Violence and looting in the financial hubs of the country was the last thing the government needed after it spent the past two years courting foreign investment in the country in order to spur economic growth and create jobs.
As Covid-19 ravages the country in a deadly third wave, no one could have imagined that this would be coupled with such extensive economic destruction as a result of criminality and lawlessness on the ground.
In eThekwini alone, there has been more than R15 billion worth of damage to property and equipment, according to eThekwini ECOC, and more than 40 000 businesses have been affected.
This has given rise to real concerns that the instability will affect investor confidence at a time when South Africa needs it the most. But some business analysts have been less pessimistic than expected.
“I don’t think this will have a material effect on investors as they understand the risks. We are an attractive market with sophisticated institutions and financial markets,” Nick Binedell, the founding director of the Gordon Institute of Business Science of the University of Pretoria, told Independent Media.
“While the unrest is not good news, if we handle this appropriately, investors will understand the underlying causes and the political agendas at play,” Binedell said.
“South Africa was re-rated in the last three months because of how we have handled Covid-19, and the leadership of President Cyril Ramaphosa.”
While some foreign investors in South Africa were concerned about the potential long-term impact on investor sentiment, there still remained a strong commitment to invest in the country in the hope that the state was able to contain the current situation and restore order.
“South Africa correctly prides itself as a country with an excellent constitution in which the rule of law and property rights are enshrined,” Vuslat Bayoglu, the managing director of the mining investment company Menar, told Independent Media on Wednesday.
“The financial system is sophisticated, and the judicial system has worked very well to ensure certainty in the resolution of disputes.”
Bayoglu said that on the strength of these factors, Menar had increased its investment exposure to South Africa and created jobs.
“We are still on course to invest more than R7 billion in expanding the life of existing mining operations, and developing new projects.”
Economic analysts working closely with the government on attracting trade and investment have, however, expressed serious concerns this week about the impact that the current instability is having on South Africa’s exports and imports, and have underscored that the situation needs to be brought under control as a matter of urgency.
“We are concerned about the main transport routes into Durban because it is becoming difficult to get stock through. The citrus industry exports its produce through the Durban and Cape Town ports, and this sector has been doing very well and experiencing net growth despite all the constraints posed by Covid-19,” Tanya Cohen of the Public Private Growth Initiative told Independent Media.
“We are also very reliant on certain imports, such as chemicals and medicines, and there are concerns about receiving these imports due to the safety and security situation.”