The final leg of South Africa’s five-year investment drive, scheduled to be held at the Sandton Convention Centre in mid-April is expected to meet the target of raising over R1.2 trillion ($70bn) set by President Cyril Ramaphosa in 2018.
The fifth South Africa Investment Conference (SAIC) is the single most ambitious investment undertaking in democratic South Africa. It has involved some of the country’s biggest corporations as well as very strong interest from around the world including the Gulf Cooperation Council’s members in the Middle East, Canada, Belgium, Turkey, China, Germany and the Czech Republic, among other nations.
In addition, thoughts are increasingly turning to what could prove to be a massive market and source of investment in the near future – the continent itself – as the African Continental Free Trade Agreement (AfCFTA) kicks into gear.
One week after the investment conference the AfCFTA Secretariat and the Government of South Africa are hosting in Cape Town the AfCFTA Business Forum – billed as the biggest such event on the continent. This will underline the emphasis that South Africa places on the AfCFTA.
The focus will be the private sector and areas of interest will include agro-processing, automotive, pharmaceuticals, transportation and logistics, and digital trade – precisely the sectors favoured by investors over the past four editions of the South African Investment Conference.
“The AfCFTA presents us with the best opportunity possible to attract investment, when paired with South Africa’s status as the most industrialised nation in Africa,” commented Sithembile Ntombela, the Acting CEO of Brand South Africa. “This opportunity puts us in an advantageous position as a preferred investment hub.”
Last year’s SAIC raised R367bn ($21bn) of new investment commitments, “bringing our five-year investment target firmly into sight,” says InvestSA, which was the main organising body of the conferences. “Since the first investment conference in 2018, South Africa has attracted R1.4 trillion ($78bn) in commitments.”
The sectors range from infrastructure development, healthcare, real estate, logistics, agri processing, foods and beverages, automotive to creative and artistic industries.
Other very promising areas of investment include electricity generation, as part of the country’s aim to increase capacity to 6,800 MW over the medium term within the Renewable Energy Independent Power Producer Procurement Programme and the Just Transition to Green Energy.
The Covid pandemic and the subsequent lockdowns wreaked havoc, especially among SMEs. This was exarcebated by the energy crisis as well as other external global shocks.
Nevertheless the country has proved resilient thanks to a sound financial backbone, including the continent’s biggest banks and most liquid stockmarket, a highly skilled and educated workforce and astute management in its mining, automotive, pharmaceutical and agri-processing sectors.
The right note
The groundswell of opinion is that the worst is past and South Africa is once again ready to start its climb and over the next few years regain its place as Africa’s most successful economy. During last year’s conference, Ramaphosa admitted “I am not here to pretend that these challenges are not real,” referring to the many shortcomings, but pledged to do his best to solve the issues.
This realistic acknowledgement of the multitude of problems, instead of glossing over them, struck the right note with investors and this year’s commitments are expected to go over the initial target of R1.2 trillion.
South Africa is considered Africa’s most developed and sophisticated economy and its commitment to continue the development and expansion of its ITC and electronics sector should place it in a favourable position to benefit from the ever evolving technological revolution.
Its well-developed and diverse tourism, hospitality and conferencing sectors should see a substantial revival as the world begins to travel once more. The hard and soft infrastructure is still world-class, hence why many multinationals use it as a gateway to the rest of the continent.
The investment drive has become a key component of the Economic Reconstruction and Recovery Plan announced in 2020. Many of the projects, especially in the infrastructure and power generation sectors, will not only stimulate growth but more importantly spread growth into some of the most marginalised areas of the country creating sustainable industries with high employment potential.
Just transition to green energy
South Africa’s treasure trove of natural resources, including gold, iron ore, platinum, manganese, chromium, copper, uranium, titanium and coal, makes it one of the world’s most valuable sources of essential industrial inputs. However, the failure of the country’s energy supply to keep pace with the rapidly growing demand has prevented the full exploitation of its potential.
But even its power woes create opportunities and a plan is underway, backed financially by a number of developed countries from Europe and the Americas as well as the African Development Bank, to transition to greener energy.
Norwegian group Scatec pledged to invest R16bn ($900m) in a solar power plant based in the Northern Cape. InvestSA says “Scatec will also channel part of its pledge into the production of biogas, photovoltaic generation capacity and lithium battery technology – technologies which are likely to dominate SA’s energy generation landscape.”
In addition to renewable sources such as wind, solar and biomass for power generation, the government has set great store on hydrogen to help decarbonise the economy. The Hydrogen Society Roadmap is a coordinating framework to facilitate the integration of hydrogen related technologies in various sectors of the economy.
Gearing up for growth
Despite serious headwinds, the IMF believes that inflation peaked in 2022 and that the road to full recovery has started.
Demand for commodities and mineral inputs is expected to increase. Major pledges towards mineral beneficiation include R12bn ($670m) from Implats, R11bn from African Rainbow Minerals, R10bn from Anglo American and R9bn from platinum miner Sidibelo. The automotive industry, one of South Africa’s most crucial manufacturing hubs has also made substantial pledges.
These include Ford, R16bn ($900m); Tshwane Automotive, R2bn; Africa Auto Group, R550m; BMW, R800m; Volkswagen, R350m; Daimler Trucks & Buses Southern Africa, R190m; Wheel Assemblers, R180m; Fromex Industries, R102m.
InvestSA says the investment drive in the automotive industry “is a catalyst for smaller industry players – predominantly black-owned – to announce ventures within the automotive supply chains, from tyres, to batteries, to components and assembly facilities”.
Vodacom, the country’s telecoms giant, has pledged R50bn ($2.8bn) on its fixed and mobile networks over a five year period. Planned reforms in this sector should see the entry of more players.
During the 2022 investment conference President Ramaphosa seemed particularly pleased with the injection of investment in the country’s creative arts.
“Our creative industries have been given a major boost by multimillion rand investments in film and television production by the world’s largest media companies like Warner Media and Netflix. After nearly 15 years in the making, the eThekwini Film Studio in KwaZulu-Natal will soon become a reality following a R7.5bn ($420m) investment from Videovision Entertainment.” Netflix pledged R929m with Warner coming in with R350 million.
Ramaphosa summed up one of the main aims of the investment drive when he said: “Over the last five years, some R32bn has been invested in nearly 800 black industrialists and entrepreneurs through funding initiatives within the Department of Trade, Industry and Competition, with close to 120,000 jobs either saved or created.”
The positive response to the fifth edition of the SAIC is a clear indication that the country’s biggest and most innovative enterprises have renewed their faith in the potential of one of Africa, and the world’s, most extraordinary countries. The country is gearing itself up for many more pledges around investments, including around the intra-African trade opportunity.
More information on the SAIC can be found at www.sainvestmentconference.co.za