News / Africa

    Investors Reluctant to Capitalize on South African Recovery

    A boy reacts, in front of a house in a township on the outskirts of Cape Town, South Africa. Thousands of South Africans live without running water in their houses and without electricity. (2010 file photo)
    A boy reacts, in front of a house in a township on the outskirts of Cape Town, South Africa. Thousands of South Africans live without running water in their houses and without electricity. (2010 file photo)

    Both local and international investors have been slow to invest in South Africa since its economy began to recover in 2009 from the global recession. 

    South African corporate cash deposits are currently about $63 billion, and experts say this is an indication that companies are hesitant to expand current enterprises or invest in new projects.  In addition there have been few major international investments in the country in the past three years.

    South Africa's economy experienced nearly two decades of uninterrupted economic growth until the global economic crisis in 2008. 

    Constraints

    But experts say problems with capacity - or a lack of it, in the country's rail network and in its electricity supply - have become a drag on further economic expansion, especially in the key mining and manufacturing sectors.

    In early 2008, national power company Eskom embarked on a program of rolling blackouts due to unexpected plant failures, and the government was forced to admit it had vetoed earlier proposals to allow the state-owned enterprise to expand its capacity.

    Cees Bruggermans, chief economist at First National Bank, says that electricity supply continues to be a major constraint for potential investors.

    “We find on the supply side of the economy," said Bruggermans, "we have very specific South African constraints in the manner that electricity capacity is fully utilized, and for the time being it is not really capable of accommodating any additional electricity use, at least for the next two, three years - possibly longer depending on how quickly new capacity comes on stream,” said the economist.

    Bruggermans says that these challenges have severely impacted the mining sector, which has not grown in a decade even though the country is resource rich with lots of reserves.

    “And [there is] nothing more dramatic I think than our mining industry, which for the past ten years has basically not increased its production levels while worldwide of course we have had an enormous commodity boom."

    In contrast, Bruggermans notes, mining interests in countries such as Australia, Chile, Brazil and Canada have expanded their operations substantially.

    Labor laws

    Some experts also say that labor in South Africa is both more expensive and less productive than that in other countries such as India and China.

    Michael Bagraim, president of the Cape Chamber of Commerce and a labor lawyer, says the current labor laws in South Africa are a disincentive for investors.

    “I get clients everyday who come to see me about the onerous labor laws and they look at the cost and the productivity of the South African worker and they try and weigh up cost against productivity and it looks like their mathematics are telling us that it is cheaper to invest elsewhere,” he said.

    But Bagraim says that there have been recent cases where direct negotiations with unions have benefited companies, such as in the severely-threatened clothing industry.

    “A perfect example is the clothing industry, which is dying in Cape Town.  The clothing industry has now struck a deal between the manufacturers and COSATU and SACTWU in particular, the South African Clothing and Textile Workers Union, where entry workers would take a 30 percent knock less than their normal minimum wage.  That has been agreed and it is put into place for one year, and already we are seeing results,” he said.

    Economist Bruggermans says that South Africa is experiencing a slow start to its recovery, but expects that in time, companies will be stimulated toward investment.

    You May Like

    US, Somalia Launch New Chapter in Relations

    US sends first ambassador to Somalia in 25 years; diplomatic presence and forces pulled out in 1993, after 18 US soldiers were killed when militiamen shot down military helicopter

    Brexit Vote Ripples Across South Asia

    Experts say exit is likely to have far-reaching economic, political and social implications for a region with deep historic ties to Britain

    Russian Military Tests Readiness With Snap Inspections

    Some observers see surprise drill as tit-for-tat response to NATO’s recent multinational military exercises in Baltic region

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Testing Bamboo as Building Materiali
    X
    June 27, 2016 9:06 PM
    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video New York Pride March A Celebration of Life, Mourning of Loss

    At this year’s march in New York marking the end of pride week, a record-breaking crowd of LGBT activists and allies marched down Manhattan's Fifth Avenue, in what will be long remembered as a powerful display of solidarity and remembrance for the 49 victims killed two weeks ago in an Orlando gay nightclub.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.
    Video

    Video Tunisian Fishing Town Searches for Jobs, Local Development Solutions

    As the European Union tries to come to grips with its migrant crisis, some newcomers are leaving voluntarily. But those returning to their home countries face an uncertain future.  Five years after Tunisia's revolution, the tiny North African country is struggling with unrest, soaring unemployment and plummeting growth. From the southern Tunisian fishing town of Zarzis, Lisa Bryant takes a look for VOA at a search for local solutions.
    Video

    Video 'American Troops' in Russia Despite Tensions

    Historic battle re-enactment is a niche hobby with a fair number of adherents in Russia where past military victories are played-up by the Kremlin as a show of national strength. But, one group of World War II re-enactors in Moscow has the rare distinction of choosing to play western ally troops. VOA's Daniel Schearf explains.
    Video

    Video Muslim American Mayor Calls for Tolerance

    Syrian-born Mohamed Khairullah describes himself as "an American mayor who happens to be Muslim." As the three-term mayor of Prospect Park, New Jersey, he believes his town of 6,000 is an example of how ethnicity and religious beliefs should not determine a community's leadership. Ramon Taylor has this report from Prospect Park.
    Video

    Video Internal Rifts Over Syria Policy Could Be Headache for Next US President

    With the Obama administration showing little outward enthusiasm for adopting a more robust Syria policy, there is a strong likelihood that the internal discontent expressed by State Department employees will roll over to the next administration. VOA State Department correspondent Pam Dockins reports.
    Video

    Video Senegal to Park Colorful ‘Cars Rapides’ Permanently

    Brightly painted cars rapide are a hallmark of Dakar, offering residents a cheap way to get around the capital city since 1976. But the privately owned minibuses are scheduled to be parked for good in late 2018, as Ricci Shryock reports for VOA.

    Special Report

    Adrift The Invisible African Diaspora