A very favourable report on South Africa’s business and economic prospects has been compiled by the international news agency Bloomberg.
Published in Engineering News, the article focused on progress since the formation of a government of national unity in July following elections in which no party won a majority.
“The formation of South Africa’s business-friendly coalition government has triggered a wave of investment announcements and positive sentiment not seen in years, spurring hope that Africa’s biggest economy may finally be finding its footing after a lost decade-and-a-half,” Bloomberg reported.
“Within days of the coalition agreement in early July, ArcelorMittal reversed a decision to shutter two steel plants that support 80 000 jobs. Soon after, Qatar Airways bought a stake in South African airline SA Airlink. A $70-million auto-parts facility to supply Toyota Motor, which just three years ago said it might leave the country, has since opened and Anglo American announced a $625-million iron-ore investment.”
It quoted Kobus Verster, CEO of the South African steelmaking unit, as describing “a much more positive outlook”. Verster was among a number of business leaders commenting on improved conditions and prospects for the country.
Since the 2008 financial crisis, rampant corruption, erratic lawmaking and hostile relations between business and the state deterred investors, Bloomberg said. South Africa’s economic expansion averaged less than 1% over the past decade, outpaced by population growth.
“Now, the new government, the sudden end to years of crippling power outages and a decision to allow private participation in the country’s electricity, freight-rail and ports are seen as a chance to reignite growth in Africa’s most-industrialized economy. A backlog in work permit applications has been halved; key climate and energy legislation has been passed.”
It’s not all good news. Rail tonnages remain a third lower than in 2018, limiting exports. Crime is rampant and there have been few prosecutions of politicians involved in corruption.
“The country has a full house of junk credit ratings and is on a dirty-money list. Government debt that the Treasury expects to stabilise at 75.3% of gross domestic product in 2026 is unsustainable, the economy grew just 0.7% last year and a third of the workforce is unemployed.”
Nevertheless, business leaders expect the coalition government to perform better because of increased competition by the various political parties.
The rosy relations between business and the state and the privatisation pledges need to be translated into action if the positive sentiment is to last, Bloomberg concludes.
