SA’s investment potential

is more than its credit rating

– business leaders

INVESTORS LOOK BEYOND A COUNTRY’S CREDIT RATING

During a lively panel discussion — moderated by Daniël Kriel, CEO of SPW — Bob van Dijk indicated that Naspers, a group with interests in more than 100 countries, invests in companies with the potential of substantial growth over the next few years, including those in ‘challenging’ markets. ‘We’ve invested a lot of capital in Brazil, for example, which has also been downgraded to junk status. But we don’t look only at a country’s credit rating. For us, the main question is around the business opportunity, but it’s also about being comfortable that an investment will be protected over the long term.’

Bob cited India as a good example of a ‘highly investor-friendly’ emerging market. ‘The regime in India is committed to creating a stable and predictable environment for investment, and the country has enjoyed strong economic growth for a number of years. Also, India has invested heavily in technology infrastructure and has now overtaken the US in terms of the number of internet users. Three years ago, around 100 million people had internet access but this number has now increased to 500 million. All these factors are very compelling from an investment perspective.’

BE AWARE OF POLITICS, BUT FOCUS ON POLICIES

Lonmin’s Ben Magara emphasised the need to navigate multiple challenges simultaneously and to embrace complexity. ‘We ignore politics at our peril, because politicians make the policies that we need to grow our businesses. Consistency of policy and stability are crucial, and we hope that the new Finance Minister will realise the value of collaborative efforts such as the CEO Initiative in ensuring that we address the issues our country is grappling with.’

ACTIVE CORPORATE AND INDIVIDUAL CITIZENS REQUIRED

Sigma Capital’s Phuti Mahanyele, formerly CEO of Shanduka Group, a multibillion-rand diversified African investment holding company, said the only way the country can pull itself out of the quagmire is through the actions of ordinary citizens. ‘We can no longer sit back and wait for the politicians to act. We all need to get involved. If South Africans stand up and show the world they want change, this will go a long way towards encouraging investor confidence.’

CONSTRUCTIVE ENGAGEMENT AND ENCOURAGING PERSPECTIVES

Daniël told the panel that one positive development after the shock of Nenegate in December 2015 was increased collaboration between business, organised labour and Treasury, primarily to avert a sovereign credit downgrade. ‘Business leaders are now speaking with one voice, as evidenced by the strong statement by the CEO Initiative following President Jacob Zuma’s Cabinet reshuffle.’

Asked what could be done to realise ‘radical economic transformation’, all three business leaders agreed that education and skills development were crucial. ‘Transformation has to be about education, all the way down to primary school level. Our main task as a nation should be to empower our youth, and this can only happen through quality education and access to jobs that can provide skills development,’ Phuti said.

SA CHALLENGES REMAIN

Bob emphasised that in order to improve South Africa’s productivity, there must be concomitant skills training and education. ‘For example, South Africa has a huge shortage of software engineers. If we can encourage the development of maths skills at an early age, youngsters with these skills will be able to obtain well-paying jobs and add significant value to the economy.’

Daniël said the role of big business as responsible corporate citizens involves a more holistic view of investing, which includes supporting education initiatives and the skills development of potential future employees – as well as encouraging South Africa’s entrepreneurial culture.

NOT ALL DOOM AND GLOOM

‘The situation in South Africa is not all doom and gloom,’ Daniël concluded. ‘Three highly respected business leaders have made it clear that a credit downgrade is not the end of the world. We have work to do to improve South Africa’s attractiveness as an FDI destination, and this involves being more active corporate and individual citizens, as well as ensuring that a level of trust and reliability remains in our various institutions.’

He added that the panel discussion had been ‘highly constructive’. ‘The business leaders cut through the noise and provided practical advice and sound insights. We look forward to future opportunities to stimulate further debate in collaboration with Financial Mail, particularly around the concept of radical economic transformation and how it can be effected to the benefit of all South African citizens.’

In the context of the current policy and regulatory environment, Daniël asked the three panelists for their top tips for South Africa’s new Finance Minister, Malusi Gigaba:

Focus on establishing credibility and stability, and coordinate education and skills development with the private sector.
BOB VAN DIJK - Naspers Group CEO

Don't bring in changes too quickly, and don't forget your oath.
BEN MAGARA - Lonmin CEO

Work on improving the relationship between the public and private sectors.
PHUTI MAHANYELE - Sigma Capital Executive Chairperson

The panel discussion formed part of the Financial Mail Private Lounge series, hosted in association with SPW, in which thought leaders and CEOs share ideas on how best to invest in South Africa’s future.