RACA Journal February 2024 | Page 3

RACA Journal : ISSN 1812-772X

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RACA Journal Publication www . refrigerationandaircon . co . za eamonn @ interactmedia . co . za

A STARK WAKE-UP CALL FOR INWARD INVESTMENT AND BUSINESSES

Incredible as it sounds , according to the Q3 Trade and Industry

Policy Strategies ( TIPS ) report , South Africa ranks alongside economic catastrophes Libya and Iraq as having the lowest rates of investment in the world – all below 16 % among uppermiddle-income economies .

Even crippled economies such as Argentina and Russia rank better than us . China ’ s investment rate was 42 %, while the average was 22 %.

In the harsh realm of global economics , South Africa stands not as a beacon of opportunity but as a cautionary tale . The recent TIPS report , revealing the country ’ s abysmally low investment rates , is more than a statistic ; it ’ s a glaring signal of a nation in peril , with ramifications that cut deep into the core of general inward investment , the broader business sector and employment rates . If South Africans won ’ t invest in their own economy , why should foreigners ?

South Africa ’ s place among the lowest in investment rates paints a picture of an economy adrift . The general business sector faces asphyxiation as opportunities for growth dwindle . With limited capital infusion , enterprises grapple with the harsh reality of stagnation and the erosion of any competitive edge .

Behind the statistics lies a tale of missed opportunities . In a recent Business Day article , Johann Rupert rightly noted that “ money goes where it is welcome ”. Capital seeks fertile ground for growth , but South Africa resembles nothing so much as an investment wasteland . The economic oasis promised by a nation of potential is marred by uncertainty , a toxic political landscape , endemic corruption and a glaring lack of infrastructure development — the promise of the rainbow nation is a mirage that fades upon closer inspection .

Our low investment rate signifies a profound lack of business confidence , transforming any investment in the local economy into a high-risk venture . It is our unpredictable business environment that deters long-term investment .

The perpetual turmoil within South Africa ’ s political corridors amplifies the economic quagmire . Investors shy away from jurisdictions where the rules of engagement change with every political tide . The nation ’ s approach to economic policies and reforms plays a pivotal role in shaping perceptions among potential investors , which increasingly sees us as ranking among the likes of Libya , Iraq and identifying with illiberal authoritarian countries such as our fellow BRICS nations .

The stunted growth in infrastructure development is a selfinflicted wound . Investors demand robust infrastructures , yet South Africa ’ s inadequacies repel rather than attract . Such new investments in manufacturing capacity as do occur often stand idle for months awaiting an electricity connection . Investors seek stable and well-developed infrastructures to ensure the success and sustainability of their investments .

Frequent shifts in economic policies and regulations muddy the waters , leaving investors in a perpetual state of uncertainty . A nation with an ambiguous rulebook is hardly conducive to attracting foreign capital . This unnecessary state deters investors from making substantial , long-term commitments .

The low investment rate disguises another factor – that of an investment exodus , such as we are currently witnessing with ArcelorMittal . This exodus of both skills and capital leaves businesses starved of the lifeblood they need to thrive . In a competitive global market , South Africa risks becoming a mere footnote in the investment playbook .

A lack of investment translates to a barren job market . Skilled professionals such as the HVAC sector ’ s much needed mechanical engineers find their talents unwanted , and job creation becomes an elusive prospect . The dearth of capital-intensive projects could impact the demand for skilled professionals . Stories abound of entire departments of engineers lured en masse abroad to New Zealand , Australia and the US , further exacerbating local social and economic challenges . Not just capital , but skills too go where they ’ re welcome .

South Africa stands on the precipice , but it is not too late for redemption . Urgent , decisive action is the need of the hour .

The harsh reality of South Africa ’ s investment abyss is a call to arms for policymakers , businesses and investors alike . The nation must shed the shackles of uncertainty , embrace stability , and lay the foundations for an investment-friendly environment . Failure to act immediately risks condemning South Africa to economic oblivion .

Addressing the challenges associated with South Africa ’ s low investment rates requires a comprehensive strategy encompassing economic reforms , political stability and targeted initiatives to improve infrastructure . There are positive signs of late that government has finally woken up to this need – but the pace has been glacial and too easily overturned by the results of the next election . RACA

Eamonn

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