investors. Any partnership between the government and business at home or crowding in private capital and FDI would best succeed in an atmosphere of compromise, clarity and confidence-building, given the complexities of transactions, especially related to natural resources, critical infrastructure, food security and energy-related projects.
Africa’s exaggerated country and credit risk perception by the global credit rating agencies clobbers the cost of finance through unfair premiums and exchange rate vagaries.
There is also the question of competition in suitors – the US with its carrot of the African Growth and Opportunity Act, the UK with its legacy of “kith and kin” colonial history with the Cape Colony and, today, together with the EU, the main initial funders of the Just Energy Transition which, Mashatile says, requires $100 billion (R1.7 trillion) of investment from the public and private sector.
The GNU’s shopping list for FDI centred on 12 priority projects unveiled by Ramaphosa in March. It totals an aggregate R141.4bn and is related to gas, ports, wastewater, hydro storage and rail projects. Equally important is the increasing participation of private providers in power generation.
South Africa is the second largest destination for British FDI in Africa.
“We want to be the investment destination of the UK and any other country. Our numerous meetings with potential investors have revealed a shift in their attitudes and perceptions towards South Africa, indicating an optimistic outlook,” says Mashatile.
With the Starmer Government trumpeting GDP growth and FDI as the holy grail of British economic recovery, as with the GNU, the two partners have more in common than appears. For Pretoria, there is the fillip of hosting the G20 Presidency from December this year to November next year – a godsend for showcasing the GNU.
* Parker is an economist and writer in London
Cape Times