On February 15, Jacob Zuma resigned as South Africa President. Zuma’s decision followed the loss of support from its own party, the African National Congress (ANC), and opened the road to the appointment of Cyril Ramaphosa as new South African President.
On February 15, Jacob Zuma resigned as South Africa President.
This historic decision came after almost 10 years of ruling marked by several allegations of corruption towards the president and economic distress signalled by ratings downgrades, loss of FDIs’ flows and jobs, growth of youth unemployment, GDP decrease, roaring inflation and troubled industrial sector (especially considering State-Owned Enterprises).
Zuma’s decision followed the loss of support from its own party, the African National Congress (ANC), and opened the road to the appointment of Cyril Ramaphosa as new South African President.
Figure 1. South Africa lost decade, (index year, 2009 = 100), 1994-2016. Source: The European House – Ambrosetti elaboration on UNCTADstat, Worl Bank, South Africa Reserve Bank, 2018.
Former lawyer, Ramaphosa became labour leader and played a key role in mobilising mine workers against apartheid regime. After he lost the race to become President of South Africa to Thabo Mbeki in 1997, he resigned from his political positions and moved to the private sector, where he became director of New Africa Investments Limited and then one of the most successful business leaders of the continent.
Elected as ANC head in December, Ramaphosa has been deputy President of South Africa since 2014. He is now in the position to revive his country, over two decades after Nelson Mandela tried to pass the presidency of the country to him. Despite past years of misruling, major economic and societal fundamentals of South Africa are still there. With adequate and supportive political environment, the country is ready to return to the promise of the so-called Rainbow nation. It remains Sub-Saharan Africa and SADC economic powerhouse, a role that has managed to keep in the past decade, accounting for 18.5% of Sub-Saharan Africa GDP, 18% of imports and 20% of export. South Africa is also the largest intra-regional investor and the 5th African investor at global level.
If you want to learn more, discover how you can take part in the Working Group “Ramaphosa’s turnaround: great opportunities for Italian companies in South Africa” to be held on April, 4 in Milan. To register, click here.
Industrial sectors such as mining, agricultural processing, automotive, chemicals, pharmaceuticals, ICT, electronics, textiles and metals have managed to remain alive and competitive at least at continental level. Larger firms benefitted in the past years from strong international ties and export vocation. South Africa also remains committed in achieving infrastructural excellence through a $115 billion infrastructure program. Large reserves of natural resource, together with a vivid ecosystem of SMEs, a new generation of technology-savvy entrepreneurs and managers, and the leadership in RT&D and innovation at continental level add. Finally, South Africa remains the best destination in Africa to raise capital, secure investments and close deals thanks to an advanced financial and legal system.
Figure 2. Business Confidence Index in South Africa, Source: The European House – Ambrosetti elaboration on OECD, 2018.
If enabled to fully deploy its potential, such business environment is ready to trigger country’s growth and competitiveness. Well respected at home and experienced in international affairs and business, Ramaphosa’s should now focus on cleaning up and rebuilding of public administration (especially judicial system and South African Revenue Service), fighting of corruption, investing in education and enhancing liberalisation. The application of the National Development Plan, that he himself crafted, would also boost economic growth. Most of all, Ramaphosa will have to regain national trust and international reputation in a country with unrivalled potential in the continent.
Given so, new South African presidency opens up unique and unprecedented opportunities for Italian companies. South Africa has remained an appealing destination for Italian players during Zuma presidency: it affirmed as the third destination for Italian FDIs in African continent and first in SADC area. Italy is also among top-20 global investors in South Africa with $490 mln. Invested in 2016 and the 5th largest EU exporter in the country with €1.6 bln. in 2016. Overall, Italy is also the 5th largest EU trade partner of South Africa with € 2.9 bln. of total trade value.
An increasing number of large Italian companies has already decided to invest in South Africa, localizing production and starting fruitful local partnerships. Magnetto Automotive, Building Energy, Ferrovie Dello Stato, Lucchini RS, Terna, Ansaldo Energia, Fata are just few of them and have been able to present their commitment and their interest in the country during the last South Africa – Italy Summit, organized by The European House – Ambrosetti in Johannesburg (24 and 25 October 2017).
Such development can now pave the way for other Italian players, in particular SMEs, that are willing to invest in South Africa. They can now profit from large Italian players’ presence and experience, using them as a trailblazer to engage with South Africa and African continent and market at large. Synergies between South Africa and Italy are many and in several fields. The two countries share the same manufacturing vocation, the same taste for innovation, the same passion, the same lively ecosystem of SMEs and the same capability to match economic performance and societal spillovers. Given these premises, Italian business community and its leaders cannot adopt a “wait and see” approach. Among the others, the opening of an air route by Alitalia would support Italian entrepreneurs together with South African overall economic growth (South Africa untapped GDP potential from opening of additional air routes is estimated at almost 285 million Dollars).
Italian business leaders have to engage South Africa with renewed trust and commitment, moving rapidly, leveraging on the good starting position preserved in the past years, and supporting new South African leadership. Working together will bring not only large bilateral advantages, but will also put Italy and South Africa at the core of the nascent dialogue between Europe and Africa.
Partner, The European House - Ambrosetti