Investment in South Africa remains low despite positively changing direction two years ago after the election, Danesh Ranchhod vice president and executive director of the Franklin Templeton Markets Equity said.
“The past two years have seen some change in direction; these include a new president with better intent, an election and subsequent change in cabinet ministers as well as an attempt to change the boards of weak state-owned institutions. While these remain positive developments the deterioration in the economy and state institutions still require serious attention,” said Ranchhod.
He said South Africa has endured several years of weak economic growth, state-owned entity mismanagement, rampant corruption and a policy stall. Which he said that much of it originated and accelerated under the previous leadership with proof pointing to middlemen and government officials who mismanaged state entities.
The Franklin Templeton Markets Equity said it highlighted several reforms needed to indicate progress earlier this year but has “not seen much movement due to the ongoing infighting within the executive in the ruling party and the resistance from public-sector unions to allow some hard decisions to be made at state-owned entities”.
“Considering these broader political risks, current opportunities remain slim amidst weak business and consumer confidence. This does not mean we would dismiss South Africa as an investment destination, there are still many quality companies operating with sound management. However, for now, we continue to monitor the political progress and look for indications of a meaningful turnaround,” he said.
He added that for them to better profile risks when researching an investment opportunity, they need to understand the company fundamentals inline with the broader economic, regulatory and political landscape.
Ranchhod said under former president Jacob Zuma, corruption had become quite pervasive at all state levels in South Africa, thus any action President Cyril Ramaphosa can take to address this meaningfully within the party and state-owned entities will be considered a key progress marker. He added that they think the next test will be how the ANC can tackle policy direction.