Despite South Africa’s challenging economic state, Finance Minister Enoch Godongwana and his team are determined to attract investors by highlighting the nation’s resilience and promising growth prospects during the upcoming World Economic Forum (WEF).
The prestigious annual event is set to take place at Davos-Klosters in Switzerland from January 15-16.
It is the invitation-only annual meeting that brings together CEOs from its 1 000 member companies, as well as selected politicians, representatives from academia, non-government organisations, religious leaders, and the media.
Hanging over this year’s event is the sharp escalation of hostilities involving Russia and Ukraine, as well as Israel’s war on Gaza in Palestine which threatens to drag the entire Middle East region.
During his pre-WEF media briefing on Thursday, the minister revealed his delegation comprising heads of departments of communication and digital technology; health; higher education and science and innovation; trade, industry and competition; the ministry of electricity; and BrandSA, outlining the country’s primary focus and readiness to address economic woes.
“We are going to Davos to sell South Africa as a destination for investments understanding our challenges because we have the capacity to resolve them. We have strategies and roadmaps to deal with these issues,” he said.
South Africa, known for its industrialised economy in Africa, faces pressing economic challenges.
Corruption and high crime rate
The most prominent among these, Godongwana said, is the persistent energy crisis marked by frequent power shortages that have taken a toll on economic growth and industrial output.
The nation is contending with logistical inefficiencies and infrastructure shortcomings that result in higher operational expenses for businesses and hinder their ability to remain competitive.
Additionally, widespread problems of corruption and elevated crime rates have discouraged foreign investors, undermining trust in the country’s governance and legal frameworks.
The economic outlook also poses a potential threat to South Africa’s plans to attract the much-needed investments.
The medium-term budget statement in November highlighted the country’s fiscal challenges including a significant budget deficit and mounting government debt.
The deficit for the fiscal year was projected to be 4.9% of gross domestic product, a sharp increase from the initial estimate of 4%.
The growth forecast for 2023 was also revised downwards to 0.8% primarily due to the prolonged energy crisis.
The persistent trend of widening the gap between spending and revenue over the past decade raised concerns about government’s ability to manage fiscal responsibilities effectively.
Money-laundering controls
Another concern is the country’s greylist status, which could impact its attractiveness to investors.
In February 2023, the financial action task force added South Africa to its list of greylisted countries over poor anti-terrorism and money-laundering controls.
Delivering his Budget Speech at the time, Godongwana said South Africa was addressing these weaknesses but warned that the country still needed to prepare for the worst.
Asked about this at the pre-WEF briefing, Godongwana expressed doubt and stated that the National Treasury has made submissions to demonstrate South Africa’s progress.
In the face of these fiscal challenges, potential investors may seek safer and more stable destinations. Nevertheless, Godongwana remains optimistic that South Africa can secure impactful investments in Davos.
He acknowledged the challenges but stressed that South Africa has devised strategies and roadmaps to tackle them head-on.
The delegation, said Godongwana, intends to leverage the WEF Davos platform to demonstrate that South Africa remains open for business, boasts a diversified economy, and serves as a gateway to the continent.
“We are the most industrialised economy on the African continent and we remain a country with strong infrastructure for development.”
