For the past two years, the government of South Africa has been working hard to woo foreign investors into the country and encourage economic growth and development let alone creating jobs. Recent cases of violence and looting are however likely to injure the economy.
As the country faces a deadly third wave of the Corona Virus pandemic, economic destruction as a result of civil unrest is the last thing the country needs at the moment.
Taking an example of the situation in eThekwini alone, there has been over R15 billion worth of harm to property and equipment. Over 40000 businesses have been ruined. This is according to eThekwini ECOC.
Business analysts in the country and all over the world have tried to come up with viable explanations on the situation at hand, with some being overly pessimistic.
The founding director of the Gordon Institute of Business Science of the University of Pretoria, Nick Binedell said that despite the unrest being a negative in terms of the economic impact it will bring, if the situation is handled properly, investors will understand the underlying causes and the political agendas at play.
“I don’t think this will have a material effect on investors as they understand the risks. We are an attractive market with sophisticated institutions and financial markets,” he said
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“South Africa was re-rated in the last three months because of how we have handled Covid-19, and the leadership of President Cyril Ramaphosa.” Binedell said.
Whereas some foreign investors in the country were worried about the potential impact on investor sentiment in the long run, the commitment to invest in the country while hoping that the state would manage to restore order remained with other foreign investors.
Vuslat Bayoglu, the managing director of the mining investment company Menar, said that Menar had boosted its investment knowledge in the country and opened numerous job opportunities, thanks to the excellent constitution in which the rule of law and property rights are appreciated.
“The financial system is sophisticated, and the judicial system has worked very well to ensure certainty in the resolution of disputes. We are still on course to invest more than R7 billion in expanding the life of existing mining operations, and developing new projects.” He said.
Economic analysts who have been collaborating with the government to attract foreign investment have, however, voiced worry on the effect of the present imbalance on South Africa’s exports and imports saying that the situation requires to be controlled as soon as possible.