Economists cautious over pledges’ influence on growth

The billions of rands pledged for projects to create thousands of jobs at the SA Investment Conference this week has divided economists on whether the expected economic growth and resultant jobs will materialise.

One cautioned that the success of the pledged investments rested on the state’s ability to implement the policies necessary.

Pledges were made for various industries, including poultry, clothing, textiles and footwear.

President Cyril Ramaphosa told delegates that of the 31 projects, eight had been realised and 17 were being implemented, representing a total of R363 billion in investments.

Economist Peter Bauer said the investment bids were “very promising” because despite the risks due to the country’s economic woes, foreign investors still saw potential in South Africa.

“With South Africa’s economic factors, such as rising unemployment and the declining economy as well as [internationally accredited rating service] Moody’s potentially downgrading South Africa [to junk status], the country may seem risky and not necessarily the best place to invest.

“However, compared to all the other instability going on around the world and business growth slowing down in various countries as a result, investors are more likely to see South Africa as the safest place to invest.”

Bauer said although it was not clear yet how the investments were going to create jobs, he believed South Africa was ready for large-scale investment as it had a well-structured financial sector in line with developed world countries.

Another expert, Jeffrey Schultz, said the conference showcased the positive moves government and policy makers were making to improve the economy.

The investments were actually “commitments to investments” and South Africans needed to be cautious about how they viewed this.

He reasoned that although foreign investors had made their bids, they could still decide not to put their billions into the country, should their confidence in the government’s creation of favourable policies wane.

“We need to see how the state is going to ensure policy certainty and frameworks that will allow the economy to grow and provide confidence among investors coming into the country. It all rests on the state to actually implement policy and I am not sure we are there yet. It’s not happening as quickly as we would like.”

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