Good news on the fixed investment front

April turned out to be an exceptionally good month for South Africa’s beleaguered government, which is experiencing the wrath of a society exposed to the incompetence of the public sector in general, and the state-owned enterprises in particular.

At the culmination of the fifth Presidential Investment Conference, South Africa’s head of state had the singular privilege to announce a huge success in securing R1.5 trillion of investment pledges (mostly from the private sector).

The five-year target that Pres. Ramaphosa aimed at with the first investment conference in 2018 was R1.2 trillion and the overrun is a feather in the cap of the head of state, who has committed his government to involve the private sector more intimately in trying to rebuild an economy that is still counting the enormous cost of state capture.

The table lists the nine largest pledges made at the latest conference, totalling close to a quarter of a trillion rand.

Rather predictably, the largest single pledge emanated from a green energy company, the Hive Energy Group, with the sectors for mining, information & communication technology and beverages also coming to the investment party.

The Hive Energy Group operates in 20 countries, with its headquarters in the UK. It is recognised internationally as a large-scale renewable energy developer. Hive is known for its innovative approach across both renewable energy and circular economy industries and has established some of the world’s leading solar energy projects. These include the UK’s largest solar park, an upcoming green hydrogen plant in Spain, and plans for the world’s largest green ammonia plant.

It is no surprise, therefore, that a company of this stature has a keen interest in the South African energy sector and its pledge to become involved in direct investment should eventually contribute to solving the country’s daunting energy challenges.

Record high for foreign direct investment

Other exceptionally good news on the investment front was the sharp increase in inward direct investment during 2022. After a slump between 2014 and 2017, induced by diminishing investor confidence in the wake of state capture revelations and the firing of Finance Minister Nhlanhla Nene, inward foreign direct investment initially recovered quite well, but was dealt another blow in 2020 and 2021 by the Covid pandemic.

Last year witnessed a resumption of the upward trend that began with Mr Cyril Ramaphosa’s presidency, with a new record high that breached the R100-billion mark for the first time (excluding the Naspers Ltd/Prosus N.V. share exchange of August 2021).

According to the latest Foreign Direct Investment (FDI) Confidence Index published by global management consulting firm Kearney, South Africa remains an attractive investment destination. Kearney’s survey amongst global business leaders on the factors influencing FDI states that the country still possesses reasonably efficient infrastructure and also enjoys stable governance and a robust legal framework.

According to the Kearney report on FDI, South Africa’s business environment offers unique opportunities and potential for growth as investors navigate the dynamic global landscape. Other reasons for standing out as an investment hub in the emerging market landscape include a skilled workforce as well as the aggressive expansion of South African businesses into growing African markets.

South Africa remains the largest and most diversified economy on the African continent and the fact that foreign companies are prepared to invest hard-earned profits in the expansion of the country’s productive capacity, despite intimidating infrastructure deficiencies, is indeed heart-warming.