Two stories were released at the weekend that should boost investments in two neighboring countries, one is little more than window dressing while the other will have actual and fairly quick impact.
South African president, Cyril Ramaphosa took to the streets on Saturday to celebrate a commitment of companies to invest R290bn over the next ten years. This was largely achieved by his star-studded investment envoys who have been traveling the globe, trying to lure more investments to SA. While they were rightfully celebrating the milestone in the streets in Soweto, Tom Alweendo, the Namibian mining minister announced that they will scrap a rule that requires mining companies to have at least 20% of their shares in the hands of previously disadvantaged Namibians.
While Ramaphosa’s achievement sounds good, Alweendo’s amendment to the ownership requirements will have a much bigger impact. To see why, one needs to analyze the numbers. The investment pledge is spread over 10 years. It is not clear if they are new investments, or if capex already planned anyways is included. Industries such as mining, real estate development, manufacturing, energy and communications will have a steady stream of capital expenditure that is needed just to stay competitive. Is this counted as new investment? And even though R290bl sounds big, if one compares it to the R200bl that was invested into the renewable energy sector between 2011 and 2016, Ramaphosa’s announcement sounds modest. Bloomberg, a financial data provider, estimates that there was another R550bl investment planned into the renewables energy sector of South Africa between 2016 and 2020. Hopefully the joyful celebrations in the streets of Soweto don’t cause the government to their eyes off the ball, because there is lots more to do to turn around the ailing economy.
Contrast that with the Namibian announcement. That’s will have an immediate impact, because the mining companies’ rate of return will increase by owning 100% instead of 80%. That’s will make new investments a lot more attractive. It also shows that the government is serious about becoming more business friendly, a seldom feat in Africa. I do think that the impact of minister Alweendo’s decision is far greater than that of Ramaphosa, and should be a bigger reason to celebrate.