Time for SA to Rejig Investment Attraction Strategies

Time for SA to Rejig Investment Attraction Strategies

The carnage wreaked by Covid 19 to what was an already economically anaemic Mzansi is self-evident. Poverty and unemployment are at an all-time high and the economy is expected to shrink by more than 7% this year. By all standards South Africa is in a state of economic emergency, and, like in all emergencies, policymakers should implement what may be unpopular but nonetheless necessary measures to pluck the country out of the present economic quagmire.

While not a panacea on its own, massive foreign and local investment is critical and could help (together with other measures) propel the country to pre-Covid 19 lockdown levels and enable it to begin a new trajectory towards significant growth in the shortest possible timeframe. To this end, creating a conducive atmosphere for foreign direct investment inflows and the deployment of local investment is imperative. South Africa needs to position itself in such a manner that allows it to perform well in an increasingly competitive global trade and investment climate powered by innovations in the digital space.

It is in this context that the economic reconstruction and recovery plan recently announced by President Cyril Ramaphosa is a most welcome development. Among other objectives, the plan aims to create jobs (primarily through aggressive infrastructure investment and mass employment programmes); reindustrialise the economy, focusing on growing small businesses; and accelerate economic reforms to unlock investment and growth.

The drive to unlock more than R1 trillion in infrastructure investments and to ensure energy security within two years as well as the focus on reduction of data costs and expansion of broadband access to poor households is particularly commendable. This is because investors, both domestic and foreign, are naturally hesitant about investing in countries where basic requirements, such as roads, health services and utilities are inadequate.

As such eliminating power supply challenges and load-shedding in South Africa is a priority. It is unstainable for investors to have to provide their own back-up generators etc as this increases the costs of doing business and reduces the rate of return on investment, thus turning away both types of investors.

Some of the challenges hampering efforts to attract investment have to do with the regulatory framework. It is worth noting that the economic reconstruction and recovery plan includes removing regulatory barriers that create inefficiencies and the fast-tracking of certain regulatory processes. For instance, the aim is to reduce timeframes to obtain mining, prospecting, water, and environmental licenses by 50%. An enabling regulatory environment is critical for the objectives of the plan to be achieved. In this regard and in light of the current fourth industrial revolution, regulations particularly in the ever-evolving digital space must be carefully considered and implemented.

Finally, as an economic giant in Africa, South Africa is well-positioned to play a pivotal role in creating a positive environment attractive for investment domestically and to advance such best practices on the continent through the African Continental Free Trade Area, among other initiatives.


South Africa bucks the Covid 19 investment depression

While global foreign direct investment (FDI) trends have halved, with global FDI flows dropping 49% in the year to June 2020, and 28% across Africa, South Africa saw an encouraging increase of 24% with a total of $ 2.9 billion in inward FDI. Of this total, $1.8 billion resulted from one transaction, the purchase of Pioneer Foods by global powerhouse PepsiCo, in a deal announced in June 2019, but completed early this year, according to the UNCTAD semi-annual Investment Trends Monitor published last week.

Welcome as this investment is in showing the potential of South Africa as an investment destination, the reason for Pepsico’s purchase is even more encouraging. Pepsico intends to use Pioneer Foods as the anchor to grow its brands in South Africa and across sub-Saharan Africa. This is the role that South Africa, the most industrialized economy on the continent, with its deep financial markets, strong bench of managerial talent, and a major transport and logistics hub should be playing far more strongly.

The promise that the South African democratic transition offered to sub-Saharan Africa in 1994, was to serve as an African beachhead into global markets. Sadly, this opportunity was not taken up, and South Africa’s economic growth performance has over the last decade actually lowered Sub-Saharan Africa’s growth performance, as our economy lagged that of the region as a whole.

President Ramaphosa’s commitment to increase investment levels, including FDI by $100 billion over five years signaled the intention to turn this sad situation around, and this has been followed by other welcome pronouncements and targets with respect to infrastructure and other important sectors.

While the investment targets were appropriately ambitious, progress to date has been tepid, and Covid-19 has finally put to rest any hopes of meeting them. However, the value of the first half FDI performance in terms of keeping South Africa on investors’ radar reminds us of the importance of keeping focused on this issue as a critical element of getting South Africans back to work and getting growth back into South Africa’s economy.

The most widely cited measure of attractiveness to international investment is the World Bank’s Ease of Doing Business indicator. This ranking compares the opportunities and burdens resulting from laws and regulations governing a typical medium-sized business operating in a country.  It has been published annually since 2007, covering an expanding number of countries 178 in 2007 and 190 in 2019. Its rankings are comparable across countries in a given year, but not across years, as the compilers have continually adjusted the collection methodology to more accurately reflect what is important for businesses and investors. (For example, when they first looked at electricity, they counted how long it took, and what it cost for a business to get an electricity connection. Now they look also at what happens if you turn on the switch – does electricity actually flow!)

The Ease of Doing Business measure provides a useful measure of how well South Africa has kept up with the competition, and also a useful guide on what the best performers are doing, as a template for us to follow. In 2007, South Africa ranked 35 in the world, second only to Mauritius in Africa. In 2019, after more than a decade of competitive global reform, South Africa dropped to 84 globally, and in Africa, Rwanda and Kenya had joined Mauritius in providing a better regulatory environment for their businesses than South Africa does.

President Ramaphosa has set a team to lead an aggressive reform effort targeting the business regulatory environment. Progress to date has been slow. Getting this right, in an area where much implementation can be achieved, if the will is there, simply “by a stroke of the pen”, will be a key contributor to getting South Africans back to work, and to helping Minister Tito Mboweni to balance his figures over the coming years!

Finding roles for groups at the bottom of the pyramid amidst the 4IR

Finding roles for groups at the bottom of the pyramid amidst the 4IR

The Fourth Industrial Revolution (4IR) is a term that comes up inevitably during discussions about job losses; for instance, “Can you imagine what the unemployment rate will be when 4IR really takes hold?” We use 4IR terms like automation and the Internet of Things (IoT) to explain trends about how the nature of the economy is changing. It is sad how we never explain the 4IR in a way a people at the bottom of the pyramid (BoP) can understand, let alone know how they are impacted. We hardly think of the BoP as forging potential innovators of products and services. And, little is being done to make the 4IR relatable to the people in the township and rural areas.

How do we explain the 4IR to the young people whose aspirations are to go to school, get a well-paying job that offers a big glass corner office as an executive? How do we explain the 4IR to people in remote rural areas, where home-based work is how families make ends meet? The lady that cooks amagwinya (vetkoek) for the income to take her child to school does not know she can be part of an online community and start trading with other community members. She does not know of apps such as KHULA from South Africa which assists farmers to have access to big suppliers.

Yet, there is much potential in the townships and rural areas across Africa. For instance, in Kenya, Tala uses non-traditional data to introduce 3 billion consumers to the global market. People apply for a loan and receive an instant decision, based on the behavioural framework of gauging one’s ability to repay back loans. This allows small businesses to have access to funds. It allows individuals to make ends meet and become owners of their destinies, through fast, personalized loans to build a digital credit history.

According to Ernst & Young, analysing the most-used FinTech services – money transfer and payments account for 50{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} and borrowing accounts for 10{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}. That is borrowing using peer-to-peer platforms and using online short-term loan providers. These are the pillars that small businesses need to have in place for them to grow.  Fintech mobile services are commonplace in the township economy, where there is an almost daily loss of electricity for specific periods.

The rise of common workspaces

One of the trends we see due to the digital economy is the rise of co-work spaces. There is a rise of bloggers, freelancers, and contractors. This flexible environment of working is ground-breaking as it gives people experience and the convenience to arrive at a working space to get work done and leaving as soon as it is done.

We forget that townships understand this concept well, as they are familiar with internet cafes. However, it has not yet been demonstrated how workspaces can be brought to the townships to give the entrepreneurs and small businesses the ability to work remotely and still own most of their day by not being stuck in the office. Perhaps the free wifi access that was trialled in Tshwane should be rolled out in township economies. Would any service provider in the public or private sector take up that challenge?

Revisiting the 4IR concepts

The aim of high technology is not out to take away jobs; however, it will change the nature of employment. One case in point, the traditional office will be a thing of the past transforming real estate and property development. Barter trading remains how people in the rural areas still trade; with technology, borrowing and making payments will be much easier for the people in remote rural areas too.

South Africa has committed to teaching students subjects like coding and programming, for example, however, we need to make it practical, in order to allow the youth of Africa to investigate problems in their communities and use the 4IR tools to solve them.

Moreover, perhaps the language of the 4IR needs to change so that everyone can understand their role and niche in being more than consumers but innovators. Politicians and successful entrepreneurs who have successfully grasped the idea behind the 4IR should stop using soundbites and buzzwords to explain the technology trends. Simplify the message. Education about the 4IR certainly does not end at schools. There needs to be a consciousness that is taught in conjunction with subjects such as coding, robotics, and programming, which allows people to make the products and services that are centred around Africa’s development and innovation.



Domestic poultry’s ‘food security catch 22’

Domestic poultry’s ‘food security catch 22’

Trade protection is an easy sell, especially in an environment where supply-side economics does not deliver the benefits that it is supposed to. The narrative is simple: imports from other countries are displacing domestically produced goods, so intervention is required. Domestic industry protection needs to trump consumer welfare – after all, no one would be able to buy anything if they don’t have jobs, right? Add to this the critical priority of ensuring national food sovereignty and the scales are tipped in favour of government intervention, be it industry support or trade protection.

But this narrative downplays the benefits of import competition, increased consumer choice, value creation that accompanies links to foreign supply chains and, while it’s a very abstract concept, the deadweight loss that accompanies tariff increases. A recent study by FTI Consulting touches on these issues and provides some insights into the South African poultry industry as well as the impact of trade protection.

Buying local

According to the FTI study, overall demand for chicken in South Africa has increased over the last eight years, while domestic production remained flat; even though several trade protective measures have been implemented to bolster the local producers.

Regarding domestic production, South Africa’s broiler industry is as efficient as many competitor countries (including EU exporters) and has managed to maintain output despite production setbacks from external factors like droughts, that contribute to plant closures and job losses. However, the industry is experiencing jobless growth as it becomes less labour intensive and more capital intensive and vertically integrated.

In comparison to the broader food processing sector, the broiler farming sector has weaker linkages to the rest of the economy as well as lower employment and output multipliers, making a strong case for less import protection as a large share of imported chicken (mechanically deboned chicken meat) feeds into the food processing sector. However, the broiler farming industry contributes directly, indirectly and through induced impacts on domestic job creation mainly for unskilled labour, which is a critical government development objective.

The FTI study also indicates losses in consumer surplus as well as net decreases in GDP and employment via modelled effects of tariff increases on consumer welfare[1]. These impacts are spread-out through several industries unable to coordinate as well as the broiler industry, which has perhaps contributed to previous successful ITAC applications for protection. Ultimately, it’s difficult to make a case for the abstract benefits of enhancing broader economic efficiency when national development objectives can immediately be serviced in a specific sector.

Just grow already!

One of the largest constraints to South Africa’s broiler industry (and many others) is the relatively limited domestic market, restricting economies of scale for domestic producers. For example, South Africa’s broiler industry is about a tenth the size of the EU’s. The solution according to the poultry master plan is to gear South Africa’s poultry industry towards exports, possibly to the rest of Africa. While this seems like a win-win solution for South Africa’s broiler industry, and potentially consumers throughout Africa, target markets and activist groups can literally copy the SAPA playbook to protect their own domestic poultry industry; again, trade protection is an easy sell.

The ‘Chicken Wars’ have been playing out in real-time over the last decade between South Africa on the one hand and mainly the US, EU and Brazil on the other but can just as easily play out between South Africa and Ghana, for example.

A brief history lesson

This is not the first time that chicken trade has ruffled diplomatic feathers. From 1961-1964 the US and EU (primarily West Germany and France at the time) had a trade disagreement over tariffs imposed on US chicken. This resulted in the US imposing counter-tariffs on several EU imported goods, most notably lightweight trucks. While most of the counter-tariffs were eventually removed, the so-called “chicken tax” on lightweight trucks remains in place to this day. The result is that lightweight trucks are more affordable in Canada than they are in the US and the hub for US automobile manufacturing, Detroit “Motor City”, was isolated from foreign competition and today lies in ruins.

There are striking similarities between the ’64 chicken war and the one playing out today in South Africa, for example, the Dutch accused the US of dumping chicken while the French banned US chicken over health concerns, seeking any relief from cheaper US imports. This ultimately resulted in more expensive chicken for EU consumers, long-running disagreements, strained trade and diplomatic ties – among cold war allies! – as well as the rise of inefficient value chains to circumvent trade barriers.

What now?

The domestic poultry industry can potentially adjust to import competition and diversify their product offerings, but this would require expensive reskilling, refitting and adjusting of value chains, which presents a high risk for the owners, directors, managers and stakeholders of South Africa’s broiler companies. Meat importers will benefit, so will consumers and the broader economy over the long term, but it would not deliver immediate satisfaction.

Policymakers are aware of these trade-offs and could choose to kick the can down the road as squaring up to vocal, well-coordinated domestic industries present a high political cost. If the poultry masterplan is implemented with a focus on expanding exports with continued import protection, the South African poultry industry might end up switching seats with the EU, US and Brazil looking to protect their own commercial interests in foreign markets. As things stand history could repeat itself, with South Africa’s automobile industry ultimately footing the bill for our chicken dinner.


[1] The South African Poultry Association (SAPA) has applied for tariff on frozen bone-in chicken pieces increased from 37% to 82%, and frozen boneless chicken cuts from 12% to 82%.

Women in the 4IR

Women in the 4IR

Advancing gender equality is crucial to ensure a sustainable future since women account for just over half the world’s working-age population. If women do not achieve their full economic potential, the global economy will increasingly be lopsided with half the population contributing significantly less than half the output. As Africa navigates the shifts that Fourth Industrial Revolution (4IR) will bring, we have to ensure equal access to opportunities the digital transformation brings, and stipulate how we can boost access to skills, to ensure women and girls are fully empowered to participate in the coming revolutions.

We are already seeing the emerging impacts of 4IR, most noticeably in the workforce where jobs are rapidly being lost to automation. There is a need to upskill employees to provide them with an opportunity to remain in their roles and to add value to their organisations.

The 4IR has the power to improve lives since production can be facilitated and made more efficient; learning can be more interactive and ubiquitous. However, women are disproportionately more likely to be doing low-value tasks that require unskilled labour that can be easily replaced with automation. Women, therefore, make up the vulnerable group needing upskilling to access to the opportunities brought by the 4IR.

Women are underrepresented especially in engineering and technology careers that are most expected to grow and benefit most from the 4IR. In Africa, the population of Africa is expected to grow from its current 1.2 billion to approximately 1.6 billion in 2030.   This point is made to draw attention to the need for Africa to have the right mix of Science, Technology, Engineering and mathematics (STEM) skills, with the softer skills like emotional intelligence, in order for African workers to have the capacity to drive change and development (though human interaction) into the continent using the 4IR.

The rest of Africa can learn lessons from Rwanda, which has pioneered integrating women into politics and the ICT revolution.  Women like Akaliza Keza Gara, a member of the 4Afrika advisory council for Microsoft that ensures that young people venture into ICT, serve as exemplary cases for gender inclusivity within the digital space.

In other parts of Africa, online initiatives such as She Leads Africa is empowering young women to excel in business. M-Pesa, the leading mobile money transfer service, facilitates business transactions and has helped thousands of female entrepreneurs to build thriving small and medium enterprises.

Yet, there is more to be done. The highest share of women in the workforce globally is found in Zimbabwe at 52.8{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}.   Additionally, women across the continent are more likely to be in informal employment relative to men. In the private sector, African women hold 23{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of positions at the executive committee level compared to a global average of 20{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}.  This clearly shows that Africa is keeping pace, but globally more must be done to empower women. More women need to be integrated into formal employment, moving up the corporate ladder and part of the decision making. This requires the world and Africa to invest in upskilling women in order to take the positions and drive the 4IR agenda forward.

Bridging the digital divide and ensuring that the education system is ready to maximise the opportunities brought by the 4IR – for women especially – are notions and issues that should be incorporated when designing new policy initiatives surrounding the 4IR, among others. Addressing these issues can change the lives of vulnerable groups, particularly the poor, women and children. Tutwa Consulting Group is keeping a close eye on policy changes and developments, as it is essential to understand how the digital revolution can also help narrow the gender divide.


A plea for the end of the ‘manel’

A plea for the end of the ‘manel’

Earlier this month I attended the SADC Industrialisation Week in Dar es Salaam, Tanzania and had the opportunity to learn new things. One of them was the term ‘manel’. I am a veteran of many conferences, summits and workshops dealing with international relations, trade, investment, regional development and economic governance. I have witnessed ‘manels’ before but had not picked up on this useful word to describe the phenomenon of a group of all male speakers discussing a topic, often in a way that brings to the table the interests and views of only one half of the population.

Unfortunately, the ‘manel’ does not appear to be facing extinction any time soon. There is an increasing awareness of the inappropriateness of a platform that does have a female voice but, in some instances, there is little done to remedy the situation. The organisers of SADC Industrialisation Week presumably had months to plan for the many sessions that took place over four days. It was disappointing to see that the programme reflected little effort to source capable and expert female participants for some sessions.

I simply don’t accept any suggestion that the lack of representation is because there are no females working in the areas that were covered at the event, including pharmaceuticals, mining, infrastructure development, trade, manufacturing and agro-processing. While it is true that some of these sectors remain male-dominated, it is certainly not a reflection of the real world to have a panel with no women on it. The policies being discussed impact on women and there is a need to ensure they can make input at the highest levels. In the opening session of SADC Industrialisation Week, the outgoing Chair of the SADC Business Council, Ms. Charity Mwiya of Namibia, presented a strong case for the participation of women. This unfortunately did not flow through into the rest of the event.

There are good reasons to include more women as speakers at events like SADC Industrialisation Week. They not only bring a different perspective and experiences of trade and doing business in the region, but they can have an approach that is more inclusive. Women (and some men!) can feel intimidated to raise questions and contribute to discussion if the setting appears to be exclusionary of their point of view. It can help to have at least one person that they can relate to sitting on the stage. Everyone will benefit from better quality engagement when diverse inputs are included at the event. The Harvard Business Review once reported that the collective intelligence of a group rises with the participation of more women. This is compelling evidence for gender representation, especially when trying to deal with complex regional issues.

The SADC Secretariat website itself recognizes that –

  • Women offer different perspectives and interests in the decision-making process, from their unique experiences which are often overlooked due to under-representation in political and decision-making positions.

There is a commitment in the SADC Protocol on Gender and Development to proactively work towards equal representation of men and women at all levels of decision making. It is a long-term goal to see more women at the level of Heads of State, Ministers and even as Members of Parliament. In the short-term, SADC could at least look at its own events and do away with ‘manels’.

It needs to be a conscious decision by all of us organizing and participating in conferences to fight against the ‘manel’. Women speakers can help us embrace different experiences and opinions so that there is a level of inclusivity in policy making that is still elusive at national, regional and international levels. Contributions from those who have been previously excluded are necessary if we are to achieve the objectives of inclusive, sustainable economic development. Join me in calling out those events dominated by ‘manels’ and recognizing those who make the effort to identify and invite a diverse range of speakers. You can even take the pledge at https://genderchampions.com/panel-parity.