SA’s CEOs on why they are optimistic about the country | American Chamber of Commerce in South Africa

October 04, 2024

Article by: Ray Mahlaka

There is an unusual wave of optimism about South Africa in the C-suite.

CEOs of multinational companies are overwhelmingly positive about South Africa, its prospects, and its reform agenda since the formation of the Government of National Unity (GNU). This hopefulness has also been seen in financial markets.

The rand has become one of the biggest gainers against the dollar among emerging market currencies this year. South African stocks have been up, up, and away, with record highs. In debt capital markets, both local and hard-currency bonds have outperformed their peers from developing markets.

This week, prominent CEOs lifted their South African economic growth and job creation expectations, saying that the economy could grow by 3% in 2025, which could create at least one million jobs by 2030 and make a dent in the joblessness crisis.

Arguably, a 3% economic expansion by the end of next year sounds too good to be true.

Apart from 2021 when Covid-19 lockdowns eased, the economy opened, and public life returned, the last time the country’s economy expanded by more than 2% was in 2013. The economy grew by 1.9% in 2022 and 0.7% in 2023, and is expected to average about 1% in 2024. This paltry growth underscores that the economy is still broken in many areas, even though sentiment among CEOs has improved.

The big question is whether the optimism among CEOs is all smoke and mirrors or whether it is informed by evidence that South Africa’s fortunes are finally turning around.

Sim Tshabalala, the group CEO of Standard Bank. (Photo:Ting Shen / Bloomberg via Getty Images)

Standard Bank CEO Sim Tshabalala believes there is evidence of real reform as seen in the fading of the energy crisis (no Eskom blackouts for six months) and the formation of a GNU, which has committed to the continuity of business-friendly policies and respect for the Constitution.

The GNU has also committed to holding the line on government expenditure and hitting its fiscal targets — the progress or regression of which will be unveiled by the National Treasury in the Medium Term Budget Policy Statement later this month. There are also positive developments outside of the GNU’s control such as consumer inflation falling fast, which will prompt more interest rate cuts from the SA Reserve Bank, providing much relief to consumers.

Tshabalala, who runs South Africa’s largest bank that oversees assets worth R3.1-trillion, said his optimism was fuelled by the government’s acceptance of help from the private sector in sectors of the economy previously monopolised by the state, mainly energy and logistics.

“Business and the government are continuing the momentum on reforms. And based on the improvements delivered so far, there is every reason to believe that the momentum will continue,” Tshabalala told Daily Maverick.

Even though there is less risk in the economy than has been previously seen, Tshabalala said investors were still wary of South Africa. This is because investors (foreign and local) had been badly burnt and disappointed by President Cyril Ramaphosa’s first presidential term since 2018, which was too slow to deliver reforms, including rebuilding capacity in law enforcement agencies so they could successfully prosecute State Capture corruption.

So, investors have been cautious about re-entering the South African market or deploying more capital. Underscoring this is economic data, more recently a modest rise in the third-quarter RMB/BER business confidence index from 35 to 38 points and a paltry 0.4% rise in economic growth during the second quarter. Not only do these numbers dim the positive mood, they also indicate that investors are still wary of making large and long-term capital commitments in the economy.

Adrian Gore, the CEO of Discovery. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

Challenging this perception is Discovery CEO Adrian Gore, who believes that South Africa is in a “completely different place than a year ago” when stage 6 Eskom blackouts were the norm and Transnet’s port and railway operations hobbled along without a plan to fix them (though progress is still slow).

‘Massive potential’

“There is a feeling that we can turn this flywheel of growth-jobs sentiment. The narrative around South Africa is much better now. If we can capitalise on it, the potential is massive,” said Gore, who is often described as “Mr Positive”.

Eskom Sasol gas

Sasol CEO Simon Baloyi. (Photo: Sasol / Facebook)

Sasol CEO Simon Baloyi supported Gore’s views, saying investor perceptions of South Africa were changing. Just days ago Baloyi returned from overseas, where he engaged international investors on a roadshow about the petrochemical giant’s affairs and growth plans.

“Investors were impressed with our politics. We have had a political party (the ANC) in power for 30 years, and then it lost the majority of votes. The party embraced the loss and moved on. There was no violence. There was a smooth transition and handover of power,” Baloyi told Daily Maverick. Investors have no choice but to look at the South African investment market considering that several emerging markets, such as Russia and Brazil, remain a mess because of their geopolitical and governance crises.

Baloyi warned that the positive sentiment around South Africa should not breed complacency, adding that now was the time to accelerate the reform agenda.

“There is no way a country can go forward without a functioning economy. It is all about an economy that functions, can create jobs, provide stability and hope. Otherwise, we will become a basket case,” he said.

Captains of industry have pledged to mobilise more money and deploy their expertise to