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In-depth Country Risk Report - South Africa
Maplecroft’s Country Risk Report for South Africa provides in-depth analysis of the emerging and structural challenges facing foreign investors in the country, including political developments; corruption; the rule of law; the regulatory environment; security issues; human rights; labour standards; and environmental concerns.
The widely publicised deaths of 34 mineworkers on 16 August 2012 after the police opened fire on protesters at Lonmin’s Marikana mine have damaged South Africa’s international image as a stable democracy with strong institutional capacity, and have increased scrutiny of the mining sector. The country’s reputation as an investment destination was further undermined by extensive industrial action following the Marikana incident, involving an estimated 100,000 workers, which saw further violent confrontations between the police and workers.
The Marikana incident and subsequent strikes have created significant uncertainty for investors – potentially leading to investment being delayed or directed to other countries – and led to questions over the ruling African National Congress’s (ANC’s) raison d’etre as a champion of the poor. While President Jacob Zuma is likely to retain his position as head of the ANC in the December 2012 elective party conference, the government’s perceived mismanagement of the Marikana incident – which included charging miners over the deaths of protesters killed by the police – has increased the likelihood of a more serious challenge to his incumbency.
According to the report, ongoing industrial action has also increased domestic and international scrutiny of working conditions and wage levels in the mining sector and other industries, posing potential reputational risks for investors. A two-week-long strike in October 2012 involving 20,000 lorry drivers, as well as an ongoing strike by farm workers that began on 30 October 2012, highlights the poor wage levels of many South African workers, as well as hostile relations between employers and employees. Poor labour conditions and ongoing industrial action underscore the instability in the national labour market and the continued risk of disruption to business operations, particularly during the annual ‘strike season’ (roughly from July to September). Companies should be aware that further illegal stoppages can be expected, and the use of excessive force by police may exacerbate poor employee-management relations.
Yet South Africa benefits from well-developed institutions and a comprehensive legal framework for business. The country continues to provide greater stability and certainty for investors than many of its neighbours, while advanced business and research capacity provide sophisticated commercial opportunities which may be lacking in other sub-Saharan African countries. South Africa’s suitability as an investment destination is strengthened by its relatively strong infrastructure network, which the government plans to develop further.
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Jason McGeown, Head of Communications
Tel: +44 (0)1225 420000
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