“We must continue to market the country as a preferred destination for investments.” In his State of the Nation Address 2016, President Zuma did not only give an overview on his administration’s past policies, but also on his plans to pave the way for South Africa to return to economical prosperity in the future. Hence, the speech bears importance to all foreign nationals willing to invest or do business in South Africa, which can hardly be underestimated.

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picture source: www.sacommercialpropnews.co.za

“If there are any disagreements or problems between us, we should solve them before they escalate.”

Nevertheless, the address was embedded in turmoil when members of the EFF and other members of the opposition repeatedly interrupted the delivery of his speech and eventually walked out on Zuma in protest.

This is due to the fact that Zuma faces a variety of allegations of which some even stem from a time before he took office as President of South Africa in 2009.

The most recent accusation in that long list questions his very competence as President and casts a shadow on his ability to bring stability to the country:

On the 9 December 2015 the President had issued a statement replacing Finance Minister Nhlanhla Nene with the little known David van Rooyen. It was widely suspected that Nene was replaced for a number of reasons all related to him vetoing suspect and/or controversial uses of public funds. Just four days after a public outcry, a strongly negative reaction by international markets and pressure from within his political party ANC, Zuma announced that van Rooyen would be replaced by the better known and trusted Pravin Gordhan. But this has since not halted the downward spiral of the Rand. It currently trades at a low of around 18 Rand to the Euro while it had been at 13 Rand just a year ago.

The weak rand has a number of implications for the country’s growth prospect: Firstly, the weakening currency carries the risk of pushing up inflation because imported goods are more expensive. This means that the South African Reserve Bank faces a difficult decision. It can keep interest rates low but then faces even higher inflation. This will only devalue the rand further. Or it could raise interest rates and run the risk of stifling growth in an economy that is expected to grow this year only at around 1%.

Better late than never, even President Zuma seems to have understood the importance of urgent counter-measurement and has sat down with business leaders in the past month to talk solutions. “We have heard the suggestions from business community on how we can turn the situation around and put the economy back on a growth path” he told the Nation and went on: “Government is developing a One Stop Shop/Invest SA initiative to signal that South Africa is truly open for business. We will fast-track the implementation of this service, in partnership with the private sector. Such an initiative requires that government removes the red tape and reviews any legislative and regulatory blockages.”

So is there hope for South Africa to turn the steering wheel around? The answer is a clear “maybe”.

Because while the government seems to be able to locate some of the most pressing problems, it is still unclear whether the right conclusions will finally be drawn, including but not limited to an improvement in openness to foreign investment.

The President admitted: “We have heard concerns from companies about delays in obtaining visas for skilled personnel from abroad. While we prefer that employers prioritise local workers, our migration policy must also make it possible to import scarce skills. The draft migration policy will be presented to Cabinet during the course of 2016.”

But in that same speech he told a surprised audience that the country “must take advantage of the exchange rate as well as the recent changes of visa regulations, to boost inbound tourism.” While the low exchange rate is problematic for the country’s growth, the latest changes within the visa regulations were also met widely with criticism from immigration practitioners, because they are regarded as further burdens on foreign investors and skilled labourers, as we have also expressed previously in this blog.

The President’s state of mind appears even more unclear when he announced a “Regulation of Land Holdings Bill which would place a ceiling on land ownership at a maximum of 12 000 hectares and would prohibit foreign nationals from owning land. They would be eligible for long term leases.”

It appears as if President Zuma – in his balancing act to appeal to his voting base of a more rural population while trying also to send the right signals to foreign investors – has not managed to be the element of stability, which the country so desperately needs.

Therefore, it remains to be seen whether the announced changes will have a positive effect on the economy of South Africa let alone be implemented at all. The President’s lack of credibility certainly does not play in his favour.

Please do not hesitate to contact us for advice regarding immigration & visa, setting up business, property transfer & investment.

by Andreas Krensel

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