Treasury tries to put a spin on South Africa’s woes

Deputy minister of finance David Masondo says that the current disruptions experienced in South Africa present risks- but also offer up opportunities for those who can see them.

Speaking at the launch of Rand Merchant Bank in New York City, the deputy finance minister made a case for South Africa still being a place of investment despite its flaws.

He said that South Africa has always rewarded investors who see its potential. “While many have predicted its demise over the years, it has proven them wrong every time.”

Masondo said that South Africa is well positioned to be an entry point into the African continent – which has a combined GDP of $624 billion.

In selling South Africa to the US as a place of investment with guaranteed returns, the minister said that South Africa is a unique emerging market that has a strong macroeconomic framework, an independent judiciary, a growing agricultural sector, a rich source of key minerals as well as an automotive manufacturing sector producing more than half a million units each year.

He added that South Africa is also a leading destination for digital services as a result of its broadband infrastructure and its good positions for solar and wind investment as its transitions to a low-carbon economy.

Investors have recently turned away from South Africa as investment opportunities in the country do not look as promising as they used to. The country is now trying to hang on to the position of being the main entry point for foreign investment into Africa.

According to recent capital outflow data from DFM Global – over R170 billion in South African shares and bonds have been sold by international investors since the start of 2023.

Luigi Marinus, a portfolio manager at PPS Investments, said in early May that sentiment surrounding the country has been extremely pessimistic.

Severe and frequent load shedding continues to batter the economic growth prospects of South Africa. At the same time, widespread political instability runs rampant, and the volatile domestic currency, the rand, has recently tanked to its lowest point on record.

Despite the country’s vast challenges, Masondo remains adamant that the country, through prudent monetary and fiscal policy, can bring about price stability, and a balance between support for economic recovery can be struck.

US relations

The deputy finance minister’s visit to the Big Apple comes as US-SA relations are strained amid allegations that South Africa supplied arms to Russia to assist the invading force in its war over Ukraine.

Such allegations, made by the US ambassador, tanked the rand and pushed investors to distance themselves from the country.

In an attempt to amend such concerns, Masondo said that: “South Africa supports a rules-based international order, underpinned by the UN Charter and the sovereignty of all nations.”

“We have consistently taken a non-aligned stance on the conflict in Ukraine. We do not accept that our non-aligned position favours Russia above other countries,” he said.

The deputy minister added that despite the knock-on effects from the US allegations that were refuted by the ruling party, the ANC, and no clear evidence of the transaction can be provided, bilateral cooperation with the US continues ‘uninterrupted’.

“The US is currently South Africa’s 3rd-largest trading partner (after the European Union and China), importing a substantial amount of manufactured goods from South Africa.”

“South Africa is the top supplier of goods from sub-Saharan Africa to the United States. The US remains the largest single source of Foreign Direct Investment (FDI) into South Africa,” Masondo said.

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Treasury tries to put a spin on South Africa’s woes