Load shedding ‘one of the biggest stumbling blocks for economic growth in SA’

As local and foreign investors are on Thursday expected to pledge billions of investments in South Africa, during the fifth SA Investment Conference (SAIC) being held in Sandton, economists and business leaders have expressed concern at the damage caused by load shedding – seen as a major impediment to economic growth.

The conference, attracting delegates from South Africa and the rest of the globe, is in its final leg of President Cyril Ramaphosa’s investment drive to attract R1.2 trillion over five years.

Load shedding impact

Last year, SAIC raised R367 billion in investment commitments – bringing the country’s five-year investment target firmly on sight, with the first conference in 2018 having yielded R1.14 trillion in commitments – representing 95% of the initial target across a wide range of economic sectors.

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With global beer giant SA Breweries CEO Richard Rivett-Carnac, expected to announce billions in a fresh major investment commitment to South Africa – anticipated to make an enormous contribution to the country’s gross domestic product – Menar MD Vuslat Bayoglu and University of Johannesburg associate economics professor Peter Baur, have expressed concern about the impact of the ongoing load shedding on the economy.

Load shedding, said Bayoglu, was “one of the biggest stumbling blocks for economic growth in South Africa”.

“It is affecting big industries and destroying SMMES (small, medium and micro enterprises), making SA a risky investment environment.

“The stability of SA’s mining sector is under constant threat, due to poor energy supply and constrained transport logistics.

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“The Transnet crisis is costing the mining sector billions in opportunity costs,” said Bayoglu, whose company trades in coal and manganese. He urged government to appoint “competent people in SOEs (state-owned enterprises) and in key government departments, to avoid failure and a crippling factor”.

Crime and corruption

Crime, corruption and failure to take decisive action – like eliminating red tape – also affected business development.

Bayoglu lauded SAIC as “an important intervention to cultivate investor confidence in the country”.

He said: “This on its own is a unique opportunity for a developing country like ours to attract investments that can benefit the economy.

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“This is no doubt a positive indication that we can achieve greater things as a country if we put effort in the right areas.

“I would say the conference is an intervention that recognises that without increasing private investment, we won’t be able to grow the economy, create jobs, increase tax revenues for the government and generally improve the standard of living.”

Concurred Baur: “A stable supply of energy facilitates business growth and development. Infrastructural constraints may provide room for investment opportunities into South Africa, but are restrictive for investors wishing to capitalise on geographical advantages or gain on export trade.

“While inflation is a consideration, an accommodative monetary policy should also be considered.

“Beyond that, an overly regulatory business environment is another factor which may form a part of the discussions.”

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He said shifts in global risk and the macroeconomic environment within South Africa, had “a very significant effect on foreign direct investment flows into South Africa”.

Tight monetary policy

“The Ukraine, China-Taiwan tension, international market volatility and the potential of a recession in the US, are key factors which may affect investor decision-making, as they seek possible investment alternatives within the emerging economies.

“Tight monetary policy focusing on stabilising the value of the South African rand and anti-inflation in SA, are also key considerations.

“The South African financial sector has remained one of the largest contributors to tax income for the treasury.

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“However, internally, the impact of the grey-listing by the Financial Action Task Force, is something that will continue to influence investor behaviour in the short to medium term, because of perceived sovereign risk,” maintained Baur.

– brians@citizen.co.za