Bond investors have handed South Africa a vote of confidence, but not their money. Big commitments, above all in mining, remain off the table, and executives warn the country risks a French-style eruption unless growth accelerates and private capital moves.
Ninety One CEO Hendrik du Toit made the point bluntly at the Financial Times Africa Summit in London on Thursday. “If you look at the TV in France, and you have South Africa’s unemployment rate, you need to think carefully,” he told delegates.
France has become a cautionary tale for South African boardrooms. Cost-of-living protests there escalated this week into looting and arson across several parts of the country, raising alert levels across Europe. The riots began last month when French high school students took to the streets demanding better access to education. For Du Toit, the lesson is that South Africa, with unemployment at 33.6% and inequality pressing on households, is not immune to a similar response.
The commercial stakes are documented at home. More than 350 people died during the July 2021 unrest, and eight days of mass looting and property destruction cost the economy an estimated R50 billion. Unemployment was not the main trigger, but reports have shown how entrenched poverty, joblessness and severe inequality left millions vulnerable to the turmoil.
Du Toit’s prescription is capital-led. Business, despite its efforts, still holds a conservative posture rather than the aggressive one that would unlock opportunity and confront the jobs threat. He argues that higher investment in mining and a rebuilt industrial base would pay higher dividends to the economy and fast-track recovery, but insists government alone cannot scale the effort. He calls for greater private-sector investment to build on the existing partnership between big business and the state to stabilise the economy, implement reforms and stimulate growth, including labour-intensive growth that rebuilds weakened industrial capacity.
The growth target hangs over all of it. South Africa aims for 3% economic growth, roughly three times its current pace, a rate it has not sustained in more than a decade. Policy shortcomings are widely blamed for the prolonged slowdown, and economists have repeatedly identified 3% as the threshold for sustainable job creation.
On the capital account, Du Toit’s assessment is measured. Political developments, he says, have improved South Africa’s standing in global financial markets over the past year or two. “We have moved on decisively from the risks of the [Jacob] Zuma years to the initial uncertainty of the [Cyril] Ramaphosa years to now, a GNU [government of national unity] which hasn’t yet settled down but which signals that the centre is holding.” Investors have a certain confidence, he stresses, but they are not excited: growth is what excites them, along with creativity and innovation. South Africa is solid and back from the brink, the rand stable and strong against major currencies, yet there are no big commitments, particularly in mining, where the country has been very uncompetitive.
Business Leadership South Africa CEO Busi Mavuso, who joined Du Toit and other South African business leaders at the summit, said the work done so far must be carried through. “We’ve done a good job so far but I think we have to see this through to its logical conclusion so we can move to the right growth levels that can deal with the high levels of unemployment that we have.” In her view, weak growth stems not from a shortage of resources but from government ineffectiveness. “You cannot think about growing the South African economy if you don’t take care of the basics.”
The executives also argue that sound domestic policy must be paired with coherent economic diplomacy. “Without the political consensus that you are driving this, you will get stuck at 3% growth,” Du Toit said. South Africa, he added, needs to repair relations with other African countries after anti-immigration protests in parts of Gauteng and KwaZulu-Natal damaged its reputation.
Earlier this month, nearly a dozen cars were torched and several buildings set alight in the two provinces. The violence subsided after the Department of Home Affairs withdrew a September directive that had allowed asylum seekers to lodge applications following a Constitutional Court ruling that people could not be excluded from the asylum process solely because they had entered South Africa irregularly. Refugee Reception Offices were overwhelmed within days of the directive being issued, a development the court order had not anticipated, and the department has yet to conclude a process to determine the most appropriate operational approach to comply.
Deputy Finance Minister David Masondo, who could not travel to London because of the Medium-Term Budget Policy Statement tabled on Wednesday, also addressed the continental relationship. “There has been a deliberate effort politically, on our side, to engage the African fellow political leadership in addressing economic growth on the continent because migration is a pull factor associated with poor economic growth in other African countries.” Discussions with other African governments, he said, focused on using existing policies and regional platforms, including the African Continental Free Trade Area, to support growth across the continent. Meanwhile, South Africa will continue to nurture its trade relationship with the US, which has been strained for some time.
Whether investor confidence can convert into the mining and industrial commitments Du Toit wants, before the unemployment picture produces its own reckoning, is now the question hanging over the GNU.
This story first appeared in Moneyweb.