EY Partner stresses the importance of FDI for South Africa

Speaking at the World Economic Forum (WEF) in Africa, Partner & EY Africa Industry Leader for Government & Public Sector Sandile Hlophe has emphasised the need for South Africa to work harder towards realising the goals laid down in the government’s new plan laid out last year.

Cyril Ramaphosa declared last year that South Africa would enter a new phase of its economic recovery, with a renewed focus on increasing foreign direct investment (FDI) in the country. The president’s objective is to draw $100 billion in foreign investment by as early as 2024.

Analysts have claimed that the realisation of this goal could boost South Africa’s GDP by as much as R340 billion over the same period, although progress on these plans has been slow thus far. Factors such as an increasingly heavy tax regime, rising interest rates, and rampant unemployment have been preventing growth in FDI.

Hlophe has urged policy makers and businesses alike to ensure that more action is taken to tackle these issues and ensure that FDI registers a steady increase, given its crucial role in the country’s economic recovery. The encouraging sign, he says, is that international businesses continue to look for ways of investing in South Africa.

“Despite being a country critically lacking in consumer and business confidence, and with employment stubbornly high, it is encouraging that South Africa remains on investors’ radar,” said Hlophe, speaking at the WEF in Africa, which kicked off in Cape Town on the 4th of September.

“An urgent focus on implementing economic reforms as outlined in the President’s economic stimulus and recovery plan announced in September 2018, and progressing State Owned Enterprise plans to strengthen governance and stabilise cash flows, will go a long way towards stimulating increased FDI flows,” he added.

One of the best ways to help FDI along, according to Hlophe, is to use technological development as a means to attract greater investment into the country. Experts have long stressed the importance of innovation to bail South Africa out of its current economic stagnation, particularly in the domain of technology. Hlophe has reiterated this claim, which is the same for other African economies as well.

“While Africa is still behind the technology curve, there is a once-in-50-years opportunity for the continent to leapfrog incremental technology advancement. By adopting digital transformation successes from more advanced countries - such as intelligent automation, cloud based software deployment and data storage - Africa can quickly scale up its technology use,” said Hlophe.