Delegates at the Allan Gray Investment Summit in Sandton, north of Johannesburg, have heard that South Africa still presents attractive investment opportunities despite the tough economic environment.
They also heard that South Africa’s subdued economic growth, the stubbornly high unemployment rate and government debt levels have resulted in a reluctance to investment.
However, these should be viewed as short-term challenges.
Experts have lauded the new administration under President Cyril Ramaphosa for its efforts to improve governance at key state institutions and say this will raise confidence among investors.
A Chief Economist at Stanlib Kevin Lings says corporate and government bonds are some example of alternative investments.
“There are investment opportunities. It’s not as if there’s nothing to invest in. If you invest in the South African bond, the yield of that sits at round 8,5 % which effectively means if you hold that to maturity, your return on that will be around 8,5%. If your Fund Manager is a little bit skilled maybe he can get that at round 9 percent. That is a very decent return and I think it suggest a low risk investment that you can put in your portfolio.”
Hindrance for investment
However, Lings warns that the lack policy certainty still remains a hindrance for investment into the country.
“There are many areas that government has put on the table but not clarified, and a couple of them are fairly obvious. The land expropriation is probably critical, the way in which we deal with National Health Insurance is also key; the way in which we deal with spectrum is going to be quite critical. The way in which we finance and deal with Eskom, I think, is absolutely critical,” says Lings.
Lings puts the local economic growth at 0.4% compared to its emerging market pair China, which he says is growing at 15%.
According to him, the economic climate is going to remain challenging in the next two to three years. This as the country comes to grips with the extent of the damage inflicted over the last nine years.
Lings expects business confidence to improve over the coming years following the appointment of key individuals into cabinet. -Additional reporting by Mbalenhle Mthethwa