President Ramaphosa celebrates Investment Summit positive outcomes

SOUTH AFRICA - Report 28 Oct 2018 by Iraj Abedian

Investment and economic growth are interconnected, with higher investment proven to lead to higher growth. The inverse is also true, countries that have low investment levels are slow to grow, and even stagnate, leading to poor quality of life in general. The South African economy is no different and needs sufficient investment, sustained over a period of time, to grow, and for this reason, President Ramaphosa has made it one of his chief goals to attract investment into the country.

Indeed, one of the biggest challenges that have been facing South Africa for a long time now has been low investment. Growth in total gross fixed capital formation for the 10-year period from 2008 to 2017 (i.e. since the great recession) has averaged a measly 1.8%, and this is in contrast to the 6.7% growth rate for the 10-year period from 1998 to 2007. At the same time, investment has been seriously muted for the past two years, contracting by 4.1% in 2016 and barely growing at 0.4% in 2017. Economic growth has been a casualty of the low investment environment. South Africa is in a technical recession owing to the negative quarterly growth rates during H1 2018, and Finance Minister Tito Mboweni stated during the recent Medium Term Budget Policy Statement (MTBPS) that the country’s GDP forecast for 2018 has been revised down from 1.5% to 0.7%.

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