South Africa: Adding another hike for 2021

The Johannesburg Stock Exchange (JSE) and its co-sponsors, Absa and Citi, successfully hosted its inaugural South Africa Tomorrow Investor conference for the United Kingdom, United Arab Emirates and Southeast Asia markets late last week. The conference had exceptional turnout with 245 attendees attracted from the regions. 

“The timing for the conference was opportune given the favourable sentiment towards South Africa. Overall, the feedback from the delegates was positive,” said Valdene Reddy, Director of Capital Markets at the JSE. “Key issues were addressed with clear direction and highlights tackled from the highest level of public and private sector representation as it relates to South Africa’s economic recovery and potential. We put our best foot forward and presented a unified and positive front, ripe with opportunities for investment,” she added.  

The virtual conference, held on 17 and 18 June, covered a broad range of social and economic topics that influence investment decisions, ranging from macro-economic policy, political landscape, agriculture, transport, energy generation, renewables and gender equality. International investors engaged with South Africa’s key policy makers and captains of industry on the country’s plans to create a conducive economic and political environment. 

President Cyril Ramaphosa, Minister of Finance Tito Mboweni, and South African Reserve Bank Governor Lesetja Kganyago addressed the delegates on the first day of the conference.

In his welcoming speech, President Ramaphosa assured delegates that the country was headed in the right direction in addressing its challenges.

“We have taken a number of steps to improve the investment environment.  We are strengthening state-owned enterprises and capacitating the public service,” the President said.  “We are addressing our energy challenges by procuring additional electricity with a focus on renewable energy. To enable cheaper and better digital access, we are in the process of releasing high-speed spectrum. We have established an investment fund on infrastructure that will facilitate blended financing with a focus on more public-private-partnership”.

South African Reserve Bank Governor Lesetja Kganyago said South Africa was no longer deemed vulnerable by investors. “Today, as we stand, South Africa is less vulnerable than it was last year. We have a current account surplus and the budget balance has recovered faster than expected and that should help treasury stabilise the debt. The economy is undergoing a recovery shock driven by a commodity price increase,” he said. Governor Kganyago added that policy makers were prudently using this recovery phase to stabilise public finances.

Minister of Finance Tito Mboweni said he expected the economy to continue to improve but added that there were challenges ahead which the government was addressing. “We still face major structural constraints in the economy and that is why the work of Operation Vulindlela is important to unlock those. As soon as we make progress in the implementation of those structural economic reforms we should begin to see better pick up especially in particular the networked industries,” Minister Mboweni said.

On the second and final day of the conference, Minister of Public Enterprises Pravin Gordhan said the President has set up State-owned Entities (SOE) Council comprising representatives from the Government, labour and private sector to rationalise SOEs.  The Minister confirmed that, in addition to the drive by the Presidency to crowd in finances from the private sector, there was a need for investment in SOEs.

“In relation to both Transnet and Eskom and other SOEs …. the kind of investment we require is not the quick portfolio investor that rapidly come into the country and leaves. What is required is investment in infrastructure and long-term investments that lends itself to the growth in gross fixed investment in this country, which is lagging behind more recently as it is in other countries.” 

“There are funders that we are engaging with through some of these entities that are willing to lend. So, the restructuring of the balance sheet is going to depend on some of these SOEs correcting their operating and business models, availing themselves to private sector investment in specific areas and ensuring they become efficient institutions that are able to compete with similar providers of services to South Africa and the region, and thereby improve both their operational efficiency and financial standing over time”.  

“I am proud to have partnered with the JSE and Absa on this very important investor conference. The conference provided a promising vote of confidence in the country, with great attendance across the two days from interested investors. Growing investment relationships will be central in helping the South African economy rebound (recover and build back better) from the disruption caused by Coronavirus,” says Citi Country Officer, Peter Taylor. 

“There is no better time to be looking forward to a post pandemic environment and the opportunities that lie ahead, with boldness and bravery. We dare not slow down or stop. Not only for the sake of our clients, but also our investors, as well as the various economies that we contribute positively towards,” said Absa CIB CEO, Charles Russon.