Corruption & instability scare away foreign direct investment in South Africa

Former ANC Treasurer and Mpumalanga premier Mathews Phosa has identified corruption, inconsistent government policies, and other factors as root causes of investors’ growing reluctance to invest in South Africa.

The Mail & Guardian’s Adam Wakefield reports that Mr. Phosa, who speaks nine languages and has had a successful but not always undisputed past history within the ANC organisation, spoke at an investment conference sponsored by the Austrian Business Chamber in Johannesburg, at which the former ANC official admitted that the current government’s tackling of corruption and other conduct had led to diminished investor confidence in the political leadership’s adherence to promoting the rule of law and in the country’s forward-looking stability.

In order to create and maintain an “investment-friendly culture where every investor feels protected and free to do business,” the ZA government should implement “actions and activities to grow the economic cake,” rather than dividing it.  Emphasising that South Africa must send a clear signal about its dedication to the fight against corruption, Mr. Phosa said that whistle blowers should enjoy greater protections, the office of the Public Protector should be strengthened, and perpetrators of graft and other corrupt activities must be removed.

Other factors he identified as leading to foreign investors’ reluctance to expand into South Africa include inconsistent BEE policies, mining policies that have led to a diversion of mining-related investments away from RSA and into  Zambia, Mozambique and Angola; lacking eduational policy; and failed agricultural development and land reform.

Mr. Phosa’s comments coincide with a new report released by the Centre for Corporate Governance in Africa at the University of Stellenbosch Business School, which concludes that corruption remains one of the major obstacles to Africa’s economic rise.  In the Centre’s “Ethics and Compliance Risk Survey 2014,” the authors claim that, among the Southern African Development Community (SADC), South Africa suffers particularly from the perception of a high prevalence of bribery and corruption in the granting of South African government contracts and procurement tenders, whilst the top countries in terms of ethical business environments and regulatory efficiency are Mauritius, Botswana, Namibia and Lesotho.