‘Business confidence has collapsed’
Business confidence in SA has collapsed and with it investment growth, Absa’s chief economist, Jeff Gable says.
“For the last decade we’ve seen very little confidence in SA,” Gable told a Ford Motor Company SA media event at the Protea Hotel, in Summerstrand, on Wednesday.
“Business confidence in SA has collapsed and with it, investment growth too,” he said in a presentation on the economic outlook ahead of finance minister Tito Mboweni’s budget speech next week.
Gable highlighted factors such as the ease of doing business, policy uncertainty, political instability and an unreliable electricity supply as instrumental in the decline in confidence.
He said he believed that economic peaks in the country were taking place less frequently and were not as high while the troughs were more frequent and deeper.
“Businesses don’t invest and ease of doing business has also been a huge contributor to his,” he said.
“A business that’s confident will take on that next investment project and that will bring in new machines and equipment, seeking that next process.
“It’s going out there and hiring that next group of people to start that next 47 years — that’s what is generated when business is confident.
“In the absence of that, it’s very difficult. This is essentially asking if businesses in SA are investing for tomorrow,” Gable said.
He said policy uncertainty and Eskom’s inability to provide a stable electricity supply had hindered growth and were a deterrent to investment.
“We’ve had a lot of load-shedding. If we think about how SA grew up, it grew up on cheap, reliable electricity and right now, there are sectors in the country that absolutely can’t take themselves off the grid,” Gable said.
“Because I’m running an engine factory somewhere in South Africa there is no version of me installing solar panels on the roof.”
He said the political climate and policy uncertainty did not promote investor confidence.
“A survey done by the Bureau of Economic Research found that it was political instability that also made investors reluctant to commit money to the country.
“For us to make that investment that will only pay us back in 10 to 15 years we need to understand the rules of the game.
“In 2004 and 2005, when business was investing a lot, doing business in the country was easier compared to now.
“Did we not need to worry about SA’s legacy? Did we not need to worry about empowerment, land?
“It was never easy doing business in SA but at [that] point, it wasn’t that doing business was easier but we understood the rules of the game,” Gable said.
Ford Motor Company SA MD Neal Hill said despite the weak economic outlook for SA, it was a case of “damn the torpedoes and full steam ahead” for the company.
Hill said Ford’s commitment to SA was evident in the launch of its first automotive special economic zone in Gauteng in November.
The SEZ will result in least R3.6bn in projected investment being pumped into the project.
“This is something we fully believe in terms of our investment and commitment to SA.
“When the graph turns, we believe SA is very well poised to not only sustain the local market, but has an important role to play in the international market,” Hill said.
During the media presentation, Neil Woolridge of Neil Woolridge Motorsport (NWM) introduced a world-first for cross country racing — the twin-turbocharged 3.5-litre V6 EcoBoost petrol engine.
NWM designed and built the all-new Ford Ranger cross country racing vehicle.
The 5 EcoBoost-powered Ranger will make its testing and development debut during the upcoming racing season driven by Gareth Woolridge.
Speaking at the media event, Woolridge said the vehicle would be launched in a month’s time.
“The Ford Castrol Cross Country Team is stepping up to the premier class in the production vehicle category of the South African Cross Country Series for 2020,” Woolridge said.