South Africa’s bond market has rewarded the country for staying the course, but Ninety One CEO Hendrik du Toit warns that the returns on political stability can vanish quickly if growth stays stuck near current levels. Speaking at the Financial Times Africa Summit in London on Thursday, du Toit pointed to the cost-of-living protests that have escalated into looting and arson across France this week as proof that social stability is, in economic terms, a prerequisite for capital formation.
“South Africa is not immune to a similar response to its own socioeconomic challenges,” du Toit told delegates, adding that anyone watching French television while holding South Africa’s unemployment rate of 33.6% in mind “needs to think carefully.”
His argument was directed squarely at the private sector. “Business is trying its best but is still having a conservative posture, rather than an aggressive posture which would unlock a lot more opportunity and deal with the unemployment threat,” he said. The implication is that capital sitting on the sidelines represents a foregone return, both for investors and for an economy that has underperformed for more than a decade.
The French unrest carries a direct price signal for South Africa. The precursor to the riots came last month, when French high school students took to the streets demanding greater means for education. France’s bonds have since dropped as the rioting heaps pressure on the government, illustrating how quickly social disorder translates into higher borrowing costs and investor flight. For a country that has only recently clawed back market confidence, that lesson is not academic.
Warnings that poverty and unemployment pose a serious risk to social stability are not new in South Africa. While unemployment was not the main trigger of the July 2021 unrest, reports have highlighted how entrenched poverty, joblessness and severe inequality left millions vulnerable to the turmoil. More than 350 people died during that wave of violence, and mass looting and property destruction cost the economy an estimated R50 billion in just eight days. That figure stands as the clearest measure of what instability can erase.
Against that backdrop, business leaders are pressing for higher investment as the route to the government’s target of 3% economic growth, roughly three times the current pace and a level the economy has not sustained in more than a decade. Shortcomings in government policy are widely blamed for the prolonged slowdown, and economists have repeatedly identified 3% growth as the starting point for sustainable job creation.
Du Toit, while critical of government performance, said recent political developments have improved South Africa’s standing in global financial markets over the past year or two. “We have moved on decisively from the risks of the [Jacob] Zuma years to the initial uncertainty of the [Cyril] Ramaphosa years to now, a GNU [government of national unity] which hasn’t yet settled down but which signals that the centre is holding,” he said. “This has given a certain confidence to investors. They’re not excited by any means by South Africa because growth is what excites investors; creativity, innovation.”
He noted that South Africa is “solid and back from the brink,” with bond market investors rewarding the country significantly and the rand stable and strong against major currencies for some time. Yet big commitments remain scarce, particularly in mining, where he said South Africa “has been very uncompetitive.” Higher investment in mining and a recovery of the industrial base, he argued, could pay higher dividends to the economy and fast-track recovery, especially through labour-intensive growth that rebuilds weakened industrial capacity. Scaling this up, he said, cannot be left to government alone.
Meanwhile, Busi Mavuso, CEO of Business Leadership South Africa, who joined du Toit and other business leaders at the summit, said the existing collaboration between big business and government on reforms and growth must be seen through. “We’ve done a good job so far but I think we have to see this through to its logical conclusion so we can move to the right growth levels that can deal with the high levels of unemployment that we have,” she said. Mavuso argued that weak growth stems not from a lack of resources but from government ineffectiveness: “You cannot think about growing the South African economy if you don’t take care of the basics.”
The executives also stressed that domestic policy must be matched by coherent international economic diplomacy. “Without the political consensus that you are driving this, you will get stuck at 3% growth,” du Toit said. He called for improved relations with other African countries after anti-immigration protests in parts of Gauteng and KwaZulu-Natal damaged South Africa’s reputation. Earlier this month, nearly a dozen cars were torched and several buildings set alight in the two provinces. The violence subsided after the Department of Home Affairs withdrew a September directive that had allowed asylum seekers to lodge applications following a Constitutional Court ruling that people could not be excluded from the asylum process solely because they had entered the country irregularly. Refugee Reception Offices were overwhelmed within days, a development the court order had not anticipated, and the department has yet to finalise an operational approach to comply.
Deputy Finance Minister David Masondo, who could not attend because of the Medium-Term Budget Policy Statement tabled on Wednesday, addressed the continental dimension. He said there has been a deliberate political effort to engage African leadership on growth, since migration is a pull factor associated with poor economic growth in other African countries, with discussions focused on using existing policies and regional platforms, including the African Continental Free Trade Area, to support growth across the continent. African markets remain key, he said, but South Africa will also continue to nurture its trade relationship with the US, which has been strained for some time.
The collective message from London was that market confidence, once restored, must be converted into investment before household pressures tip into the kind of unrest now playing out in France. The cost of failing to do so has already been counted once, at R50 billion, and the open question is whether the capital now watching from the sidelines moves before it is counted again.