Investors call for bold moves by Ramaphosa
A COMPLETE restructure of the South African economy is necessary in order to build consumer and investor confidence.
Political uncertainly, debt, load shedding, corruption, state capture and the possible nationalisation of the SA Reserve Bank (Sarb), among other issues, have been the deciding factors for many investors to look to international opportunities to create, build and safeguard their wealth.
Although it is clear that there is no quick and easy fix when it comes to driving South Africa's economy towards growth, President Cyril Ramaphosa will now be under serious pressure to streamline his Cabinet and review economic policies, to look carefully at plans around land expropriation without compensation, as well as find a sustainable solution for Eskom and other beleaguered state-owned enterprises.
Another sword hanging over the economy is whether the country will be further downgraded by ratings agency Moody’s in November.
Moody’s is the only rating agency to give South Africa an investment-grade rating. Other major rating agencies, Fitch Rating and S&P Global, downgraded South Africa's credit rating to sub-investment grade in 2017.
An additional downgrade by Moody’s to sub-investment grade will result in the country being ejected from the Citi World Government Bond Index, which requires asset managers to sell billions of rand in South African bonds.
Not only will this have dire consequences for the economy and far-reaching effects in terms of rand value, it will make it increasingly difficult to attract new investment into South Africa.
The country and the international investment community will be watching closely to see who the president elects to his new Cabinet and whether these will be competent appointments or politically expedient selections, given the limited pool of available candidates.
The extent to which the president reduces the size of his Cabinet and is able to unite a divided and fragmented ANC will be other factors coming into consideration.
The names of Parliament’s presiding officers have already been announced, indicating a focus on female representation, while certain officials involved in corruption have been given the boot. It is imperative that these individuals are held accountable for their actions and dealt with accordingly.
Investors will be looking for some kind of certainty around the mandate of the Sarb and what the president's plans are in terms of nationalising the bank. They will also be seeking answers around how he plans to finance Eskom's debt and the sale of SAA.
Ultimately, a total restructure of the economy is required so that growth can be supported. The president urgently needs to focus his attention on revitalising the economy with practical solutions.
Of equal importance is creating a stable regulatory environment that builds both business and consumer confidence.
Not only has land expropriation without compensation already negatively affected the economy and lowered investor confidence, but the rand continues to be susceptible to the slowing of the world's major economies.
Gavin Smith is the head of Africa at deVere Acuma.