If investment slows down, “we may lose our comparative advantage to others who are able to invest and develop faster and better ways of doing things,” Zuma said in an interaction with business leaders in Cape Town.
“As business you are the backbone of the economy as you contribute 85 percent to our Gross Domestic Product. As government our job is to create an enabling environment,” Zuma said.
In this regard, failure in communication and cooperation between the government and business is not an option, said the president.
The channels of communication must remain open at all times, he said.
The interaction was seen as an attempt by the government to boost investors’ confidence in SA amid the possibility of further downgrading of South Africa’s credit rating by international rating agencies.
Standard & Poor’s has warned that any deviation from the South African fiscal policy could lead to a credit downgrade.
After downgrading by Fitch, Standard & Poor’s and Moody’s, South Africa’s credit rating stands at BBB- and Baa3 (a rating equivalent), respectively. That means the country is at very real risk of becoming a junk country, which has substantial implications for investment.
South Africa has challenges like all developing countries, Zuma said.
“However, the positive attributes of our country far outweigh the challenges. That is why we always overcome in difficult situations,” he said.
Along with the slowdown in the world economy, South Africa’s own short-term economic outlook “is not inspiring”, he said.
The low economic growth is a cost to business, community and the government, ultimately undermining the ability of the SA people to create better lives and further compromising the ability of the government to deliver on basic services, said Zuma.
“We will thus continue to invest in infrastructure development such as electricity, bulk water, ports and rail infrastructure.
“It is for this reason that co-investment with business should be supported,” Zuma said.
He pointed to the positive attributes that make South Africa an investment destination of choice, citing the World Economic Forum’s Global Competitiveness Report for 2015/2016 which ranks South Africa in the top 10, out of 140 countries.
The report finds that South African businesses are amongst the most innovative, ranking 32 in terms of “capacity for innovation” and 33 in company spending on Research and Development.
“Some of these businesses that give us so much pride are run by CEOs in this very room,” Zuma said.
But in spite of all these positive attributes, the economic outlook remains difficult, he noted. Enditem