Speaking at a media breakfast held in Johannesburg last Tuesday, Richard North, Saxo Capital Markets country head warned that South Africa was in a difficult situation adding that the current situation could even get worse.
“We are in a rocky road but there will be opportunities ahead,” noted North.
He further noted that the country’s credit downgrade effects were not yet visible but this was not an indication that the situation would remain calm.
(WATCH VIDEO: Impact of S.Africa’s downgrade)
Warren Drue a partner at Hogan Lovells said mergers and acquisitions (M&A) were on a downward trend that could be an indicator of investors’ mood.
“It looks like most deals will be done locally as entities understand the environment,” he said.
Drue added that though South Africa held peaceful elections recently, investors were still pricing political risk.
He further noted that the weak currency was also impacting on returns, which was discouraging some investors.
South Africa’s regulatory framework is one of the factors that discouraged other investors as in some cases it took at least three months for investors to register a company when other competing markets saw registration taking less than a month.
“The government has to wake up and know that the country is competing with other attractive markets in the continent,” noted Drue.
Imraan Mahomed, a partner at Hogan Lovells said that the government needed to address uncertainty that came as a result of industrial action.
The platinum strike cost the South African economy more than 13 billion rand while the Numsa strike cost the country almost 10 billion rand.
“The government needs to give leadership on the labour sector with strike ballot being an option that could be explored,” noted Imraan.
He added that uncertainty especially in the mining and metal industries made it difficult for foreign investors.