Here's how to restore investor confidence,Mr Mboweni
Budget / 28 October 2019, 2:30pm / Andrew Bahlmann
JOHANNESBURG - All eyes are on Finance Minister Tito Mboweni, who is under a significant amount of pressure to pull more than one rabbit out of a hat when he delivers the medium-term budget policy statement this week.
In recent months, the biggest concern in our own business is that we are seeing a slowdown of international interest.
While there are still transactions lined up, lenders and funders are making it very difficult to enable these to conclude.
Looking at what is currently happening in the market from a business growth and acquirer perspective, this is what I am hoping to see come out next week's mid-term budget:
Clarity on Eskom: Chief among the concerns that need to be answered is Eskom. Given the debt - R450billion - the Treasury needs to present a credible plan. While Eskom received a planned R59bn when a special appropriation bill was passed on October 22, this does not solve the overarching problem. Any movement here will be positive from an investor sentiment point of view.
Restarting the government's renewables programme: The Treasury’s public discussion document - "Economic transformation, inclusive growth, and competitiveness: Towards an economic strategy for South Africa" - gives some insight into the department thinking. It highlights that “Eskom's unwillingness to sign independent PPAs with bidders in the past, despite the fact that Eskom can cover IPP costs through the tariff process, has undermined investor confidence”.
This is fundamental, given that the government's renewable energy independent power producer procurement programme (REIPPPP) has been the country's most successful effort at attracting foreign direct investment in decades. Since 2011, there has been more than R209bn in investment across 102 projects, but the procurement process has stalled completely. One reason for this was the much-delayed Integrated Resource Plan. This was published by Mineral Resources and Energy Minister Gwede Mantashe a week ago, which is good news.
In the document, the Treasury also hints that Eskom's tardiness in contracting with independent power producers may be a thing of the past.
We expect news on this front and investors will be watching this closely.
Unlocking infrastructure investment: We will also be looking for any momentum when it comes to the government's infrastructure spending.
There are infrastructure projects under way, but the level of activity is significantly below the long-term average, as resources drained away in a decade marred by state capture. Infrastructure investment is vital to get the cogs of the economy moving again, from a period where the prevailing mood in the economy is one only of survival.
Cyril Ramaphosa’s second investment conference will be held in just a week, and there is clearly a deliberate push by the government to shift the narrative on investment.
Make it "easier" to do business: No wish list would ever be complete without this item, but this is one where we would like to see a two-sided approach. First, there are some tangible changes the government could make to improve processes and cut red tape.
Any incentives on the investment front would be welcomed, but we do not expect these to be in the mid-term budget per se. These details are the kinds that will emerge in forums like the investment conference.
Certainty and effective execution will help restore confidence domestically and abroad, and a turnaround in investment will follow.
Andrew Bahlmann is the managing director of Deal Leaders Africa.