Economy

'WEF a chance for SA President to convince investors'

Date: Jan 22, 2019

World Economic Forum (WEF) 2019 will give South African President, Cyril Ramaphosa, a platform to argue for increased investment in South Africa.

But analysts say Ramaphosa must be ready to answer questions about the independence of the SA Reserve Bank and the SA Revenue Service.

The President is expected to explain how he intends to fix debt-laden power utility Eskom, according to analysts. "Given all the revelations of corruption and maladministration through various inquiries in SA, Ramaphosa has to show potential investors that the country is on a different trajectory compared to previous years," said political analyst Ralph Mathekga. 

Ramaphosa is leading the SA delegation to the annual meeting of heads of state, finance chiefs and captains of industry amid low economic growth in SA. The country's economy struggled in 2018, falling into a recession after GDP declined for the first two quarters of 2018. Growth picked up in the third quarter, but the SA Reserve Bank still estimates that the economy will expand by only 0.7% in 2018. 

Although Ramaphosa has attended the WEF in Davos before, this will be his first visit as President. He will likely find at WEF "the world does not revolve around South Africa and understanding the renewal that he brings," said Mathekga.  

"I think Ramaphosa will find the global community will be more receptive to SA, given the leadership changes that occurred in the country since the end of the Zuma-era. Many will look for assurances from him on policies like land expropriation and the independence of the SA Reserve Bank," said political analyst, Daniel Silke. "The WEF as a chance for Ramaphosa to shine, but the global leadership will not be there to hand him a blank cheque."

With United States President Donald Trump and UK Prime Minister Theresa May not attending the WEF this year, Silke said there was an opportunity for other developed and developing powers to come to the fore. Mark Appleton, head of multi asset strategy at Ashburton Investments, noted that there has been a backlash against international co-operation, led by populist political leaders like Trump, who cite globalism as sometimes conflicting with national interest.

The Global Risks report recently published by the WEF highlights worsening economic and political confrontation between the major powers as a key risk in 2019, Appleton pointed out. With SA suffering from a severe lack of business confidence and related weak private sector fixed investment, Ramaphosa and his delegation needs to convince investors that SA is "getting its act together", said Appleton. 

"Commitment to collaboration between business and government, a corruption clean-up, the stabilising of institutions such as the SA Revenue Service, along with a willingness to preserve the independence of the SARB needs to be emphasised," he said.

"The ultimate aim will be to attract inbound fixed investment which SA so desperately needs to bolster its economic growth potential." Investec economist Annabel Bishop told Fin24 that the SA delegation would have to explain how it intends to resolve the financial crisis at debt-laden power utility Eskom. "SA's government finances could also come under scrutiny ahead of the Budget in February, while the general election is likely to raise debate, given the extreme left-wing political parties' commentary that has weakened business and investor confidence at the end of last year," she said.

"SA will also need to explain its low growth performance, and key plans to turn this around and so instill investor interest," she said.

She said global growth is likely to be topical at Davos, particularly concerns around slowing growth on China and the US and the impact on stock markets. Climate change, geopolitics, human capital and society will be other focus areas.

Momentum Investments economist Sanisha Packirisamy, meanwhile, said Ramaphosa had noted that SA was entering the 2019 WEF on "firmer footing", given the on-going restoration in the trust deficit between business, government, labour and communities.

"As such, the country's views are in alignment with all the constituencies, allowing SA to show a 'united front'," she said. "It is likely that Ramaphosa and the rest of the team from SA will also highlight SA's attractiveness as a trading partner to boost the country's export, and thus growth potential."

The theme for this year's event is "Globalisation 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution". 

--News24--

Comments

comments powered by Disqus

Web Content Viewer (JSR 286)

Actions
Loading...
Complementary Content
CLOSE

Your Name:*

Your Email:*

Your Message:*

Enter Captcha:*