‘The EU is South Africa’s best friend’

European Union (EU) Ambassador to South Africa, Riina Kionka, said the 28-member state body has heard President Cyril Ramaphosa’s plea for a strengthening of foreign direct investment (FDI) into the country.

Kionka was speaking in Sandton on Tuesday, during the 6^th Southern Africa Europe CEO Dialogue.

She said the president’s calls are aimed at boosting South Africa’s economic growth. “He has urged local investors to get behind his government’s efforts to salvage the [South African] economy, pointing to local investment as a catalyst for much-needed foreign direct investment.”

South Africa’s best friend

The ambassador said the EU has always been in support of South Africa during its toughest economic times, and that diplomacy on investment protection has been coupled to credible engagement with the broad spectrum of the country’s business sector and civil society.

She said this has been done through its involvement with industries that have undergone transformation as a result of factors such as the fourth industrial revolution and climate change, notably in the mining, telecommunication and coal sectors.

“This becomes even more important in a context where the South African economy is still at risk of recession.

“In these times, it is to the mutual benefit of both the EU and South Africa to work together even more closely to fulfil our potential as strategic partners.”

Kionka said that while South African exports decreased by 3.1% last year – mainly due to strong declines in exports to the US (down 13.5%) and China (down 9%) – its exports to the EU increased by 2.8%.

“This is a testament to our preferential agreement,” she said, referring to the Economic Partnership Agreement (EPA) between the EU and the Southern African Development Community.

She described the EPA an anchor for investment decisions, as it provides stability and predictability to the EU’s trading and business environment.

“This is particularly true of the automotive sector, where the EPA provides the bedrock for investment through guaranteed long-term preferential access and flexible use of rules of origin.”

SME development

Kionka said small and medium-sized enterprises (SMEs) are the backbone of the EU, in driving economic growth and job creation.

South Africa has played a crucial role in the EU’s own economic growth, she said, by sharing its experiences – particularly with regards to helping SMEs to access business funding and operate smoothly, so they can act as a catalyst to job creation for the youth.

“It is not China or Russia who is South Africa’s best friend in FDI, despite what many believe. It is the EU by far.”

She pointed out that the EU has the largest stake in FDI stock in South Africa – at 75% (around R1.4 trillion).

“It is almost as much as South Africa’s state budget for 2019.”

However, Kionka did not shy away from pointing out that the country’s shortcomings in the past years have undermined its integrity, as well as the joint goal of boosting the business and investment environment.

“EU business wants action not talk.”

Action time

Herman Mashaba, outgoing executive mayor of Johannesburg, shared her sentiments, adding that South Africa should stop behaving like it is the only viable country in Africa for investment.

“Africa is increasingly becoming a very competitive economic environment and investors have choices of where to go with their funds – and they will go,” he said. “They will go to where the greatest prospects of stable economic returns exist.” 

He said South Africa should refrain from boasting about being the most developed economy in Africa, as there are other countries on the continent that are giving South Africa a run for its money on numerous key development indicators.

“As these countries increase their performance output, they too become a favourable destination for FDI, and so competition increases.

“Government has to change from making the right noises to taking the right action that will enable the potential of our people to be realised.”

Mashaba said dissent between organised labour and the governing political party must come to an end, because it compromises government’s ability to make tough economic decisions.

“That is how we end up with labour laws that have become inhibitive for small businesses, which are the backbone of developing economies.

“That is how we end up with a minimum wage which serves the interests of those employed, at the expense of 10.2 million people who are without the basic dignity that comes with work.”

Mashaba also called for an increase in private-public partnerships.

“The simple truth be said, a strong partnership is needed between the two because [private] businesses can succeed where the government cannot and government can pave the way for business to strive.”

He suggests they build consensus around how they can develop and implement policies, because people are tired of political rhetoric and internal scepticism.