Foreign investment could add billions in revenue to South Africa's GDP

20 November 2018 Authored by Consultancy.co.za

Having analysed the new policies under Cyril Ramaphosa and their potential economic impact, economists at global professional services firm PwC have estimated that the new investments that South Africa aims to draw up until 2024 are likely to add nearly R340 billion to the country’s GDP. 

In addition to navigating a period of sluggish economic growth, South Africa is currently trying to break down the reputation that it accumulated under the previous Zuma administration, one dominated by corruption, a disorganised and overly intrusive regulatory environment, and consequently poor returns on investment.

Ramaphosa’s economic agenda has been simple in principle, consisting primarily of plans to draw foreign investment to boost the country’s economic growth. To this end, the new President has laid out a five-year plan that hopes to draw $100 billion in foreign investments by 2024.

The President recently held a Presidential Investment Summit, where he invited leaders of business from across the globe to examine investment opportunities in South Africa. According to Ramaphosa, the conference was relatively successful in that it secured R290 billion of promised investments from firms across the world as well as some domestic firms.

Foreign investment could add billions in revenue to South Africa's GDP

The consulting world – particularly the Big Four accounting and advisory firms – have been closely monitoring these plans for boosting investments and offering their insights. A Managing Director at Deloitte recently argued that the Investment Summit should be used as a platform to declare South Africa’s newly found economic openness to the world.

PwC has now made its own predictions regarding the five-year plan. According to economic analysts at the firm, the investments drawn under the new plan will provide a world of economic benefits, including the addition of R338 billion to the GDP and the creation of approximately 165,000 jobs both directly and indirectly. 

Government coffers are also expected to benefit from the growth in investment, specifically through the anticipated addition of nearly R60 billion to government revenues. In the long term, PwC places the boost to production from the investment at nearly R470 billion between 2025 and 2035.

According to the firm, “This (increased investment) aligns with president Ramaphosa’s State of the Nation Address (SONA) 2018 in which he promised to use investment, among other levers, to address the country’s challenges of poverty and inequality.” Nevertheless, the actual road to realising this potential might be bumpier than expected.

“However, following a challenging economic and political period in South Africa leading up to the appointment of President Ramaphosa in February 2018, attracting FDI is much easier said than done,” the firm said, adding that “the challenge for South Africa is to ensure that the already-listed factors that influence investment are addressed. Investment pledges will only translate into actual investments if a supportive business environment, policy certainty and political stability are in place. These too were pledges of SONA 2018.”

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