This article was sponsored by Brand South Africa
South Africa is the African country that is most integrated into the global economy. This means that it is often the most exposed to global headwinds, including the many-headed crises of the past two years. The effects of the pandemic, supply chain disruptions, accelerating inflation and uncertainties brought on by war in Europe have added to the country’s own problems and presented the country’s leaders with a Rubik’s Cube of challenges.
Among these problems is the supply of energy, shortfalls in which have led to power rationing. The state-owned distributor, Eskom, is weighed down by debt and ageing infrastructure and unable to supply the power that an economy the size of South Africa needs daily. The country’s own debt stock had also risen considerably, though the rate has slowed in the year, in part because of the rise in commodity prices, with South Africa being an important global player in metals and mining.
Despite well documented recent problems and longstanding issues of social inequality, Mpumi Mabuza, General Manager, Stakeholder Relations at Brand South Africa, is upbeat about the country’s prospects and about how others view it.
A recent assessment of how the country is perceived, she says, left the team at Brand SA pleasantly surprised. While South Africa is very cognisant of its challenges and must fully grapple with them, it is important not to lose sight of the many ways in which the country is loved and admired abroad, she tells us in an interview ahead of the Davos meeting where South Africa will be hosting a number of activities including the most sought-after Country Dinner slot at the main Congress Hall.
It is, after all, the sixth most desirable country to relocate to, according to a global ranking compiled by Australia’s Compare Market in September, 2022.
Positive trajectory of growth
Part of the messaging that Brand SA and the delegation accompanying the president to this year’s Davos Meetings will be that South Africa is on a positive trajectory of growth with some strategic sectors ripe for investment. The delegation will be made up of members of the cabinet and also a strong cohort of private sector players representing many different industries. But as Mabuza explains, these private sector players are looking for partners with whom to invest and take advantage of the opportunities that many sectors present, not only in South Africa but on the continent as well.
Recent challenges notwithstanding, South Africa remains one of the most attractive destinations for business, investment, study and leisure on the continent. The Global Innovation Index lists it as the second most innovative country in sub-Saharan Africa.
It is also the sixth largest producer of gold, with a robust minerals sector that is home to more than a hundred companies. In addition, it also exports the second largest amounts of citrus annually, while its manufacturing sector remains internationally competitive in the production of various goods.
It is little wonder then that the country has birthed some of the most established brands on the continent, including MTN, the telecommunications behemoth that dominates mobile communications in several parts of Africa and the Middle East. Other brands, such as Anglo American, Old Mutual and Multichoice, have also expanded rapidly around the continent and beyond and serve as notable ambassadors for the country’s innovation, investor-friendliness and economic clout.
Ms Mabuza credits this to the country’s approach to business: “South Africa offers an opportunity to grow. We invite businesses to grow with us. We have case studies and proof points that show the growth in investment from various companies.”
Structural reforms bear results
Investors – current and potential – will also be heartened by the structural reforms that President Cyril Ramaphosa’s government has embarked on, some of which are already bearing results.
Borrowing by government declined in 2021/22, due to higher-than-expected revenue collection. A new mining exploration strategy is being finalised to boost investment into new minerals that are fit for the new, greener global economy, part of a grand plan for energy transition that will also support new industries.
Thirteen special investment zones which present targeted incentives for production and export have been set up around the country. With the help of digital tools, South Africa is empowering disadvantaged communities and disrupting the provision for social services for the benefit of citizens. Crime and corruption are being tackled through a rejuvenation in the leadership of the relevant agencies, while state capture will be addressed through a series of recommendations from a special commission of enquiry.
Ahead of the Nation Brand Forum held last October in Johannesburg, Brand South Africa’s acting CEO, Sithembile Ntombela, told African Business that “the successful implementation of the recovery plan has demonstrated that South Africa, Africa’s most diversified economy and one of the top three highest grossing economies in the continent, remains an attractive investment and trade destination. This is due to the country’s political and macro-economic stability, deep and liquid financial markets, independent judiciary, free press, entrepreneurial culture, world-class infrastructure, and a skilled workforce.”
South Africa offers opportunity
This will be the general approach when South Africa sets up its stall in Davos for the 2023 World Economic Forum. President Ramophosa will be leading a team that includes four ministers of state and several business leaders on a charm offensive to direct attention to his country and to contribute to the conversations around how the world can bounce back better from two years of perma-crisis, with Africa as a solution provider.
The message to businesses will be quite simple, according to Ms Mabuza. “We offer an opportunity; a launch pad for companies that want to do business in the continent. We give companies the support the need to access the African market,” she explains.
That offer will be sweetened by the African Continental Free Trade Agreement, which is slowly but surely taking off in Africa. The agreement will enhance and promote borderless trade across the 54 countries on the continent, remove tariffs, harmonise standards and in the process create a single market with over a billion people.
The proposition here is that companies that set up in South Africa will not only enjoy the advantages and incentives that it offers, but will now be able to shop their goods and services to an enormous market with a rapidly growing middle class freshly able to afford them.
This is a message that has already resonated with global investors. In 2022, Netflix announced a R900m ($50m) investment into the country’s film and television industry, signalling its long term ambitions in the country. In the year before that, Ford Motor Company also committed to investing $1bn in its operations in the country.
Other firms that entered or consolidated their position in the country include Johnson & Johnson, Kerry, P&G, H&M and Singapore-based Petredec.
South Africa wants many more international brands to join these and others already operating in the country and has set itself a target of attracting at least a thousand international companies into the country by 2025. With such a mission backed by its message, South Africa seems set for a very vigorous week in Davos.