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

African States Push to Keep Boko Haram Offline

Central African telecoms ministers working with Nigeria to block all videos posted by Boko Haram in effort to blunt Nigerian militant group's propaganda More

Falling Oil Prices, Internet-Savvy Youth Pose Challenge for Gulf Monarchies

Across the Gulf, younger generations are putting a strain on traditional politics More

Philippines Call Center Workers Face Challenges

Country has world’s largest business process outsourcing, or BPO, industry, employing some one-million workers More

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

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Supreme Court Hears Hijab Discrimination Casei
X
Katherine Gypson
February 25, 2015 11:30 PM
The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video US Supreme Court Hears Hijab Discrimination Case

The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video Falling Gas Prices Hurt Nascent Illinois Hydraulic Fracturing Industry

Falling oil prices are helping consumers purchase cheaper petroleum at the pump. But that’s made hydraulic fracturing or “fracking” less economically viable for the companies in the United States invested in the process. VOA’s Kane Farabaugh reports on one Midwestern town that was hoping to change its fortunes by cashing in on the next big U.S. oil boom.
Video

Video Fighting in Sudan's South Kordofan Fuels Mass Displacement

Heavy fighting in Sudan's South Kordofan state is causing hundreds of thousands to flee into uncertain conditions. Local aid organizations estimate as many as 400,000 civilians have been internally displaced since the conflict began more than three years ago, while another 250,000 have fled across the border to refugee camps in South Sudan. VOA's Adam Bailes reports.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.
Video

Video A Filmmaker Discovers Her Biracial Identity in "Little White Lie

Lacey Schwartz grew up in an upper middle-class Jewish family, in a town in upstate New York where almost everyone she knew was white. She assumed that she was, as well. Her recent documentary, Little White Lie, tells the story of how she uncovered the secret of her true racial background. VOA’s Carolyn Weaver has more on the film.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video US-Cuba Normalization Talks Resume Friday

Negotiations aimed at normalizing diplomatic relations between the U.S. and Cuba resume Friday. On the table: lifting a half-century trade embargo and easing banking and travel restrictions. There's opposition in Congress, but some analysts say there may be sufficient political and economic incentives in both nations for a potential breakthrough this year. VOA's Mil Arcega reports.
Video

Video Pakistan's Deadline For SIM Registration Has Cellphone Users Scrambling

Pakistani cell phone users have until midnight Thursday to register their SIM cards, or their service will be cut off. While some privacy experts worry about government intrusion, many Pakistanis are just worried about keeping their phone lines open. VOA Deewa reporter Arshad Muhmand has more from Peshawar.
Video

Video Myanmar Warns Factory Workers to End Strikes

Outside Myanmar's main city Yangon, thousands of workers walked off their jobs earlier this month demanding a doubling of their wages, pay raises after a year and input from labor unions on industrial regulations. Since Friday, the standoff has grown more tense as police moved in to disrupt the sit-ins, resulting in clashes that injured people from both sides. VOA correspondent Steve Herman visited industrial zones which have become a focus of Myanmar's fledgling workers rights movement.
Video

Video Oscar Winners Do More Than Thank the Academy

The Academy Awards presentation is Hollywood’s night to reward the best movies from the previous year. It’s typically a lot of glitter, a lot of thank you’s, a lot of speeches. But many of this year’s speeches carried messages beyond the thank you's. VOA’s Carolyn Presutti takes a look.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More