Ramaphosa Eyes Incentives to Lure $100 Billion to South Africa

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South African President Cyril Ramaphosa said his administration will introduce incentives in a bid to woo $100 billion in new investment and will tackle the thorny issue of land ownership without endangering economic growth.

Since succeeding Jacob Zuma as president two months ago, Ramaphosa has been on a drive to convince investors of his commitment to reverse years of economic stagnation, policy uncertainty and the plunder of state funds. While he’s fired some of Zuma’s ministers and replaced the boards of several troubled state companies, his bid to sell South Africa as an investment destination has been hindered by the ruling party’s decision to back land seizures.

 “We will have well-crafted incentives that will attract people,” Ramaphosa, 65, said Wednesday in an interview with Bloomberg Television in London, where he’s attending a Commonwealth Summit and met with Prime Minister Theresa May and Queen Elizabeth II. “Some of them may well be tax incentives or general industrial incentives.”
 Ramaphosa is seeking $100 billion in new investment and this week named four “envoys,” including former Finance Minister Trevor Manuel and ex-Standard Bank Group Ltd. Chief Executive Officer Jacko Maree, to travel the world seeking commitments.
 More than two decades after the end of apartheid, whites still own most of South Africa’s profitable farms, and about 95 percent of the country’s wealth is in the hands of 10 percent of the population. The ruling African National Congress decided in December to amend the constitution to allow for expropriation without compensation. A parliamentary committee is considering the changes and is due to report back by Aug. 31.

Land Discrimination

“We will do everything around the land question within the parameters of our constitution,” Ramaphosa said.

A 2017 land audit by AgriSA, a farmers’ lobby group, found that the government and racial groups that were discriminated against under whites-only rule owned 26.7 percent of South Africa’s agricultural land in 2016, up from 14.9 percent in 1994. A separate government audit found that whites owned 72 percent of farmland.

“We want round-table dialogue, a full discussion on the question of land because we want the protection of property rights not to be a protection of property rights to a few people only, like it has been in the past,” Ramaphosa said. “Our economy has also been constrained by the fact that the land, which is a powerful resource, has just been reserved for a few. Let us share the land.”

Investor Feedback

The president said he was getting positive feedback from investors, and recent gains in the value of the rand indicate improved sentiment. He said he was sticking to his target of 3 percent growth for this year, which is more than double the 1.4 percent forecast by the World Bank.

“Attracting more investment in the economy is key to boosting growth,” Ramaphosa said. “We are open for business, we are embarking on reforms that are going to lead to South Africa becoming even more attractive than it has been.”

Total fixed investment in South Africa declined to about 19 percent of gross domestic product last year, from 24 percent in 2008, with foreign direct investment dropping to 17.6 billion rand ($1.5 billion) from 76 billion rand over the period, government data shows.

The rand extended its gains as Ramaphosa spoke, strengthening 0.3 percent to 11.9468 per dollar by 3:55 p.m. in Johannesburg. The currency has advanced 10 percent since Ramaphosa was elected as ANC president in December and almost 20 percent since the start of November, the world’s best performer over that period.

“The rand where it is now reflects a level of confidence that the world has in South Africa,” Ramaphosa said. “They can see that South Africa is going somewhere. The exporters from our own country, the stronger rand is not so positive for them, so we need to find a balance. It’s near the balance, not yet quite there, but near the balance.”

BLOOMBERG


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