South Africa is becoming more and more irrelevant globally as the country’s economy is plagued by load-shedding, poor economic growth, and a lack of investment in innovation and entrepreneurship.
This is feedback from Sygnia CEO Magda Wierzycka, who lamented South Africa’s economic constraints in the company’s results for the year ended 30 September 2023.
“South Africa continues to squander its opportunities, from natural beauty and abundant resources to its world-prized constitution, respected universities, sophisticated financial services sector and well-functioning private sector,” Wierzycka wrote.
She said the country continues to be weighed down by the electricity crisis and continuing inequality while its economic growth continues to underwhelm and the rand depreciates.
“In the absence of a competent government, the provision of basic services is being increasingly ‘privatised’,” she wrote.
Wierzycka also bemoaned the fact that South Africans have “become too complacent and accepting of corruption, disorder, and non-delivery”.
“To achieve meaningful change, South Africans must unite again, much as we did in 2016 and 2017.”
The lack of change has led to South Africa’s global status being steadily diminished, with the country no longer being relevant to global superpowers.
“On the global stage, where South Africa is becoming more and more irrelevant, world powers such as the US and China are trying to decouple, striking new alliances to strengthen their respective positions,” Wierzycka wrote.
This is reflected in foreign investors dumping South African assets.
Foreign investors have been dumping South African assets over the past five years, with R98.1 billion being sold so far this year, threatening the country’s financial stability.
This is feedback from the Reserve Bank in its latest Financial Stability Review.
The report showed that foreign investors had been consistently selling South African government bonds and equities since 2018, with the sale of equities accelerating since 2021.
Data collected by the Reserve Bank shows the financial sector is coming under “sustained pressure resulting from non-resident investors gradually reducing their holdings of government bonds and equities”.
In particular, foreign investment in government bonds has been on a downward trend since 2018, with a sharper decline following the country’s removal from the World Government Bond Index in April 2020.
The share of bonds held by non-residents has dropped from 38.7% in May 2019 to 25.4% in October 2023.
Over the past decade, domestic banks and financial institutions have taken on a greater role in supporting the South African economy, filling the void left by foreign investors who have been reducing their holdings of local bonds and shares.
This shift has put pressure on the local financial sector to absorb an increasing supply of government debt, increasing the risk of instability from external shocks.