Parliamentary chaos during the State of the Nation address (Sona) last week is unlikely to deter investors, but it is negative for the country’s international image as a stable democracy, according to economists and analysts.
The EFF were thrown out of Parliament, while other opposition parties staged a walkout during President Jacob Zuma’s speech where he outlined plans to stabilise the economy, as well as boost employment and investment.
Dennis Dykes, Nedbank’s group chief economist, said Thursday’s chaos held no shock value for the markets and they did not react negatively.
He said parliamentary chaos was not unique to South Africa, and the incident was unlikely to deter investors. But it did send out a negative image of the country.
“Parliaments around the world are very rowdy lately and in other countries we see disturbing scenes. I do not think investors will look at it and conclude that there is chaos in South Africa,” Dykes said.
He said it would definitely draw investors to other issues, regarding the continuing concerns and allegations about the suppression of opposition political parties’ views.
Petrus de Kock, the head of research at Brand South Africa, said the organisation was not worried about dents on the country’s image, but he conceded that parliamentary chaos attracted negative global coverage. Brand SA would have to reposition its message to accommodate the evolving robust democracy, he added.
“The country enjoys a lot of respect for its fundamentals, and what happened on Thursday is part of the evolution of our democracy. The biggest challenge we have now is how we maintain the respect and decorum of our institutions at the same time keeping that openness,” De Kock said.
He said the country was still a preferred investment destination and had the most diversified economy on the continent. It was the top destination for foreign direct investment (FDI) in Africa, attracting $8.88 billion (R103.5bn) in 2014 compared with $4.55bn in 2013, according to the UN Conference on Trade and Development.
Meanwhile, Parliament was trending in social media and global news outlets.
George Glynos, the chief economist at ETM, shared similar sentiments, saying despite the chaos in Parliament, investors would probably overlook it. “Obviously it was disappointing, but I don’t think it will be a deciding factor for future investment.”
He said: “A person who is going to invest in South Africa will take into account a host of features like the size and strength of the market.”
In January, Trade and Industry Minister Rob Davies said the country had attracted about 24 percent of all the FDI projects in Africa between 2007 and 2013.
The 2014 AT Kearney Foreign Direct Confidence index ranked South Africa number 13 among 25 leading economies. The country moved up two places from 2013, but has not regained its 11th spot from 2012.
Ross Harvey, a senior researcher in the governance of Africa’s resources programme at the SA Institute of International Affairs, was not so positive and said the investment outlook was bleak.
“Not only because of what happened in Parliament, but because what happened in Parliament was arguably a symptom of a deeper malaise in policy and execution on all matters economic,” he said.
In terms of the country’s international standing, private investors would be increasingly nervous, and it would be interesting to see whether the credit ratings agencies revised their outlook to an even more negative rating, Harvey said.
“What was once seen as a stable jurisdiction in southern Africa is now treated with severe caution. Fixed capital formation is declining,” he added.
So far the country has performed well compared with other emerging markets. But if EFF MP Floyd Shivambu’s warning is anything to go by and they are armed the next time parliamentary officers confront them, it looks like there are more dicey days ahead.
Article credit: http://www.iol.co.za/business/news/investors-not-fazed-by-sona-chaos-1.1818508#.VOGrWNiS-M9