JOHANNESBURG – President Cyril Ramaphosa will next week go on a charm offensive at the World Economic Forum (WEF) as he scrambles to raise $100 billion (R1.38 trillion) in new investments in an environment of heightened global trade tension.
Ramaphosa will attend the annual gathering held in Davos fully aware that the WEF Global Risks Report 2019, released yesterday, has flagged trade tension as being an impediment of foreign direct investment (FDI) globally.
The report further said the five biggest risks facing South Africa were: high unemployment, critical infrastructure shortfall, social instability, water crisis and national governance failure.
Ramaphosa yesterday told South Africa's business delegation that the event would be used to woo investments as the government sought to build its investment book.
Data from UN Conference on Trade and Development has revealed that South Africa is the third biggest exporter of capital as a percentage of gross domestic product globally.
Chief economist at economists.co.za, Mike Schussler, said South Africa invested more outside of its borders than it received.
“South Africa has R1.7trln in fixed investment stock outside the country, more than other countries have here,” Schussler said.
“The fact that this fixed investment could have added say R2.2trln (using emerging market average) then we should have a million more people in work.”
The WEF report warned that because FDI created economic facts on the ground in a way that trade flows did not, this was an area where increasing geoeconomic competition could sow seeds of tension that took years to grow and years more to resolve.
Bridy Paxton, the client advisory services leader at Marsh Africa, said FDI was on the decline.
“All this will have a significant impact on emerging markets, specifically around price of goods, disruption to supply chains, further unemployment with global organisations retracting from the country (SA),” Paxton said.
The report further found that there would be a deterioration in economic and geopolitical conditions this year.
“Trade disputes worsened rapidly in 2018 and the report warns that growth in 2019 will be held back by continuing geoeconomic tension, with 88 percent of respondents expecting further erosion of multilateral trading rules and agreements,” said the report.
Last year was dominated by a trade spat between the US and China, with the two biggest economies in the world engaged in a tariff war that hurt global trade.
Børge Brende, the president of the WEF, said co-ordinated, concerted action was needed to sustain growth and to tackle the grave threats that were facing the world today
“With global trade and economic growth at risk in 2019, there is a more urgent need than ever to renew the architecture of international co-operation. We simply do not have the gunpowder to deal with the kind of slowdown that current dynamics might lead us towards,” Brende said.
The WEF Global Risk Report also highlighted the impact of climate change, underinvestment in infrastructure, cyber attacks and the rise of fake news as presenting significant risk to the globe.