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Business ‘waits’ to invest R600bn

| Economic factors

Business is sitting on R600bn in cash and is awaiting the right signs from the government before it will invest the money into the economy.

Trade and Industry Minister Rob Davies was at pains on Thursday to assure the private sector that the government is looking to build business confidence in order to encourage investment and job creation.

Stanlib Asset Management deputy CEO Patrick Mamathuba said that should the R600bn be invested it would help finance infrastructure programmes in partnership with the government. "It makes sense for us that this capital [R600bn] needs to be used to augment the economy and build infrastructure," Mamathuba said.

But the "right commitment" from the government would play a big role in lifting confidence and investment by the private sector, he said.

Business leaders often cite policy uncertainty, weak economic growth and stiff regulations among the reasons for low investment rates.

Davies and Mamathuba were addressing members of the South African Chamber of Commerce and Industry (Sacci).

Davies sought to allay any concerns, although he did not dwell on specifics or venture into worries about political risk such as the recent investigation of Finance Minister Pravin Gordhan by the Hawks.

"This R600bn that you talk about, we want to build stronger confidence in relations with the private sector because we want to unlock that, but simultaneously we want to encourage also foreign direct investment. That’s going to come in and build productive capacity in our country," Davies said.

Government policies were now defined in six "I’s" — infrastructure, industrialisation, investment, inclusion, innovation and integration, he said.

Speaking on the pending assessment of the economy by ratings agencies, Davies said he believed the country could avoid a credit-rating downgrade in 2016 because low growth, which has been one of the main reasons for previous downgrades, was over the worst.

The economy grew better than expected in the second quarter, resulting in the Reserve Bank upwardly revising its growth expectations for 2016 to 0.4%, from 0%.

However, the new growth projection for 2016 is expected to be the lowest since the 2008 recession. Many analysts expect growth to improve to 1% in 2017 and forecast it at 2% in 2018.

Ratings agencies have said SA’s inability to raise economic growth could result in the country being downgraded.

The next ratings reviews are due in November and December and are crucial as downgrades could result in further rand weakness and capital outflows from the country.

Ratings affirmations, however, could make SA more attractive to investors.

"I think we can avoid the downgrade because one of the things they want to see is … that budget numbers will hold.

"But they also want to see that there is more of a growth story and that we are working together around that," Davies said.

With commodity prices yet to recover, there was a need to move up value chains and ramp up industrialisation to support economic growth and jobs, he said.

Sacci president Vusi Khumalo said partnerships between the government and the private sector would speed up the implementation of programmes to support the economy.

Delegates at the event raised concerns about information on the department’s programmes failing to reach small-business owners, along with excessive administered price increases particularly at municipal level and limited inclusion of beneficiaries in the department’s programmes.

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