South Africa is Open for Business

The 2016 SA Tomorrow Investor Conference serves as a convenient gauging point one year on from Barclays’ Africa Trade Index, with both assuring investors that SA is still the continent’s primary gateway

A group of leading South African business executives, key government officials and labour representatives convened in New York in October, 2016 to tell the South African investment story to international investors.

Standard Bank partnered with the South African National Treasury, the Johannesburg Stock Exchange (JSE), Old Mutual and UBS, in sponsoring the fourth annual SA Tomorrow Investor Conference, which took place in New York on Tuesday 4 October and Wednesday 5 October.

The key objective of the conference was to showcase South Africa as an investment destination and to highlight that South Africa is ‘open for business’. Progress on initiatives to achieve fiscal consolidation and structural reform were discussed by senior policymakers, corporate executives and labour representatives.

In attendance - alongside many esteemed representatives including Standard Bank CEO, Sim Tshabalala and JSE Chairman, Nonkululeko Nyambezi-Heita - was Barclays Absa CEO, Maria Ramos; a significant attendee on the anniversary of Barclays’ 2016 Africa Trade Index.

 And with the SA Tomorrow Conference in place to provide a high-level business networking platform for engagement between South African policymakers, senior executives from South Africa’s top listed companies and investment professionals at institutional fund managers, it was as good a time as any to look back at the finance heavyweight’s forecasts 12 months ago; to analyse the extent they have come to fruition in the eyes of the event’s esteemed guests.

“Various nations across Africa increasingly present major economic opportunities given growing consumer markets, relatively under-developed natural resources and widespread political and economic reforms,” Chief Executive of Corporate Banking, Barclays, John Winter explained. “Sub-Saharan Africa (SSA) in particular has made major inroads into market openness.

“Yet it is also clear that progress is not uniform across the region, with the World Bank estimating that, on average, it takes 54 days, 10 documents and costs nearly $8,000 to import a single container into the Republic of the Congo, compared to 21 days, six documents and $2,080 cost incurred for a similar container into South Africa.

“The region as a whole has also experienced a major shift in terms of trading partners, with the conventional narrative of trade with Africa in recent years being a story of major investment by Asian trading partners.”

Changing perceptions

That being said, much of this interest and investment is still being directed at the three, key, continental gateways in Nigeria, Kenya and South Africa. So in comparison to emerging markets at least, the latter can very much still be seen as open for business; not just internally but on a global scale.

Recent issues around energy shortfalls and dropping FDI interest are certainly, statistically, valid concerns but analysts are eager to urge people not to lose sight of the country’s overall significance in driving wider African progression.

However, within Barclays’ 2016 Trade Index, Winter did allude to a paradigm shift already occurring as a result of FDI influences sprawling outside of the heavyweight trio.

“Unsurprisingly, Nigeria and South Africa dominate the continent from a size perspective, but spin this around to consider market openness alone and a different perspective appears,” he said. “Nations like Botswana, Zimbabwe or Senegal may not be as attractive from a sheer size perspective, but the ease of doing business changes perceptions.

“It’s clear that Nigeria gets through in spite of trade policy and infrastructure, not because of it.  In order to achieve a higher level of trade openness, Nigeria will need to address a range of business environment factors while investing more heavily in transport networks and power provision.

“Kenya and South Africa by contrast set an example to follow. Countries such as Botswana, Namibia and Zimbabwe essentially support South Africa’s trade policy and logistics offer to mutual benefit.”

Broadening focus

 So in terms of conclusions and outlooks generated at the SA Tomorrow Investor Conference, the overall fallout may well prove to revolve around South Africa’s status as a role model and African investment starter pack, if not the be-all-and-end-all that it once was.

While the country is being urged to not only stay open but to smooth over its recent challenges, there is also a realisation that - for new entrants into the African market - businesses should look beyond South Africa before making a decision on where to invest.

“For now, traders with an interest in Africa would do well to broaden their focus; South Africa, Nigeria and Kenya will remain hotspots, but investing now in the sleeping giants of Ethiopia, DR Congo, Mozambique, Kenya and Tanzania may present future growth opportunities,” Winter admitted. “Rapidly developing consumer markets are not only increasing the size of the market opportunity but the opportunity is also becoming more accessible, thanks to continued progress in improving soft and hard infrastructure.

“Africa is evidently a continent on the move and nowhere is this more evident than in improvements in trade openness.”