The title of a glossy booklet distributed at last week’s SA investor conference in New York was Making it Happen: South Africa driven to deliver.
The title, and the booklet’s content, captured the challenge for business and government leaders who were in New York to persuade US investors representing US$2trillion of funds under management of SA’s merits as an investment destination.
The members of the SA delegation could draw on a positive story line, particularly about what one of the CEs who attended called the "new embrace" between government, business and labour, which was much in evidence at the conference. They could highlight, too, SA’s great strengths, especially its well-developed and deep capital markets and its robust institutions and legal framework — strengths that are in contrast with the other emerging markets that the US investors watch.
Yet they had to explain why SA had arrived in New York, again, without nearly enough evidence that it was indeed "driven to deliver" on the structural economic reforms that government has promised and that the business-government-labour initiative that came together at the beginning of this year has been trying hard to accelerate.
Fortunately, if last week’s conference is anything to go by, US investors are still keen to hear the SA story, and the CEOs of SA’s largest companies are keen to work with government to tell it.
The New York conference is now in its fourth year and its sponsors — the JSE, Standard Bank, Old Mutual and UBS — were delighted with its success.
It is one of at least three such roadshow conferences that provide a platform for SA’s listed companies and government to meet investors and potential investors, and like the annual investor conferences in SA by RMB Morgan Stanley and Bank of America Merrill Lynch Sun City, this one allows for intense one-on-one sessions behind closed doors.
There are also several emerging markets investor conferences abroad in which SA companies participate, the largest of which is Deutsche Bank’s global emerging markets event, which took place in New York last month.
But the New York event is the largest such investor conference in the US that focuses on SA alone and that has such a focus on the "macro" of SA’s political economy.
It has grown in size and in quality since its relatively modest beginnings four years ago, with over 200 people attending this year. About 85 US fund management houses were represented, including the likes of Wellington, Lazard and Fidelity, and the $2trillion of global funds they collectively have under management includes about $80bn of global emerging markets funds, mainly in equities but also in fixed income (bonds) and even currencies. JSE chair Nonkululeko Nyembezi-Heita says many were repeat attendees, who could see that the product was better each year.
The conference also drew record corporate attendance, in part because of the business-government-labour initiative. The CEs of 17 JSE-listed companies with a combined market capitalisation of $302bn (R4trillion) were there, with their teams, as were state-owned companies including Eskom, Transnet and Sanral.
The conference is timed each year to take place just ahead of the IMF/World Bank annual meetings, so that helps to draw treasury and the SA Reserve Bank. They were more strongly represented this year than previously, with finance minister Pravin Gordhan leading the SA delegation, accompanied by deputy minister Mcebisi Jonas, and Bank governor Lesetja Kganyago and deputy governor Daniel Mminele also coming along.
It has been a year in which Gordhan and Kganyago have been seemingly tireless in making speeches and engaging with investors in their efforts to stave off a ratings downgrade and manage the fallout from SA’s serial political debacles. The CEs of the business-government-labour initiative often join the roadshows, as they did in New York, where, for example, Old Mutual CEO Bruce Hemphill, Standard Bank joint CEO Sim Tshabalala, Imperial CEO Mark Lamberti, Sasol joint CE Stephen Cornell and Nampak CEO André de Ruyter spoke on a panel — chaired by Moody’s analyst Kristin Lindow — on how SA corporations were responding to the low-growth environment.
They did tell something of a good-news story, with Hemphill for example commenting that SA’s "amazing achievements were often too easily overlooked in the maelstrom of daunting noise that is SA as it matures", and Lindow herself commenting on SA’s deep and liquid financial markets and the way SA had come through the global financial crisis without having to support its banking system.
Yet the key question, as she noted, was about SA’s future in terms of structural reforms and growth. "Does SA have what it takes to move forward?" she asked, with the CEOs on the panel raising similar questions, even as they urged that SA shouldn’t always default to a "negative narrative".
The business-government-labour initiative itself was a positive signal for investors that Gordhan and the CEOs who spoke emphasised in the open sessions, but there was an acknowledgment that, as Hemphill said, "we now need to consolidate so we can take the country forward. We can’t rely on rhetoric." He pointed to the urgent need for policy and regulatory predictability as well as better labour productivity.
A fiscal discussion also elicited robust, albeit careful, comments from the CEOs, with Lamberti highlighting the "elephant in the room" of wastage, corruption and inefficiency in government spending that prevented public money from being used better — and Hemphill saying: "As businesses we focus on operational efficiency; government can do the same thing."
If the size of the conference was one measure of success, another was the quality of the debate, which pleased the organisers even more. "The subject matter was much richer and more interesting than in previous years," said Tshabalala.
But where in previous years issues such as electricity supply and strikes, as well as fiscal issues, had tended to dominate the agenda, this year SA’s noisy politics and the attacks on institutions topped it, with investors showing particular concern about the future of the finance minister himself.
Said Nyembezi-Heita: "Investors wanted our take on institutions and on issues of political stability — they want to know whether this is a space where you can do business. "That CEOs were projecting an air of confidence about the future and appeared to be running their businesses [successfully] was a very important message."
Some of the fund managers had evidently noted little about SA other than the reports of the finance minister’s possible arrest by the Hawks, yet most asked probing and informed questions in the open sessions and even more so in the closed one-on-one sessions. One of the CEOs said the foreign fund managers were much more sophisticated and strategic in the way they assessed his company than many of the locals.
At the open sessions Gordhan was questioned about how government was doing on the four issues raised by Standard & Poor’s in its June ratings report. He was also asked how he would balance fiscal consolidation and growth in his next budget, as well as what effect the outcome of the recent municipal elections and the "change of management" in the major metros would have on the fiscal accounts.
Gordhan responded in some detail, noting that national government provided only about 9% of the funding for local government, so fiscally it was not that much of a burden, and saying: "National government is the government of all of SA." But, he said, "we are going to have fascinating conversations with the new Democratic Alliance mayors, and we look forward to that."
Whether they were persuaded or not, many of the investors who were there were impressed more than anything by the transparency and frankness about SA’s problems from both government and business leaders. "You wouldn’t get that in the US," said one.