The investment is a nice, big figure and had the politicians attending smiling from ear to ear.

They spoke about investment and job creation. They sang Nestlé’s praises, adding that they will do everything in their power to make South Africa and Babelegi (Hammanskraal) more attractive to new money.

But, the R505m investment did not happen overnight. Nestlé SA MD and chairman, Sullivan O’Carroll, said that the firm started importing the cereals now produced at Babelegi six or seven years ago to test the local market.

This market acceptance of the product and the promise of an ever-growing middle class created the basis for the investment decision.

The Global CEO, Paul Bulcke, told delegates that the firm will be spending R1.2bn on capex projects in South Africa in the next three years.

He told Moneyweb that Nestlé makes long-term capex investment decisions based on the current market in a specific territory and the growth potential thereof.

Nestlé spent in excess of R40bn in the 2011 financial year on capex projects worldwide, including about R8.5bn in Africa in the last two years.

Put all these huge figures together and the answer is that Nestlé knows what it is doing when it comes to setting up or expanding factories and its decisions are based on cold, hard financial facts.

The Trade and Industry Minister Rob Davies told delegates that his department has approved R168m in allowable tax deductions for the Babelegi project.

Davies acknowledged that incentives only come into play once a company makes an investment decision; it does not necessarily drive the investment decision, which is based on local market conditions.

So, once a company the size of Nestlé makes the decision to invest in a territory, most of the hard work has already been done by the bean counters behind the screens.

The two big jobs for local politicians and civil servants however, is to ensure a stable and growing economy, and that the money invested easily flows from Swiss bank accounts in South African ones.

Most would agree that the second task seems to be the easier one. Not so if one listened closely to what Tshwane executive mayor Kgosientso Ramokgopa and minister Davies had to say.

Both took credit for resolving a “delay” that involved transferring and rezoning the land Nestlé intended to build on.

O’Carroll was diplomatic in his responses to Moneyweb, merely indicating that there was a delay of a “couple of weeks” in construction. He was grateful that the problem could be resolved reasonably quickly once the big guns in Tshwane got involved.

Whether the problem was bureaucratic bungling or an attempt at palm greasing is a matter of opinion as more details on the situation were not forthcoming from the mayor’s office.

However, if one considers that the CEO of the R25bn Redefine Properties previously told Moneyweb that his firm would not invest in Hammanskraal due to corruption, the mind wanders.

According to Marc Wainer, the firm was held hostage by local Hammanskraal councilors as they attempted to extend a retail property in Kopanong: “… When we handed over to the supermarket chain for beneficial occupation … nine of the local councilors came and said that unless we pay them R20 000 each, they would disrupt the site and not let us go back on site.”

Redefine refused and halted the project, shelving up to R80m and thousands of jobs for the area.

During his speech at the opening ceremony, the Tshwane mayor added that his administration would pull out all the stops to make Hammanskraal more attractive to investors.

One can only hope that this involves sorting out issues on the ground and not just cuddling up to new potential investors.

 Surely it must be easier to get an existing local business to expand than to convince a new one to invest?

Similarly, one can only hope that businesses already operating in the area – especially SMEs without direct access to Ramokgopa’s ear – can resolve similar issues on their own before they go out of business due to bureaucratic bungling or itchy palms.
– hendri@moneyweb.co.za