Uncertainty keeps investors away

President Cyril Ramaphosa. Source: GCIS

While the ‘Ramaphoria’ factor has seen business confidence rise 11 points to 45 in the first quarter – the highest in three years – South Africa is not out of the woods

“Already seeds of uncertainty have been planted,” said Nedbank economist Nicky Weimar. “When Cyril Ramaphosa stepped in and immediately addressed state capture, business confidence was lifted across the board resulting in expectations of much faster economic growth this year.”

But, said Weimar, there were mixed messages from government.

With the ANC-led government currently investigating the potential change to the Constitution to allow for land expropriation without compensation, it remained unclear how much attention policy was getting.

“This entire land conversation introduces brand new uncertainty into the picture. One simply does not know what is going to happen and as long as there is uncertainty, we will not attract investment.”

She said with companies unable to price risk and subsequently determine the return on investment, South Africa would remain low on the list of investment destinations.

“One needs to know the return to exceed the risk and cost. In South Africa, you can’t price the risk or cost. It is just too difficult to quantify. This has been the case for ten years - hence the disappointing growth rate.”

Whilst Ramaphosa has more than once re-iterated that land reform would not come at the expense of damaging the economy or threatening food security, it was the uncertainty being introduced yet again into an already uncertain landscape that was damaging.

“The South African waters remain murky and unclear. We expect to see cyclical lift but it will not be enough to get us to the 5 or 6% growth rate that is needed.”

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