South Africa losing out to Africa – Standard Bank CEO

South Africa is quickly losing its competitive advantage over the rest of Africa, with its risk premium deterring investment and making it harder to raise capital to stimulate economic growth. 

Standard Bank CEO Sim Tshablala told Newzroom Afrika following the presentation of the bank’s interim results that South Africa is falling behind the rest of the continent. 

Tshabalala explained that South Africa is involved in a global competition with its African counterparts and other emerging markets for scarce capital to drive economic development. 

“The world competes for capital. We compete for the money we need to finance our nation’s budget deficit and compete globally for the money to finance infrastructure investment, fund Eskom and Transnet, and finance corporate projects.”

The biggest factor in attracting capital is the country’s risk premium which dictates the returns an investor should expect for taking on the risk of investing in a given country. 

This directly impacts a country’s ability to raise capital and the companies that operate in it. As this premium increases, which it has in South Africa, it makes it more difficult to attract investments in local businesses and finance the government’s deficit. 

“We are competing on the continent and with emerging markets for this capital. So if they have decreased the risk of investing in their country and generated greater returns, the money will then rather go to those places than South Africa,” Tshabalala said. 

The key factor is the rate at which the economy is growing. South Africa is expected to grow at less than 1% in 2023, while other African countries will average greater than 3% growth. 

“What does this mean? It means that we are losing our national competitive advantage. We need to grow faster and get people healthier and wealthier,” Tshabalala said. 

A richer population will also generate more capital to invest locally and drive further economic growth. 

“We are growing at 0.8%. Other countries are growing much faster. Where do you think that money is going to go? It is going to go to other countries and not South Africa.”

The biggest impediments to South Africa’s economic growth are an unstable electricity supply, logistical inefficiencies, and crime and corruption. 

Tshabalala said this is central to Standard Bank’s engagements with national leaders. 

Standard Bank South Africa CEO Lungisa Fuzile is actively engaging with the government as part of a business-led initiative to assist the government in fixing the country’s energy, logistics, and security problems.