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

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants 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.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs