As leaders of the BRICS nations gather in South Africa next week for the 10th summit of the grouping that accounts for more 17 percent of global trade, Chairman of the Industrial Development Corporation (IDC) Board, Busi Mabuza reflects on the importance of the event and its role in the country’s ambitious drive to secure investment of 100 billion US dollars over a period of five years.
In South Africa we are inclined to think of ourselves as entirely unique in terms of our history of struggle and the continuing challenges we face nearly a quarter a century after we attained our political freedom. As we mark in 2018, the centenary of the birth of Nelson Mandela, we can surely be forgiven for pausing to celebrate with pride at least a few of our characteristics that make us uniquely South African.
This sense of being different has become more acute in recent years as the trajectory of our democratic politics has put our democratic institutions to the test. And yet, South Africa’s institutions of governance remain robust and continue to advance the fundamental interests of human development, freedom, transparency and democracy. We continue to defy those who have predicted imminent catastrophe for more than two decades now.
On the other hand, the steady erosion of the post-second world war global consensus, the rise of populism, anti-migration sentiment and a trade war among developed economies provides for a different perspective on our South African challenges. Our people still see the best as yet to come while others mourn for their past.
In fact, the BRICS nations as a group continues to move in a different direction to much of the developed world, particularly with respect to trade and investment. Intra-BRICS trade, for example, has more than doubled from 204 billion South African rand in 2010 to 462 billion South African rand in 2017.
This achievement has been consolidated through the implementation of BRICS forums across a wide range of activities and institutions such as the BRICS New Development Bank. This steady institutionalization of BRICS relationships will enhance the group’s effectiveness as cooperation and integration become further embedded in our relationships with one another and with the rest of the world.
This is a substantial achievement particularly in the context of lingering developed market skepticism about whether BRICS could amount to anything more than the invention of an investment banker.
For South Africa, the occasion of the 10th BRICS Summit is not only a point of national pride. The summit also comes with a great deal of engagement among the BRICS institutions as we get deeper and deeper into the mechanics of cooperation and integration.
Our BRIC partners and representatives from many other countries attending the summit will find a re-energized country wide open for business and fully engaged in the task of attracting new investment.
The centerpiece of this drive is President Cyril Ramaphosa’s target of 100 billion US dollars in new investment over five years. The president will emphasize to our BRICS partners and other heads of state that South Africa’s investment proposition for foreign investors remains a powerful one.
He has put in place a team of special envoys on investment, who are setting about meeting with significant businesses and leaders from all over the world to promote investment towards meeting the 100 billion US dollar objective.
In practical terms, South Africa’s Department of Trade and Industry (DTI) is leading efforts to create an enabling environment for investment and trade. The department has established a relatively new entity, Invest SA, as one-stop facility to assist potential investors with the procedures required to meet regulatory requirements to grow the economy and create jobs.
In addition, there is a broad range of incentives for investors and support services available in the country’s Special Economic Zones. Beyond the often-shifting tides of global macro-economic fortunes, South Africa maintains core characteristics that investors can count on in a more uncertain world.
We have a growing middle class and an affluent consumer base that underpin excellent returns on investment. South Africa is still abundantly endowed in precious metals. We are the world's leading producer of platinum group metals and the sixth largest producer of gold with world renowned underground mining expertise.
Even as Africa continues to rise, South Africa is a diversified African economy with the best manufacturing and leadership as a services destination.
For evidence of this status, we can turn to multinationals for whom South Africa is the location of choice. Global corporations continue to reap the benefits of doing business in South Africa which has a supportive ecosystem as a hub for innovation, technology and fintech.
In terms of a key aspect of investor interest and concerns, South Africa remains number one in Africa and highly rated globally for a regulatory framework and judicial system that protects investors. The country’s commercial and legal practices are in line with those in the rest of the developed world.
Indeed, we are already widely known for our sophisticated banking sector which has a major footprint in African countries. This underpins our status as the largest financial hub in Africa, with the JSE the continent’s largest stock exchange by market capitalization.
Our world-class physical and technology infrastructure is targeted for ongoing investment and expansion that will enhance levels of investor comfort in a very practical manner.
The conditions are especially favorable for investors seeking to benefit from the African Continental Free Trade Area (AfCFTA). The AfCTFA will boost intra-Africa trade and create a bigger market of more than billion people on a continent with a GDP of 2.6 trillion US dollars. The keys to unlocking industrial development are thus available to investors seeking long-term opportunities with stable returns.
In terms of state-owned entities, which are of particular concern to investors, it has been most encouraging to note the significant progress made in stabilizing the governance structures and thus placing these enterprises on a sound path to recovery. The South Africa government’s commitment to the efficient management and optimal performance of its state-owned entities is demonstrated through the various initiatives aimed at strengthening governance models and improving compliance to ensure adhere to the principles and practices of good governance as envisaged in the public finance management acts.
The Open Budget Index, an index that independently rates the transparency of government budgeting processes, ranked South Africa at number two out of 102 countries evaluated. This is testimony that as a nation we are committed to high levels of transparency and a public-sector governance model that ensures democratic accountability. In a similar vein, the World Bank Ease of Doing Business Index ranks South Africa 22nd in the world for investor protection, while Business Monitor International’s 2017 Trade and Investment Risk Report puts us at the forefront in terms of comparatively low investment-related risks in the region.
This means that South Africa's sound institutional framework, which is built on the robust foundation of a constitutional democracy, positions the country favorably as we work to enhance and maintain business confidence.
Any investor should in my view be pleased by the palpable fresh energy and renewed optimism among the country’s friendly and inviting people. We hope investors will be encouraged and reassured by our choice to live on the front foot, in the certain knowledge that the arc of our history bends resolutely towards a better life for all.