Gigaba interfered in SAA over Gupta-linked airline, Cheryl Carolus says

Malusi Gigaba got involved in the operation of the Joburg-Mumbai route in order to give it to Jet Airways, Carolus says.

Former public enterprise ministers Malusi Gigaba interfered in the operation of SAA in relation to its Johannesburg to Mumbai route in order to give it to Gupta-linked Jet Airways, the former board chair of the state-owned airline, Cheryl Carolus, said on Thursday. 

It was a Jet Airways carrier that flew Gupta guests to the Waterkloof Air Base in 2013 for the lavish Sun City wedding. This was one of the first incidents to reveal the extent of the Guptas’ involvement in state capture. 

Carolus was testifying at the state capture inquiry on Thursday about the pressure SAA endured from Jet Airways, with the help of Gigaba, to cancel the airline’s route to Mumbai, India.

Carolus was SAA board chair from 2009 until 2012 when she and a number of the airline’s board of directors resigned. 

Former public enterprises minister Barbara Hogan testified to the commission earlier in November that she was confused when she heard SAA was looking at canceling the India route because it was actually the ‘‘least loss-making’’ route. 

She contacted Carolus, who told her, via a text message, that this was not true and that Jet Airways would be in SA for a meeting and was ‘‘lobbying hard’’ for SAA to end the Mumbai flight. The board, however, was not having that.

Gigaba replaced Hogan as public enterprise minister in late 2010. Hogan was axed by then president Jacob Zuma.

Gigaba resigned from President Cyril Ramaphosa's cabinet earlier in November following damning findings by the courts and public protector that he had lied under oath in the Fireblade Aviation matter. 

Carolus testified on Thursday that within weeks of his appointment as public enterprises minister, Gigaba had called SAA to a meeting.

Carolus was unable to attend and sent CEO Siza Mzimela and another board member to the meeting. She was then given a report about what transpired.

According to Carolus, when the SAA officials arrived at the meeting with Gigaba, they were told to wait for another three gentlemen to join them. After a three-hour wait, the president of Jet Airways and two others arrived.

The Jet Airways president took over the meeting while Gigaba sat back saying nothing, and insisted that SAA cancel its Mumbai route, she said. 

Gigaba did nothing as the Mzimela tried to explain why SAA would not get off the route. Eventually, Gigaba's deputy Ben Martins had to intervene.

Carolus said SAA made it clear that it would consider reasonable proposals from Jet Airways that made business sense and followed due processes.

When asked by commission chair deputy chief justice Raymond Zondo if this was strange, Carolus said: “Yes it is very strange. And there the shareholder minister [Gigaba] was sitting”. 

In April 2011, Carolus was again called to a meeting with Gigaba in Cape Town. Again Carolus could not attend and sent Mzimela, accompanied by a board member.

On arrival, the SAA officials were told the minister wanted to discuss the Mumbai route, among other things. Gigaba once again took a back seat at this meeting and allowed his legal adviser, Siyabonga Mahlangu, to lead, Carolus said.

“Then Mahlangu proceeded to berate Mzimela for SAA’s refusal to close the Mumbai route and among other things [said] to her SAA is wasting government money, which could be spent on RDP houses,” she said. 

Gigaba then said other people would be joining the meeting, and the Jet Airways president appeared once again.

Carolus said that at the conclusion of the meeting, Gigaba asked that SAA and Jet Airways “please find each other”.

“We found it quite peculiar at the time. The minister is our shareholder, and he seemed to be quite persistent to assist SAA and Jet Airways to find one another. As a shareholder, you are not about … [helping] the other side, and it was clear he was in discussions with Jet Airways in a way that he wasn’t with us,” she said.

“The appropriate way it would have happened is one business approaching the other — it shouldn’t have gone to the department because the department is not the trading partner.”

Carolus said SAA did not get any proper proposals to close the route.

She said SAA had four flights a week to Mumbai, and Jet Airways put in seven flights, and as a consequence, both airlines suffered losses because of the competition.

In the end, Jet Airways abandoned the route and so did SAA, but Carolus said she did not know what eventually led to the national carrier doing this.

Load-shedding has begun and will be with us for 10 hours

The power cuts follow Wednesday's release of Eskom’s interim results, which showed a dire state of affairs both financially and operationally.

From my perspective, Eskom is reverting to their classic playbook. Publish a set of results that show a dire need for a bailout as well as the need for a massive increase in the price of electricity. Then immediately cut power supply so that the public can be scammed into higher prices just to keep the lights on. This scam is not new, we can all remember how Enron used the same strategy to create massive revenue shortly before management skimmed the cash flow and they crashed out of business.

Eskom has announced 10 hours of load-shedding on Thursday, as the embattled utility’s operations and finances continue to worsen.

SA’s largest state-owned entity announced on Thursday that stage 1 rotational load-shedding would be implemented from 12pm until 10pm, as a result of “increased generation plant being out for planned maintenance and unplanned outages”.

Stage 1 rotational load-shedding requires 1,000MW to be load shed nationwide. “Load-shedding is conducted as a measure of last resort to protect the power system from a total collapse or blackout,” Eskom said in a statement.

In a tweet on Thursday, Eskom spokesperson Khulu Phasiwe said: “Besides the high unplanned outages (breakdowns), Eskom is also investigating the cause of the collapse of the power lines that carry imports from Cahora Bassa [a hydroelectric power plant] in Mozambique. As a result of the damaged lines, imports have been reduced to about 400MW, down from the usual 1,500MW.”

The load-shedding follows Wednesday's release of Eskom’s interim results, which showed a dire state of affairs both financially and operationally.

The cost of servicing its debt had doubled to R45bn for the six months ended in September, while cash from operations was less than R27bn.

Eskom said its energy availability factor — which shows how well generation plants are running —  dropped to 74.2% in October, below its target of 78%.

Ten of its 15 coal-fired power stations are facing severe coal shortages.  

Emergency open-cycle gas turbines are now in use, and Eskom said it expected to spend as much as R1bn on diesel to run the turbines and keep the lights on while getting up to date on maintenance over the next four months.

Although costly, the diesel option is seen as a better alternative to load-shedding, given load-shedding's negative effect on the SA economy.

However, Eskom has said load-shedding would remain a risk for the remainder of the year.

‘Bold steps’ needed to save Eskom, Jabu Mabuza says, as more load-shedding looms

Mabuza says the way in which the company is operating now ‘is not sustainable’

Eskom, which is facing dire financial woes, has seen a steady decline in plant performance and coal supply, which could threaten its ability to keep the lights on, chair Jabu Mabuza said on Wednesday. 

Mabuza said at the release of the state-owned power producer's 2018-2019 interim results that the way the company was operating now “is not sustainable”. 

“We are locked in a permanent loss-making position,” he said. “We need bold steps to save Eskom.”

Mabuza said they were engaging stakeholders to find financial alignment, with the aim of about R30bn in savings over the next five years. 

He also confirmed the permanent appointment of Calib Cassim as CFO. 

The interim results showed that most financial ratios deteriorated, and that arrears from municipalities continued to worsen — jumping from R13.6bn earlier in the year, to R17bn in September.

Eskom CEO Phakamani Hadebe said that despite a recovery programme, load-shedding could not be ruled out for the remainder of 2018.

“We will do our best but South Africans need to know it’s a risk that is existing,” he said. 

Meanwhile, the final report of parliament’s inquiry into Eskom was adopted on Wednesday with the unanimous support of all political parties.

The public enterprises committee, which conducted the inquiry, found that former ministers of public enterprises — Malusi Gigaba and Lynne Brown — were “grossly negligent” in carrying out their responsibilities. 

The committee found that there had been corruption of procurement processes at Eskom and that there was a corrupt relationship between the Gupta family, their associates and key state functionaries.

Lynne Brown and Malusi Gigaba were ‘grossly negligent’, final Eskom report finds

The public enterprises committee recommended to parliament that its report be given to the state capture inquiry

The final report of parliament’s inquiry into Eskom has found that former ministers of public enterprises — Malusi Gigaba and Lynne Brown — were “grossly negligent” in carrying out their responsibilities.

The public enterprises committee, which conducted the inquiry, adopted its report on Wednesday with the unanimous support of all political parties present.

Business Day reported earlier in November that the draft report found that Brown and Gigaba were on the list of suspected “captured” individuals and companies that should be criminally investigated. 

The approved report recommends that appropriate remedial action for wrongdoing be pursued by the relevant authorities against all implicated individuals and companies. Lifestyle audits of implicated individuals must be conducted.

The committee has recommended that the Treasury review and strengthen the regulations on procurement by state-owned companies and criminal investigations into possible fraud, corruption and other unlawful conduct must be pursued.

The committee also recommended to parliament that its report, together with all documentation and the record of evidence, be given to the commission of inquiry into state capture headed up by deputy chief justice Raymond Zondo.

The committee found that there had been corruption of procurement processes at Eskom and that there was a corrupt relationship between the Gupta family, their associates and key state functionaries.

There was “overwhelming” evidence of external interference and noncompliance with legislation by Eskom.

The committee heard evidence on Eskom’s coal contracts with the Gupta owned Tegeta Exploration and Resources, its relationship with Trillian Capital and The New Age, and the resignation of former CEO Brian Molefe.

“Various gratifications were provided and accepted in order to influence Eskom board members and employees to act unlawfully and to induce Eskom to enter into a number of business contracts,” the report said.

With regard to Brown, the report notes that “in spite of there being ample evidence of wrongdoing being raised frequently about Eskom in Parliament and in the public domain, [former] minister Brown often failed to take appropriate action, responsibility or accountability for a large set of impugned decisions taken by the board and management of Eskom.”

The committee noted that Brown’s oversight of the executive and nonexecutive directors “was inadequate, leading to gross breaches in fiduciary duty and potentially illegal acts”.

Gigaba’s overhaul of the Eskom board introduced patterns of instability.

“It is not apparent that the board appointed by [now former] minister Gigaba had been sufficiently vetted in terms of integrity, collective skills and experience to govern Eskom and execute their fiduciary responsibility.”

The same observation was made in the report about successive boards appointed by Brown.

“While the two former ministers pleaded ignorance regarding the irregular and possibly criminal acts committed by the executive and nonexecutive board members they appointed, the King Code stipulates clearly that while ministers and officials within the department may not be directly responsible for acts of wrongdoing, they may still be accountable for these acts.”

The committee found that it was “patently clear that there was undue influence by private individuals and companies over the appointment of Eskom board members as well as some procurement decisions”.

The report noted that many examples of institutional and oversight failure had emerged during the inquiry. These allowed private interests to benefit unduly from business with Eskom.

The committee found that the legislation and policies that regulate the shareholder’s relationship with Eskom may have left room for interpretation, that led to inconsistencies.

The evidence presented to the committee corroborated many of the findings and observations of former public protector Thuli Madonsela’s State of Capture report.

“The committee has uncovered substantial and compelling evidence that a number of corporate entities amassed substantial illicit private gains many of which have reportedly been funneled out of SA through shell companies and private accounts in Dubai and Hong Kong.

“It is disconcerting that it seems the relevant authorities have not yet acted in light of the allegations.”

It has also recommended that the department of public enterprises and the cabinet review the legislative and regulatory framework governing state-owned enterprises.

NPA to drop Gupta-linked Estina dairy case

The National Prosecuting Authority (NPA) is dropping its hallmark “state capture” case against Gupta family members and business associates accused of involvement in the alleged Estina dairy project scam in the Free State.

The NPA sent a letter to lawyers for the Guptas and their associates on Wednesday, informing them that it “has not received information regarding the mutual legal assistance requests made to India and the United Arab Emirates, as a result, the investigations are not finalised”.

“The state intends to provisionally withdraw charges against the accused on December 4,” it said. 

However, the NPA, speaking to Business Day on Wednesday, stressed that that did not mean the Estina case was dead.

“We can reinstate the prosecution once our investigation has been finalised, and all outstanding information [is] obtained,” spokesperson Luvuyo Mfaku said.

The NPA had until Friday to hand over the finalised docket and indictment in the case, in which it alleged that R250m intended for the upliftment of poor black farmers was siphoned to Gupta companies.

But, as it has not finalised that investigation, it will provisionally withdraw charges against former Oakbay CEO Nazeem Howa,  nephew of the Gupta brothers Varun Gupta, former Sahara Computers CEO Ashu Chawla, Estina director Kamal Vasram and three Free State provincial government officials Peter Thabethe, Sylvia Dlamini and Takisi Masiteng.

They faced charges of fraud, theft, conspiracy to commit fraud and theft, contravening the Public Finance Management Act, contravening the Companies Act and contravening sections of the Prevention of Organised Crime Act.

Earlier in 2018, the high court in Bloemfontein ruled that it wasn’t satisfied that there was adequate evidence connecting R250m in Gupta assets to the alleged scam.

Judge Phillip Loubser stated that the evidence that the state relied on was “unreliable” and showed “many shortcomings that remain unexplained at this point”.

The NPA did not attempt to appeal against that ruling.

In August, Hawks head Lt-Gen Godfrey Lebeya told parliament’s portfolio committee on police that the unit was investigating cases where more than R40bn had been plundered from state coffers as a result of alleged “state capture”.

Speaking about the Estina investigation, he said the Hawks had obtained 302 bank account reports, as well as the statements of 139 witnesses.

Lebeya added that two search and seizure operations had been conducted and an auditing company was procured to analyse the flow of funds linked to the alleged scam.

ANC calls on SABC to reconsider extensive retrenchments

The ANC has supported the call by communications minister Nomvula Mokonyane that the financially ailing SABC reconsider its plan to retrench staff.

On Monday, the SABC announced that it would proceed with retrenchments in a bid to cut costs. It is looking at cutting 981 of its 3,376 permanent employees and 1,200 of its 2,400 freelancers.

CEO Madoda Mxakwe said on Wednesday that the SABC’s wage bill was R3.1bn, and its total expenditure R3.5bn, noting, ‘‘This is not sustainable.’’ 

The ANC said it did not believe Mokonyane was undermining the SABC board’s independence and authority by making the call.

‘‘The government, like any other stakeholder or actor in South African society, has a right to express an opinion,’’ spokesperson Pule Mabe said. ‘‘The government does not lose that right because they appoint a board.’’

He said expression of an opinion is not an instruction, but a request for the view to be noted and factored in, and that an opinion is not an attack on its independence.

‘‘We call on comrade Mokonyane, as a representative of the shareholder and the SABC board, as well as labour, to urgently enter into a dialogue to discuss ways and means to avoid retrenchments, especially during this difficult economic period in our country,’’ Mabe said.

‘‘The retrenchment plan will have adverse effects on the country’s objective of creating decent jobs and fighting unemployment.’’

The EFF has called the looming retrenchments ‘‘disgusting’’. It said the state of the SABC’s finances had to be put squarely in the hands of the ANC.

‘‘It is the ANC which imposed, sustained and guided [former COO] Hlaudi Motsoeneng’s [looting] of the SABC. It is also the ANC’s Treasury that is refusing to give SABC a guarantee letter so it can go and get help from commercial lenders,’’ the EFF said.

The party called on finance minister Tito Mboweni to urgently intervene, by giving the SABC a guarantee letter so it can find the funds and not retrench thousands of workers.

SAA tells MPs it needs nearly R17bn by March

The airline has also pushed back its break-even date to 2021

SAA will require another R16.7bn from the government, either in the form of capital or loan guarantees by March 2019, the airline's executives told MPs on Tuesday.

The R16.7bn is made up of R3.5bn that is required by December, R4bn that is needed by March, and the refinancing or repayment of another R9.2bn in debt that matures in March 2019.

Together with the R5bn that was allocated in October’s medium-term budget policy statement, this makes up the R21.7bn that SAA had previously stated made up its working capital requirements.

SAA CEO Vuyani Jarana also told MPs that the airline had pushed back the expectation of its break-even point from 2020 to 2021. 

CFO Deon Fredericks said that the R3.5bn was urgently required as “negotiating for the R3.5bn loan is not possible anymore as banks require additional commitments from the shareholder”.

The government is the sole shareholder of SAA.

The break-even date had been pushed back due to higher-than-expected oil prices.

The strategy had assumed an oil price of $45 a barrel when the real price over the past year was closer to $75 a barrel.

Business confidence in SA continues slide into fourth quarter

In addition to the fourth quarter results, this release incorporates the outcome of some data revisions and survey improvements. On occasion, the BER updates, among other things, its surveys’ sector weights to reflect structural changes in the economy. To maintain a consistent time series, historical data also get revised. In the main, revisions have been small and historical trends have broadly stayed the same. A brief note at the end of this release gives more detail about the methodology and changes which have occurred.

The fourth quarter survey was conducted between 31 October and 19 November. The fieldwork was therefore completed before the 25-basis point interest rate hike of last week, the cabinet reshuffle and “Black Friday” promotion sales. The survey covered 1,700 business people in the five cyclically-most-sensitive sectors of the economy i.e. building, manufacturing, retail, wholesale and new vehicle trade.

Details

In terms of the five sectors making up the RMB/BER BCI, sentiment deteriorated in two (motor trade and building) and increased in three (manufacturing, retail and wholesale trade) during the fourth quarter.

Confidence among new vehicle dealers declined by the largest margin (22 points), and at 15 it is the lowest of all the sectors surveyed. The drop in confidence can almost entirely be attributed to an unexpected (and considerable) further deterioration in sales volumes.

After rising from 37 to 44 in the third quarter, building contractor confidence fell back to 32 as previous expectations of improved activity in especially the residential sector failed to materialise.

The fourth quarter’s reading of lower confidence is consistent with continued weakness in both residential and non-residential building activity.

Of all the sectors, retail trade registered the biggest improvement in sentiment, with its BCI rebounding from 23 in the third quarter, to a still low 33 in the fourth quarter. Even before “Black Friday”, sales volumes improved a little with retailers of durable goods (such as furniture, appliances and electronic goods) continuing to do better than most other retailers, especially those selling new cars which have seen volumes plunge.

Manufacturing confidence increased slightly from 26 in the third quarter to 30 during the survey quarter. While domestic as well as export sales volumes showed some signs of life, improvements were moderate. Similarly, production output only increased a bit.

Somewhat better sales of both consumer and non-consumer goods boosted wholesale confidence from 40 to 44 in the fourth quarter.

Bottom line

Even though improvements have been modest, it’s nonetheless encouraging to see confidence having risen in three out of the five sectors surveyed. In fact, if it wasn’t for the unusually large drop in new vehicle dealer confidence, the RMB/BER BCI would have risen for the first time in almost a year. Yet, concerns continue to linger; in aggregate, seven out of every 10 respondents remain unhappy with prevailing business conditions, while confidence continues to track below the neutral-50 mark in all the sectors.

“While President Ramaphosa’s refreshing new focus on public-private-sector partnerships is welcome, the reality is, a multitude of political and policy issues (chief amongst which is the uncertainty around the government’s land reform plans), continue to weigh down on confidence.

Unless these are resolved in a more speedily and concrete fashion, private sector fixed investment, and by implication, economic growth will remain disappointingly low. Time is running out as global headwinds are mounting and domestically inflation as well as policy interest rates have bottomed” said Ettienne Le Roux, chief economist at RMB.

Human rights lawyer charged with assault for pointing his finger at a police officer

South African human rights attorney Richard Spoor is well-known for his sharp mind and forthright tongue‚ but now he has run into deep trouble because of his finger — or‚ to be more exact‚ for assaulting a police officer “by pointing him with a finger”.

Two weeks ago‚ the Nelspruit-based attorney was involved in a heated verbal encounter with mineral resources minister Gwede Mantashe and senior Eastern Cape police commissioner Maj-Gen Andre Swart on the Wild Coast‚ which ended with Spoor being taken off to the local police station and charged with assault.

Spoor‚ who represents members of the Amadiba Crisis Committee who are opposed to an Australian-led mineral sands mining project near the village of Xolobeni‚ had complained that anti-mining residents were being marginalised from Mantashe’s public meeting.

He later appeared in the Mzamba Magistrate’s Court‚ where the case was remanded to October 25.

But now Spoor is back in the news after posting a copy of his charge sheet on Facebook on Friday.

The charge sheet reads: “The accused is guilty of the crime of assault in that on or about September 23 2018 … the accused did unlawfully and intentionally assault Andries Petrus Swart by pointing him with a finger [sic].”

His post has set off a chain of comments from his Facebook followers‚ some of whom remarked that it was fortunate that Spoor had not “thrown him with a stone”. Allison Thomson wanted to know just which finger he had pointed‚ while Pieter Steyn cautioned‚ “Don’t touch me on my finger.” Truida Prekel commented: “Which finger? In German you can give someone a ‘Stinke Finger’. That is rude!”

But other followers were not quite as amused‚ commenting: “What a stupid‚ immature little chip off someone else’s political shoulder. What a waste of time and our money to try in all predictable futility‚ to justify the ego trip of a small man in a big world.”

Another follower commented: “Hey Richard! This serious stuff. Just as well capital punishment has been abolished; who knows what could befall you?” Liam McKay asked: “Was your finger loaded at the time?” And Piet Meyer observed that perhaps the finger is mightier that the sword.

Shortly after Spoor was arrested‚ Mantashe’s office was invited to comment on the circumstances leading up to Spoor’s arrest. 

A spokesperson for the department of mineral resources said: “In short‚ discussions were positive.

All parties present were given an opportunity to present their views either for or against mining‚ including a representative of the Amadiba Crisis Committee. It’s unfortunate that that a small group of people were instigated to disrupt and suppress discussions‚ but the meeting proceeded as planned.”

On why Spoor was arrested‚ the department said: "Kindly contact Mr Spoor or the local police for comment regarding his arrest.”

Eastern Cape police spokesperson captain Khaya Tonjeni responded: “The matter is in front of the court of the law and, unfortunately, as the Eastern Cape police‚ we cannot comment on a matter that is sub judice”.

However‚ a video clip from the scene showed Spoor‚ shortly before his arrest‚ engaged in a heated discussion with Mantashe outside a large marquee erected during the minister’s weekend tour to address community tensions over several mining ventures.

“Don’t call me a liar please! I am trying to help you. If you work with us we can work together to solve problems‚” Spoor told Mantashe in the clip. Mantashe responded: “Okay. But you are disrupting my meeting.”

Spoor is described on his company website as a pioneer in the fight for workers’ rights and safety over the past 20 years. He is a graduate of UCT. He served his articles of clerkship with human rights lawyer Priscilla Jana in 1985 before joining labour law firm Cheadle Thompson & Haysom‚ where he became a partner.

“During this time‚ he represented people and organisations engaged in the struggle against apartheid. With the advent of democracy in 1994‚ he moved to White River‚ Mpumalanga‚” states the website.

“Among Spoor’s most notable settlements were those achieved on behalf of asbestos miners with Gencor and the Swiss multinational Eternit. These settlements led to the creation of the Asbestos Relief Trust and the Kgalagadi Relief Trust‚ both of which have, to date, paid more than R320m in benefits to thousands of sick mine workers or their dependents suffering as a result of asbestos exposure.”

As crime rate rises, South Africans are even less happy with police response

SA’s national crime rate worsened due to sharp increases in the North West and Free State, StatsSA reported on Thursday.

StatsSA segments its annual Victims of Crime report into two broad categories: households and individuals.

The percentage of South African households that suffered burglaries, robberies and other crimes in this category rose to 7.5% in the 2018 report from 7.2% in 2017.

The percentage of individuals who were victims of crime worsened to 3.7% from 3.5% the previous year.

A breakdown of crime by province showed the Western Cape managed to reduce crimes against individuals by 24.4% and against households by 1.7%.

But the national average saw crimes classified as against households increase 5.3% and against individuals by 5%, led by what appears to be crime sprees in the North West, followed by the Free State and Gauteng.

“Police visibility declined between 2017 and 2018,” the report said.

“It is estimated that the proportion of South Africans who never saw a police officer in uniform during the past 12 months increased by 6%.

“Police visibility was least in the Eastern Cape, where the percentage of people who never saw a police officer in uniform during the past 12 months is estimated to be 38%.”

StatsSA also found that the percentage of South Africans who were satisfied with police response declined to 54.2% from 57.3%.

Of the types of crime StatsSA classifies under households, more than half are burglaries, which are differentiated from robberies in that they do not involve family members being threatened or attacked.

“An estimated 832,122 incidences of housebreaking occurred, which is a 7% increase compared to the previous year. An estimated 156,089 incidences of home robbery occurred, constituting an increase of 3% from last year,” the report said.

“It is estimated that 16,809 incidences of murder occurred in 2018, which is an increase of about 4% from the previous year.”

According to StatsSA, robbery away from home decreased by 5%, sexual offences were down 61%, but assault increased by 12% from the previous year.

What do foreign investors really want from SA?

Trade openness and the efficiency of government regulation are among the most influential factors globally on the value of foreign direct investment (FDI) inflows that a country receives.

Among upper middle-income economies such as SA‚ the next most influential factors are the ease of trading across borders and safety and security considerations. These are some of the key highlights from an analysis carried out by PwC Strategy& researchers and economists‚ issued on Thursday.

FDI is critical to stimulate economic growth and financial sustainability. In particular‚ for emerging economies‚ foreign investment inflows are vital for transferring money and expertise from multinationals to local enterprises.

Foreign investors look to a number of macro-factors when considering FDI. These not only relate to the economic outlook for a particular country but also policy decisions taken by a government.

Investors also tend to be wary of any economic and political uncertainty. In SA‚ recent political and economic uncertainty‚ including the perception of corruption‚ have clouded investor sentiment.

‘What foreign investors want: South African insights from a global perspective on factors influencing FDI inflows since 2010’,  sets out to ascertain what foreign investors are looking for when investing in a country‚ with a particular focus on SA’s performance in this regard.

The analysis identifies 19 key variables that potential investors consider in their investment decisions: political stability; policy continuity; exchange-rate stability; labour-force affordability and flexibility; safety and security; property rights; state stability; investment freedom; competitiveness of the economy; quality of infrastructure; efficiency of government regulation; control of corruption; rule of law; quality of governance; trade openness; investor protection; corporate tax rate; ease of trading across borders; and natural resources.

Data from the UN Conference on Trade and Development indicates that FDI inflows into SA declined from an equivalent 2.3% of GDP during 2013 to 0.5% in 2016‚ with PwC estimating a reading of around 0.4% of GDP for 2017.

The overall number of completed deals with SA as the target market declined from 163 in 2015 to 117 in 2016‚ and fell to just 79 in 2017.

On a positive note‚ President Cyril Ramaphosa has taken steps to address FDI confidence in SA. In his state of the nation address 2018‚ Ramaphosa promised “a major push this year to encourage significant new investment” in the economy. To this end‚ the president has organised an investment conference on October 26 2018‚ “targeting both domestic and international investors to market the compelling investment opportunities to be found in our country”.

With the investment conference approaching fast‚ it is important to consider what foreign investors are looking for when they consider a direct investment into a specific country. What do potential investors want to see to improve the attractiveness of an economy to them? These are some of the questions challenging governments and investment agencies worldwide in their quest to attract FDI inflows.

The PwC Strategy& research found that differences in factors such as trade openness‚ efficiency of government regulation‚ safety and security‚ property rights‚ quality of infrastructure‚ control of corruption‚ and policy continuity are associated with differences in FDI inflows‚ as discussed in the South African context. Furthermore‚ the results show that‚ across 132 countries‚ the two factors with the highest correlation with FDI inflows are openness to trade and the efficiency of government regulation.

It is encouraging to note that SA has already promised to address a number of these issues.

Ramaphosa made particular promises in his state of the nation address 2018 related to a number of factors identified in our analysis. Some of these are easing the regulatory barriers for small businesses; intensifying efforts to tackle crime and build safer communities; and improving the quality of infrastructure.

The value of SA’s FDI inflows from 2010 to 2016 was equivalent to an average of 1.2% of GDP‚ compared to a global mean of 5%. Countries that received a similar level of FDI to SA include Ivory Coast‚ Hungary‚ New Zealand‚ Nigeria‚ Sri Lanka and Swaziland. All of these countries experienced FDI below the global average.

To further encourage investment interest‚ PwC’s Strategy& economists make the following recommendations:

1. Near term (the period overlapping the investment conference):  Ramaphosa’s investment envoys must be empowered with information on progress and plans regarding the promises made in his 2018 address. Importantly‚ local investors and the domestic business community must also be well informed about these factors.

2. Short term (towards the 2019 elections): get investment-enablers on board‚ for example, consultancy firms‚ marketing companies‚ organised business‚ academics‚ etc.

3. Medium term (five-year horizon for the president’s R1.2-trillion investment campaign): provide the public‚ business and investment communities with regular updates about envoy visits and progress on the topics identified in this report.

4. Long term (reaching the goals of the National Development Plan 2030): align R1.2-trillion investment goals and strategies with the plan's goals and strategies, and ensure that economic planning beyond 2030 is communicated timeously.

SA’s economic slippery slope; falls to 94 on freedom index

South Africa ranks 94 out of 162 countries and territories according to their economic system. Economic Freedom of the World (EFW) index measures the degree to which the policies and institutions of countries support economic freedom. In 2000, South Africa ranked 46th in the world, which meant being in the top 30% of economically free countries. Not only was it high on the index, but it was rising, destined to be one of the world’s freest and thus most prosperous countries.

Unfortunately, instead of building on its post-apartheid achievement, SA started sliding down the rankings and is now in the bottom 40%. This means that South Africans now have less economic freedom than they had gained by 2000. Sliding down the index condemns countries to lower incomes, greater poverty, more inequality, reduced life expectancy, fewer political rights and liberties and bleak prospects for the quality of life.

“If South Africa is to increase prosperity and reduce unemployment and poverty, it is essential that the financial sector be allowed to function as freely and efficiently as possible without stifling bureaucracy, and that true judicial independence be restored expeditiously,” said Free Market Foundation (FMF) Executive Director, Leon Louw.

Hong Kong and Singapore top the index, continuing their streak as 1st and 2nd respectively. New Zealand, Switzerland, Ireland, the United States, Georgia, Mauritius, the United Kingdom, and Australia with Canada (tying for 10th) complete the top 10.

The index is based on data from 2016 (the most recent year of available data) and measures the economic freedom of 162 countries and territories for which data are available.

The 10 lowest-ranked countries are Sudan, Guinea-Bissau, Angola, Central African Republic, Republic of Congo, Syria, Algeria, Argentina, Libya, and, last-place, Venezuela. Some despotic backward countries such as North Korea and Cuba cannot be ranked due to lack of data.

Other notable countries include Germany (20th), Japan (41st), France (57th), Russia (87th) and China (108th).

According to peer-reviewed research, people in countries with more economic freedom are more prosperous, enjoy more political and civil liberty, and live longer.

Countries in the top quartile (25%), such as the UK, Japan and Ireland, had per-capita incomes of more than US$40,000 in 2016 compared with less than US$6,000 for the bottom quartile, such as Venezuela, Iran and Zimbabwe.

Life expectancy is nearly 80 years in the top quartile compared with just 65 years in the bottom quartile.

“Where people are free to pursue their own opportunities and make their own choices, they lead more prosperous, happier and healthier lives,” said Fred McMahon of the Fraser Institute.

South Africa’s largest score reductions in economic freedom (where 1 is low and 10 high) are Judicial Independence down from 8.03 to 6.52, Independent Courts from 7.42 to 5,45, and Regulation of Credit from 10.00 to 7.50.

Germany arrests suspect over murder of Bulgarian journalist

Viktoria Marinova

A Bulgarian man has been detained in Germany over the rape and murder of television journalist Viktoria Marinova, officials said on Wednesday, as Prime Minister Boyko Borissov defended his government’s record on press freedoms.

The suspect was identified by Bulgarian authorities as Severin Krasimirov from Ruse, Marinova’s hometown where her body was found in a park near Danube River last Saturday. Krasimirov, who lived near the park, left the country on Sunday, they said.

Bulgaria has charged him in absentia with rape and premeditated murder with extreme cruelty and Germany was expected to extradite him for trial in Bulgaria, chief prosecutor Sotir Tsatsarov said.

German authorities confirmed a 20-year old suspect had been arrested in Stade at the home of relatives’ on Tuesday night and was due to be brought before a magistrate.

Marinova, a 30-year-old presenter on a local TV station with a 7-year-old daughter, had been raped, beaten and suffocated, police said.

On her last TV show, on September 30, Marinova introduced two journalists who were investigating suspected corruption involving EU funds and said her own show, “Detector”, on local television station NTV, would carry out similar investigations.

No link has been established between the crime and Marinova’s work so far.

But her murder has all the same revived the debate over the extent of press freedom in Bulgaria and the rights of journalists to pursue investigative reporting.

Bulgaria ranked 111 out of 180 countries in the Reporters Without Borders world press freedom index this year, lower than any other European Union member.

Borissov, speaking at a news conference, criticised people who he said had rushed to mention Bulgaria in the same breath as Malta and Slovakia, where journalists had been killed recently for their work.

He said journalists in Bulgaria had “total freedom to write and report on any topic” and he decried pressure on the authorities from abroad over the murder. He had summoned foreign ambassadors to Sofia to brief them over the investigation.

“We have done all this work in the frame of three days. In the frame of three days I read monstrous things about Bulgaria and none of it is true,” he said.

Chief prosecutor Tsatsarov told the news conference that he could not say at this stage if the murder was linked to Marinova’s work as a journalist. The collected evidence so far pointed to a spontaneous attack and sexual assault, he said.

Ivan Stefanov, the NTV channel producer who worked with Marinova on her on show said he did not think the murder was linked to her work and that neither of them had received any threats.

“We are full of grief, pain and anger, but also with a determination to continue her work,” he said. 

Colleagues spoke of her charitable work and commitment to social causes such as support for disabled and disadvantaged children.

“I remember how she tried to help everyone who is in trouble,” said Silva Agopian, an editor at NTV.