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Finance minister Enoch Godongwana is leading South Africa’s delegation at the 54th World Economic Forum in Davos, Switzerland this week, aiming to alleviate investors’ doubts in hopes of wooing much-needed investment for the country.
Speaking to Newzroom Afrika on the sidelines of the first day of the forum, Godongwana admitted that questions have arisen about how South Africa is going to garner investor confidence, given its serious challenges that are impeding the economy, such as an electricity and logistics crisis.
“We are not hiding [the challenges,]” Godongwana said, adding that “the message we’ve got to communicate [to potential investors] is that South Africa is an investment destination.”
He said that the delegation of both government and private business “understand those challenges very well” and have been working together to deal with them back on home soil.
An impeding factor for investment could also be pointed to the worrisome state of the country’s finances, the debt-to-GDP ratio, and the trade deficit.
Godongwana admitted that South Africa is currently facing a challenge because “our growth levels are insufficient to be able to cope with higher levels of debt”, with a need for the country to contain higher borrowing.
However, the finance minister held his ground by saying that many emerging market economies “have not fully recovered from the impact of the pandemic in terms of their public finances, so South Africa is no exception.”
Other counterarguments posed were that he believes that global growth is “not as promising as it should be” and that the “size of debt is not an important consideration [as it] depends on the capacity of the economy to service it.”
Godongwana said there is scope for the growth of the South African economy in such a way that allows the country “to service whatever level of debt we’re facing.”
As the delegation seeks investment injections into the local economy, current economic problems persist. The minister warned that next month’s budget will be a “difficult one”.
“I will have more on this in the February budget next month. I can tell you now, we are operating in a fairly constrained fiscal space, so the message we are likely to put across in February is going to be a difficult one,” he said.
Read: February is going to be a difficult one, says Godongwana
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