Policy certainty as effective as uncertainty at pushing foreign capital away from SA
Key policymakers in the South African government have a major kink in their think. They cite policy uncertainty as a major deterrent to foreign direct investment into the country, when policy certainty is often as harmful a detractor. You could say, for example, that uncertainty around property rights being enshrined in expropriation legislation is as undesirable as a certainty that these rights will not be protected.
An instrument to address race-based skews
Today’s opinion piece was triggered by comments to the recent Sanlam Benchmark 2025 event. Speaking in his capacity as a board member of Impact Investing South Africa, Temba Mvusi, who is also the country’s acting B-BBEE Commissioner, lauded the country’s Broad-Based Black Economic Empowerment (B-BBEE) legislation as “an instrument that government created” to address race-based skews in economic participation.
Mvusi drew links between BEE, inclusion and social impact and claimed that foreign investors were shunning South Africa due to the risk of instability linked to inequality. This implies that ownership requirements under the law are viewed as necessary to foster inclusion, and, by extension, attract investment. He also singled out policy uncertainty as the worst enemy of investment. His comments were unsettling in the context of South Africa’s B-BBEE, which many criticise as being anything but broad-based.
A hard-hitting piece published on Daily Investor recently claims that BEE has contributed to increased poverty, unemployment and inequality in South Africa. “Conservatively, R1 trillion has been moved between under 100 people since 1994; the same people have been empowered and re-empowered, over and over,” said Prof. William Gumede of the Wits School of Governance. He contends that the country’s approach to empowerment has created a model of corruption in which people set up companies just to get a contract.
“The kind of policies that the ANC is putting in place is simply not supportive of economic growth in a modern economic environment,” said Efficient Group economist, Dawie Roodt, in an interview run on Biznews.co.za. “I am in favour of empowerment, but you have to do it the right way.” He lambasted the government for poor outcomes in education and skills development, saying “the lack of empowerment in South Africa was due to an ANC with the wrong policies, the wrong ideologies, and being beset by corruption.”
Costing R5 trillion and four million jobs
To reinforce Gumede’s view, a recent study by the Free Market Foundation (FMF) and the Solidarity Research Institute (SRI) estimates that BEE has cost South Africa R5 trillion and contributed to the loss of four million jobs. “Our findings show that BEE, as currently designed, is enriching a small elite while throttling economic dynamism and deepening unemployment,” said Morné Malan, FMF Senior Associate and co-author of the report, again courtesy Daily Investor. “From the ordinary South African’s perspective, we are stuck in an enormous negative-sum game.”
Few scenarios better illustrate the impact of policy certainty on foreign investment than the ownership requirements set out under the B-BBEE legislation. To operate in certain sectors, foreign firms must cede 30% equity to qualifying Black South African shareholders. This requirement is among the reasons why Starlink, the satellite internet service operated by SpaceX, remains unavailable in South Africa despite being active in more than 100 countries globally.
To operate legally in South Africa, Starlink has to obtain a telecoms licence through ICASA, which applies B-BBEE equity ownership criteria to individual licence holders. In a formal letter to the South African government, Starlink proposed a public benefit trade-off to exempt it from the 30% black ownership requirement: “Starlink proposes to provide over 5000 rural schools with fully funded Starlink kits and service,” wrote Ryan Goodnight, Starlink’s Senior Director for Market Access.
“To be clear, the only reason Starlink is not in South Africa today is because ICASA’s license regulations stipulate that all license holders must be 30% locally owned,” Goodnight wrote. The result is that government’s strict adherence to policy leads to the outright rejection of a connectivity solution for rural education. The policy is certain, as is the resulting exclusion. Ironically, the Sanlam Benchmark event highlighted access to education, say through affordable internet access, as a major inhibitor in financial inclusion and retirement outcomes.
Meanwhile, the mining sector is not booming either
Another prime example of policy certainty decimating foreign investment is in the mining sector. South Africa’s once robust pipeline of mining IPOs has all but vanished. In December 2008, there were approximately 71 mining companies listed on the JSE. Today, that number has shrunk to just 35, with many of those operating mines in other countries.
The resources sector drove South Africa’s last economic boom. But since 2007, a succession of ministers has done little more than throttle investment into the mining sector. For proof, just consider the country’s attempt to introduce a mining cadastre. A cadastre is a digital, map-based system that records, manages and publishes information on mining and prospecting rights. It is a fundamental tool used to prevent overlapping claims, reduce administrative bottlenecks and provide transparency to investors, local and foreign.
South Africa’s failure to implement a functional cadastre over more than a decade has become a textbook example of how poor governance deters capital flows. The country’s original system, SAMRAD, launched in 2011, was widely criticised for being opaque, unstable and unfit for purpose. It lacked basic mapping capabilities and routinely failed to process applications efficiently, leading to enormous backlogs and deep industry frustration.
Too little, too late for foreign investors
By 2021, the Department of Mineral Resources and Energy had acknowledged the system’s collapse, but attempts to replace it were beset by delays, tender disputes and administrative inertia. A new system was only formally commissioned in January 2024, with the Western Cape rollout expected by mid-2025, more than a decade after the original cadastre began failing.
The delay has come at a steep cost. And in the context of South Africa’s licensing process taking up to 270 days compared to 90 in Botswana, the former has missed out on billions in potential investment, with junior and mid-tier miners increasingly choosing to raise capital and mine elsewhere. As exploration activity declines, so too does the pipeline of new mining projects, leaving South Africa less competitive in one of its most vital sectors.
Recent changes proposed in the draft Mineral Resources Development Bill, under Minister Gwede Mantashe, include removing mandatory BEE participation for prospecting licences and cutting ministerial oversight for shareholding changes in listed companies. But these changes, and the recently introduced cadastre, do nothing to address the policy certainty around ownership contained in the B-BBEE legislation.
Dodging gold’s resurgence
The point here is that if policy certainty leads to foreign investment, then South Africa should be awash with new mining ventures. Gold is changing hands at more than USD3,300.00 per ounce, and the world is hungry for a wide array of rare earth metals for use in EV batteries and computer chips.
In fact, gold makes a great proxy for the success of South Africa’s policymaking. Back in 2004, we produced around 300 tonnes of gold, ranking second in the world and accounting for around 15% of total output. By 2024, our gold production was around 100 tonnes, ranking 10th behind Indonesia and Peru. Is this the success of policy certainty, or the failure of policy itself? You decide.
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