South Africa is improving its infrastructure and business environment as it strives to become the preeminent hub for commercial investment into the rest of the African continent, says Charlotte Maponya, the chairperson of Brand South Africa.
South Africa is becoming more competitive as a gateway for investment in the rest of Africa, as demonstrated by the number of local companies moving into the continent’s high growth markets, says Charlotte “Chichi” Maponya, chairperson of Brand South Africa.
That diversification of trading and investment relationships comes at an important juncture, she says, as global economic conditions remain uncertain and growth major partners — particularly the European Union and China — slows.
“It’s still important to preserve and maintain the relations [with Europe and Asia] and have South Africa viewed as a destination for investors on the African continent. But of course the emphasis and the need to increase trade within African becomes a major priority for South Africa,” she says.
“More and more South African companies are looking at the rest of the continent as a new market. It’s a growing and big phenomenon.”
Availability of capital, improvements in political stability across Africa and a concerted effort to open up to business has led to an increase in South African companies’ energy for investing in their home continent, she says. Other African centres are vying to establish themselves as the hub for international investment into sub-Saharan Africa.
Nigeria leapfrogged South Africa to become the largest economy on the continent last year, after recalculating the size of its economy, and the country’s commercial capital, Lagos, has attracted interest due to its sheer scale.
Thanks to strong international air links and a burgeoning technology sector, Nairobi has also increased its international profile. North of the Sahara, Morocco is trying to establish an Africa investment hub in Casablanca.
“Competition will always be there amongst growing economies, whether inside the continent or outside the continent. As a developing economy, you are always looking for investment. I think South Africa has an advantageous, pivotal position,” Maponya says. “South Africa has quite a lot of infrastructure that is necessary for investment to thrive. It’s telephonic, road, power. Hard and soft infrastructure is well-placed to become a gateway, as it were. And we are quite advanced in terms of some of the aspects that drive economic growth and become attractive for investors.
“We have one of the largest and best stock exchanges in the continent. Globally it is amongst the top. The banking sector in South Africa is amongst the top globally. We have so much that is right for investors to want to base their operations in South Africa when they want to focus on the continent.”
The various centres have their own advantages, Maponya says, but each should focus on developing a speciality that is complementary to the others. The same is true of the regional trade groupings — the Economic Community of West African States, the East African Community and the Southern African Development Community — she believes.
The three associations have been working together on building inter-regional free trade, which would introduce new competition for goods and services, but also new opportunities for complementarity.
Investing in power
South Africa’s power infrastructure has repeatedly attracted negative headlines over the past few years as undersupply of electricity prompts fears of rolling shortages. Maponya acknowledges that bringing more power generation capacity online is a major priority for the country, and for Brand South Africa.
“We know that without energy you can’t really drive robust economic growth. You need stable power supplies to be able to grow your economy and your industry. Whether you want to industrialise or grow your service sector, you still need a strong, reliable supply of energy. It’s one of the cornerstones of what would be on the priority list of investors,” she says.
The government is targeting growth in the sector and attempting to attract independent power producers (IPPs), Maponya says.
“There is a clear policy around that. There are a few loose ends to tie here and there, but the first and second rounds have called for renewable energy IPPs, they have shown the way that there is real willingness in terms of opening up that space,” she says. “More and more will be encouraged in the next few years to emerge and begin to have a stronghold in augmenting the power supply for South Africa.”
Likewise, the country’s labour disputes are regularly cited by current and potential investors as barriers to further expansion. Trade unions wield a great deal of political power in South Africa, and strikes and walkouts often make the financial pages of international newspapers, as political unrest impacts on economic growth. Turmoil within the labour movement resurfaced late last year.
Employers often complain that inflexible labour politics prevent them from hiring and firing people in line with their business needs, making them less competitive.
“There is enough discussion to make sure that the issues are addressed. Hopefully they are speedily addressed. The issue is, how do we create more jobs while still looking after the interests of those who are already employed?” Maponya says. “[The government] wants to increase the unemployment rate, and if the unions together with the governments can agree on some of those gaps, it would make space for other people to be brought into the labour force, as opposed to just protecting the ones who are already in there.”
Creating more jobs means creating more businesses, Maponya says, and the current government has taken significant steps to reduce the friction for entrepreneurs who want to set up companies.
In 2014, the government established the Department for Small Business, to promote the SME sector and drive improvements to the business environment. South Africa is second, behind Mauritius, in sub-Saharan Africa on the World Bank’s Doing Business index, but is 43rd in the world. Access to credit, registering property and trading across borders are all major concerns for entrepreneurs in the country. These issues are being addressed by the new ministry, according to Maponya.
“The fact that a ministry has been established begins to elevate the issues around that and put them on the agenda. They are not subsumed within a ministry that has so many other things to focus on.”
One of Brand South Africa’s strategic objectives is to leverage the country’s Diaspora and encouraging them to bring their skills and capital back home.
“We are very fortunate in South Africa that amongst the many resources that we export, minerals and all of that, we also export quite a lot of human capital. That just goes to show the kind of skills and the level of skills that we have,” Maponya says.
The commercial opportunities that so many South Africans have sought out overseas now exist back home, Maponya says, making it easier to attract talent back from the Diaspora.
“With the growth opportunities that are available on the continent and in South Africa, it’s becoming more attractive for the professionals in the Diaspora to come back to contribute. And the global issues make it tougher. It’s not as easy as it was to take great strides in the global arena. It’s becoming more and more attractive to work in developing economies.”
The presence of multinationals in South Africa and the rest of the continent is also proving a spur for the Diaspora to return, according to Maponya. South Africans working in these companies overseas are increasingly using them as a way to stay in the global workforce while living closer to home.
The agency reaches out directly to global South Africans to remind them of the potential of their home continent, she says, and more and more are responding.
“As Brand South Africa we put forward that proposition — Africa is the next frontier, South Africa has a very important role to play in the growth of Africa. It’s more attractive to be back in South Africa and to put your skills towards developing South Africa and the continent.”