The Weight Of Crime And The Policy Uncertainty As Major Factors Of Investment Into South Africa

Fiscal confidence has risen since the new political leadership under President Cyril Ramaphosa in 2018 who has shown a great deal of obligation to the consolidation of institutional integrity especially to the labour and business sectors. The rand rose up by approximately 12 percent since the African National Congress elective conference and the ten-year government bond yields decreased to levels seen in 2015, minimizing borrowing charges. There are many motives that has the investors vigilant. Although, the government tried to clear up clashes over South Africa’s third Mining Charter, there is still hesitation of legislation which holds mining back. Also, World Bank has estimated that raw materials will either stay modest or decline. Therefore, this essay will discuss the weight of crime and the policy uncertainty in South Africa, two macro political factors which play an important role for investment into South Africa.

Prospects of Investment

The evidence of tangible, increased and constant domestic economic success, increased education quality and improved job creation techniques will need to take place before foreign investors makes a contribution to South Africa. The local economy is in a “lukewarm” salvage as the IMF’s estimation for the GDP to increase by 1. 5 percent in 2018 together with the lacklustre estimation of 2020-2023 seeing approximately 1. 8 percent growth. Foreign investors will only invest when they can see that South African people are encouraged. There are many issues investors will want to clear regarding the state of government South Africa will have after the elections in 2019, this is due to the lack of policy clearness. Investors will be curious as to the rise of populism and its consequences regarding economic and political address.

Rating agencies made clear of “significant growth potential for the country” however, simultaneously confess that the latest administration needs time to elevate economic growth, improve employment and strengthen the fiscal position, granted South Africa’s structural disadvantages. Momentum Investments estimates growth at approximately 2 percent which is weaker than 5. 4 percent per annum estimated in the National Development Plan for 2011 to 2030 envisioned to create 11 million jobs. Since his presidency, Ramaphosa initiated a swing in the narrative and enabled more collaboration between firms, government, civil and labour society to nurture better inclusivity in the country’s policymaking atmosphere. Hence, an increased market friendly approach and an alteration in the way fraud and maladministration is seen has consoled firms, consumers and investors. Ramaphosa, therefore stated in December 2017 that “a restoration of confidence is the quickest and cheapest form of stimulus available, especially in light of our fiscal constraints”.

Euler Hermes wrote in its sector and national risk ratings that South Africa is considered a medium risk country with a Gross Domestic Product growth of 2 percent in 2018 and 2. 5 percent for 2019. The pharmaceutical industry seems to gain drive with metals and construction the more risky segment in 2018. Euler Hermes, the global lead in credit and trade insurance, continues to state that South Africa's macroeconomic outlook looks to be increasing for the year 2019.

Crime as a Macro Political Risk

According to Price water Coopers (PwC) organizations in South Africa are witnessing the largest amount of economic crime in the world in the last ten years. PwC’s two-yearly Global Economic Crime Survey stated that firms in South Africa has seen economic crime currently at a level of an overwhelming 77 percent with runner up countries like Kenya at 75 percent and France with 71 percent. The investigation observed approximately 7300 participants from a pool of 125 countries with 280 from South Africa. “Assets misuse” is still the rampant issue of economic crime by 45 percent of partakers and 50 percent of South African respondents. This investigation comes as South African investors, still overwhelmed after the loss of billions of rand regarding the Steinhoff International “accounting irregularities” scandal.

Along with all the interest regarding the business growth with President Ramaphosa, investors should be reminded that a difficult functional atmosphere still exists. Therefore, allows for a huge amount of security pressure. Crime rates are soaring with violence broadcasted internationally. Though, rates of violent crime which includes murder and rape instances have decreased considerably since 1991. Crime reports fluctuate from province to province with South African Police Service (SAPS) reporting the Eastern Cape with 53 murders per 100 000 people in the 2015/16 season. Limpopo saw 15. 9 per 100 000 people, however the most crime across the board are reported in lower income regions. Socio economic issues are the main cause for crime. Issues such as inequality of income, joblessness and poverty which causes the collapse of social networks, together with the exacerbation regarding the frequency of migrant labour and not to mention the soaring rates of HIV/AIDS. This makes the task of decreasing levels of crime a difficult one further "blowing up" crime as a macro political risk for investors even in the future for South Africa. When talking about Crime in South Africa, Bheki Cele, police minister added that “It borders close to a war zone while there is a peace,” Experts also state that the soaring levels of crime has seen the biggest increase since the departure of the Apartheid rule twenty-four years ago. Labours by President Ramaphosa to draw in overseas investment into the country and advance the tourism sector will also be seen as futile. Furthermore, even though recently crime statistics has decreased, it will not mean much due to global and local rightwing organizations. Added to this includes comments by United States of America President, Donald Trump's divisive tweet of "mass killing" of white farmers. During April 2017 and March 2018, SAPS reported sixty-three murders during fifty-seven attacks on farms. The fifty-two victims of the serious attacks were occupiers or owners, nine were workers on a farm and one being a farm manager, with forty-five of the murder victims being white.

Furthermore, experts note that seventeen percent increase in murders for the last five years after a fifty-five percentage drop in the last seventeen years is due to issues such as corruption with police, the senior law enforcement arrangements and a decrease in economic environments. In date show that South Africa was in recession and the currency deteriorated to a level before the new leadership. This brings into play the impending calamitous downgrade by ratings agencies emerged. Economic growth is at one percent for 2018 and joblessness is soaring with inflation causing the "poorer to become poorer", coalesced with this inequality is a monumental issue reports show to fuel increase crime in South Africa. Policy Uncertainty as a Macro Political RiskIt is no secret that the deficiency of skills, land expropriation, visa restrictions and policy uncertainty are at the forefront of the obstacles President Ramaposa's special economic envoys has to negate when trying to attract overseas investors to contribute to the country's economy. According to presidential envoy Jaco Maree, who addressed the conference on African Investment opportunities in the 6th BRICS Business Council in Durban stated that investors are asking severe questions relating to South Africa's policy certainty and asks for stability, but more significantly they want to know that the changes for South Africa's policies do not change much for some time in the future.

Economists have also warned that due to the economy which needs to negate the risk of more reduction is due to the policy uncertainty. Malopyane, labour and mining specialist stated that the mining sector performance will worsen for the remainder of the year and added that "Collectively the sector is going to have a really hard time, I see this continuing for at least ten months and for as long as there is policy uncertainty". Also, Hodes stated that policy certainty plays a significant role for the government's ambitions to give back confidence into the economy and enhance employment. "Crucial to lifting confidence, attracting investment and boosting economic growth is removing remaining uncertainties surrounding key issues, with land expropriation without compensation and the eradication of corruption and state capture key to this," Malopayne concluded. Trevor Manuel, attempted to lure in US100 billion worth in investment for the last half decade stated that comforting possible investors regarding policies around land expropriation is a difficult task. There have been many criticism around land expropriation as mining and land policy are linked in that the two sectors were subject on which the government demanded internal consultations. Malopyne saw no certainty on both issues as the President treaded cautiously during the factional densities of the ANC ahead of the national elections 2019.

South Africa's growth is wadding compared to emerging countries and policy uncertainty grows and destroys investment confidence as the World Bank reports that emerging markets are predicted to steer large-scale growth. Also, South Africa's economic growth has not been good enough to allow for large scale jobs in the private sector, chief economist for StanLib Kevin Lings stated as “Policy uncertainty is likely to remain and could weigh on investment,” the World Bank wrote in an outlook for South Africa's economy. The South African Chamber of Commerce and Industry economic released a business confidence index which noted the significance of policy uncertainty. Thanda Sithole, economist for Standard Bank stated that the government could regain business confidence if they worked diligently. Economic policy action is seen as monumental regarding business confidence but even after the election win by Ramaphosa which caused an increase in 1. 3 index points for South Africa, Daniel Silke, political analyst stated that policy uncertainty still loomed. Silke stated that "we are still locked in a weak growth cycle and I expect we will be until 2019”. Busa CEO Cohen also stated that “We are very concerned about policy uncertainty, which won’t be alleviated until decisive action is taken around these policy issues”.

Conclusion

It is clear to see that weak regional conditions can hinder the chances of positive Foreign Direct Investment (FDI). In addition, anti-competitive performance by international businesses can cause an interest loss, mainly if their interests are not united with the state's developmental ambitions. South Africa looks good when compared to other countries in Africa regarding FDI due to the lofty real returns on investment. Ironically, there has been hardly any interest in the country particularly due to exports, exchange and inflation rates as well as political stability, crime and policy uncertainty. Structural fences like these causes investors to rethink about contributing to the country. It is also evident that South Africa's government needs to realise that the recession needs to be negated as the country does not want another presidency to start with a recession. Added to this, employment, skills, policies, industrial relations, crime prevention and policy clarity are monumental when taking into consideration the future of the country.