SA's tarnished image drives investors away

South Africa’s image has been badly dented this year by a number of issues which will have adversely impacted the perception of foreign observers. The extended platinum strike, linked to an ongoing history in recent times of other industries’ labour troubles, have done nothing to help SA’s reputation as a reliable supplier of export goods and materials. But probably even more damaging has been the Nkandla scandal. It has been extensively covered as frontpage news by the international media. And, being a sociopolitical emotive issue, it has garnered attention at all levels of society. The UK’s financial warhorse, The Economist, said: “…the scandal is corrosive not just because of the sums involved but because of the damage it does to South Africa’s institutions”. The Nkandla report will likely be unfavourably viewed by potential foreign direct investors, Peter Attard Montalto, emerging markets economist at financial services group Nomura, warned Fin 24. “For foreign direct investment (FDI) the report may entrench existing perceptions about corruption,” he said. The businessman’s body, the National Employers’ Association of South Africa (Neasa), was also reported to have said that the Nkandla report had “further tainted South Africa’s image, both locally and internationally”. FTW’s own investigation on the local business scene revealed similar fears of foreign investor confidence in SA having taken a battering. According to Andrew Layman, the CEO of the Durban Chamber of Commerce and Industry, the Nkandla scandal has been all over the international press, and has not presented a savoury image of the country. “Along with the platinum strike, any adverse publicity surrounding SA is likely to affect investor confidence,” he said. “Although we acknowledge our membership of a ‘global village’, we have yet to learn how to project a global image.” Bronwen Kausch, acting CEO and COO of the Cape Chamber, was even more gloomy. The Nkandla report will never be read in isolation, she told FTW. “A potential foreign investor will be looking at the bigger picture,” she added, “which is pretty bleak at the moment.” She also suggested that we are working in an environment where the state is becoming overly involved. “While we are in favour of a developmental economy, we are seriously concerned with the barriers being created for new businesses to start, and existing businesses to grow. More particularly, potential investors will look at the operational requirements and legal and regulatory requirements before they make a move. The ease of doing business is key.” Kausch then pointed to what has happened on the legislative front in just the last few months, which again emphasises excessive government involvement in business. Proposed legislative changes, she said, include extending the deadline to 2018 from 1998 for claims to be lodged on land seizures Also, despite opposition from both labour and business, there is now a bill on the table requiring company boards to comprise 50% women. Kausch then suggested that the new Employment Equity Act (EEA) requirements were sending local companies into a panic. “One can only wonder what foreign companies must be feeling,” she said. “Quotas in isolation will never transform this country. We need to focus on skills development. Transformation is a desperately important issue, but we must take a pragmatic view and one which nurtures the growth of business.” Kausch was also adamant that talks with local representatives of foreign chambers of commerce “paint a very grim picture”. “They are struggling to entice their national companies to even consider SA as a place to set up shop. “Over-regulation, regulatory overlap and proposed legislation which harkens back to the bad old days does not fill an investor with confidence. Now, throw into the mix an ongoing scandal involving the leader of the country, which can only be described as embarrassing.” This, Kausch felt, meant that business had a long, hard road ahead. “It is up to organised business to take a stand and make its voice heard – both locally and globally,” she said.