President Cyril Ramaphosa has been warned by five world powers that his ambitious investment drive could fail unless SA starts to take tangible action against the perpetrators of state capture, corruption and other serious crimes.
In an unprecedented move, the governments of Germany, the UK, the US, the Netherlands and Switzerland have written to the presidency through their missions in Pretoria stating that there should be a “clear, unqualified and manifest political commitment to the rule of law, the independence of the judiciary and to honest and ethical business practices”.
The five countries, which account for 75% of foreign direct investment in SA, have also expressed concern about what they called “obstacles” to foreign investment. These include “constant changes of the goalposts” in the regulatory framework for mining, broad-based BEE targets and scorecards, and intellectual property rights. They have also called for “a reconsideration of current visa practices”.
“No investor would venture to come to SA without proper and comprehensive guarantees for his investment,” the memorandum reads.
Some of SA’s biggest companies, including British American Tobacco, Volkswagen, Mercedes-Benz, Ford and Barclays, are headquartered in these countries, and employ thousands of South Africans locally.
The document was signed by German ambassador Martin Schäfer, British high commissioner Nigel Casey, US chargé d’affaires Jessye Lapenn, Dutch ambassador Han Peters and Swiss ambassador Helene Budliger Artieda.
The move to send a joint confidential memorandum to Ramaphosa’s office was prompted by jitters from potential investors in the five countries about committing new funding to his investment drive.
Presidency spokesperson Khusela Diko confirmed receipt of “correspondence from representatives of a number of countries with significant investment in SA”.
“Whilst it’s unfortunate that those who are diplomats amongst them ignored and undermined established diplomatic channels and protocols for communication, the presidency has noted their input and regards it as part of the very important and ongoing dialogue taking place amongst South Africans and the investment community — both domestic and foreign,” she said.
The intervention is the first formal indicator that Ramaphosa’s New Dawn campaign to stimulate economic growth by attracting $100bn (R1.3-trillion) over five years might be in trouble.
At his presidential investment summit in October, there was much hype about pledges totalling R290bn. But this mainly constituted intended spending, public development money from international development agencies and lending from the Brics New Development Bank.
Ramaphosa and the four special investment envoys that he appointed last April have been scouring the globe for new spending and addressing negative perceptions of SA, including at the recent World Economic Forum in Davos, Switzerland.
The decision by the five countries to address their concerns formally with the presidency came after engagements with officials in Ramaphosa’s office, including his economic adviser Trudi Makhaya and the envoys, Trevor Manuel, Mcebisi Jonas, Phumzile Langeni and Jacko Maree.
Other countries being targeted for investment have apparently expressed similar concerns.
Of particular concern to those who signed the memorandum was that Ramaphosa’s commitment to act against
No investor would venture to come to SA without proper and comprehensive guarantees for his investment
corruption was not being followed through with cases being brought to court.
“There needs to be action to back up the words about tackling corruption,” said one of the signatories, who asked not to be named. “For there to be fresh investments, the CEOs need arguments to take to their boards about why it is time to make commitments to SA. It is difficult to make that when we haven’t seen a single person jailed.”
Another diplomat, who also spoke on condition of anonymity, said the proceedings at the Zondo commission were being closely monitored in foreign capitals.
“The past nine years have been marked by uncertainty and stagnation on many fronts in SA. President Ramaphosa has set out to change that. Important steps have been taken — particularly in the fight against corruption. We have been watching the revelations of the Zondo and other commissions very attentively and I can assure you that the commission is also being followed very closely from abroad, in our home countries,” he said.
“From the perspective of foreign investors, it is imperative to not stop here, but to continue on the path towards transparency and accountability and for the judiciary to see this through.
“It is crucial to rapidly and credibly reconsolidate the rule of law,” the diplomat said.
International investors had been encouraged by the messages from the president and outreach by his envoys, as well as the government’s commitment to improving investment and business climate, he said. “What they need now to persuade their boards to commit to fresh investment in SA are clear decisions on regulatory frameworks in key sectors like telecommunications, action to put [state-owned enterprises] on a sustainable footing, and action to make clear that corruption will be tackled effectively.
“I am convinced that if trust is being restored, investors will flock back to the country,” said the diplomat.
Diko said the issues had been raised in numerous other forums, especially by South Africans themselves. “All of these issues are receiving the necessary attention from government and other affected stakeholders,” said Diko.
Maree said all these issues had been raised with them during interactions with potential investors. He confirmed that he had been engaged directly by all the signatories to the memorandum.
“There are processes in place but many people are impatient. It is of course better if we can demonstrate action and there are tangible results to show progress,” said Maree.
An official in the presidency said the move by the five countries was unprecedented as foreign nations only “interfere” in domestic affairs when governments violate their laws or commit human rights violations.
“We must all be careful not to undermine the [Zondo] commission. These countries must also understand that with the NPA [National Prosecuting Authority] in the state it was, who was supposed to take the cases to court? It is well known that some of our institutions were hollowed out and corrupted,” he said.
A foreign policy expert at the South African Institute of International Affairs, Elizabeth Sidiropoulos, said it appeared that the five nations wanted to alert Ramaphosa to genuine concerns in their capitals. “These countries … are flagging for him that if SA is to be perceived according to what he set out in his first state of the nation address, they need to bring people to book.”
– Sunday Times