By Sithembile Ntombela
The South African delegation that represented the country at the World Economic Forum 2022 (WEF) Annual Meeting in Switzerland has returned home after it vigorously promoted our country as an attractive investment destination with the potential to generate long-term returns for investors.
A day before the start of WEF 2022, which took place from 22 to 26 May, the South African delegation comprising over 35 business representatives, led by the Minister of Human Settlements, Water and Sanitation and Head of the Cabinet Economic Cluster, Mmamoloko Kubayi, came into the global event full of confidence after South Africa had received good news from credit rating agency S&P Global.
S&P Global announced that it had upgraded South Africa’s economic outlook to “positive” from stable” due to improvement in the country’s fiscal position, boosted by an increase in prices of commodity exports, which, in turn, improved tax revenues.
This piece of positive news came on the back of S&P Global’s peer, Moody’s, making a similar move in April when it upgraded South Africa’s outlook from “negative” to “stable”.
The encouraging stance by these credit rating agencies on South Africa has been influenced by our government’s full commitment to implementing economic policy reforms aimed at stimulating economic growth, boosting competitiveness, and attracting investment following the fallout from the Covid-19 pandemic.
This message of South Africa being a competitive economy that continues to reinvent itself as a prime investment destination was widely welcomed by our delegation at WEF Davos, 2022.
This year’s WEF meeting, held under the theme ‘History at a Turning Point’, was not like any others before it.
For starters, the meeting took place during Switzerland’s spring season of May, as opposed to its usual wintry days in January, which is the traditional period most heads of state or governments and influential business leaders’ set out to attend this annual event.
This break from tradition followed the gathering’s two-year hiatus, which was prompted by the pandemic, resulting in hundreds of global events like this one around the world being cancelled or postponed.
Instead of braving the usual Davos snow in January, delegates this time the team had to contend with rain, so umbrellas replaced the usual and famous South African scarves.
More than 2500 leaders attended this year’s meeting, including 50 heads of state or government and about 90 billionaires.
The event was dominated by four themes: war, pandemic, climate change and inflation.
These were an intrinsic part of WEF 2022’s lexicon with Team South Africa making constructive and insightful contributions to the deliberations.
Delegates were, of course, worried about the Russia-Ukraine war and the negative impact this is having on the global economy, not to mention the tragic loss of human lives and the infrastructure destruction of cities and livelihoods.
South Africa has continued to call for an approach that includes all parties sitting around the table to negotiate a peaceful and permanent resolution to the conflict.
Many countries that rely heavily on Russian food (grain) and energy imports (oil and gas) are concerned about their economies sliding into a recession after Russia was slapped with economic sanctions.
The sanctions have disrupted global supply chains and sent prices of energy and food skyrocketing, leading to an increase in inflation across the world, particularly in the United States and Europe. This is particularly concerning, given that the world economy is barely emerging from the Covid-19 pandemic and is still very much fragile. South Africa has an opportunity to contribute to global food security by increasing its agricultural exports.
The International Monetary Fund (IMF) has projected the global economy to grow by 4.4% in 2022, but this forecast is being revised downwards because of the impact of the sanctions on Russia.
The war, pandemic, and economy were not the only topics that featured prominently at WEF 2022, but we also saw climate change making a return to the top of the agenda after taking a back seat to the healthcare concerns related to the pandemic.
The deliberations on climate change allowed the South African delegation to provide feedback on initiatives that are underway to implement the Paris Agreement, which encourages countries to reduce greenhouse gas emissions to limit global warming to around 1.5 degrees Celsius.
This ambitious target can only be achieved if our country moves away from fossil fuel energy sources (coal and crude oil) to clean energy sources (wind and solar).
However, there are risks associated with energy transition, given our country’s heavy dependence on coal to generate electricity. We must manage the transition in a manner that is fair and equitable to avoid having stranded assets and job losses, particularly in the coal mining sector, which provides the coal that we use to generate electricity.
As a global platform, WEF 2022 was immensely useful for South Africa. It also gave leaders an opportunity to update their global counterparts on the rollout of the Economic Reconstruction and Recovery Plan (ERRP), the country’s response to the pandemic, which is aimed at stimulating the economy and attracting investment.
The South African delegation also provided feedback on Operation Vulindlela - a programme led by the Presidency and the National Treasury to fast-track the implementation of structural reforms in key sectors such as energy and logistics. About 60% of the structural reforms have since been implemented.
South Africa’s response to the pandemic included the manufacturing of vaccines to ensure that Africa has enough jabs to vaccinate its population.
The impact of Operation Vulindlela and ERRP on our economy has been positive because they have fully supported President Cyril Ramaphosa’s five-year drive to attract R1.2 trillion into our economy, which he launched in 2018.
Four years on, and despite disruption by the pandemic, South Africa has raised R1.14 trillion, amounting to 95% of the target set by the President. There is no doubt that South Africa is well placed to attract more investment as it continues to implement the structural reforms and reduce the cost of doing business for investors.
* Ntombela is Acting CEO of Brand SA