Johannesburg, South Africa – At the recent Nedgroup Investments Cash Solutions Pre-Election Treasurers’ Roundtable, local business leaders and treasurers gathered to discuss the economic future of South Africa, with a view to better allocating surplus cash balances. The discussions highlighted that loadshedding, while the nation’s biggest threat, also presents its greatest opportunity in the form of a transition to private generation.

All speakers iterated that with the financial onus for economic growth increasingly falling on the private sector, SA Inc. is actively seeking viable investment opportunities.

JP Landman, a renowned political analyst, addressed the current economic crisis, noting a 6% decline in per capita income over the last decade. “The last ten years have been marred by the effects of COVID-19 and stage 6 load shedding, delivering a body blow to the economy,” Landman stated. He predicts this trend will continue for at least the next three years, given population growth of about 1,8% per annum.

Landman emphasised the need for 21,000 megawatts of renewable energy to plug the load gap for base power., 5 000 MW of renewable power can result in a 61% reduction in load shedding. “If the growth of renewable continues along the expected trajectory, I believe that by the end of 2025, we may have addressed most of the load shedding issues caused by a lack of generation capacity,” he affirmed. Importantly, he stressed that much of the financing for these initiatives is expected to come from the private sector.

Eskom’s ambitious plan to build 14000km of transmission lines over ten years were also discussed. An investment of R235 billion is required for the planned development. By 2030 R1,5 trillion is required for new generation, transmission and distribution capacity.

“Money is not the problem; there is enough money in South Africa. The challenge is to channel the funds into the right projects – and there is a lot of work going on in the private sector in this regard. There are a lot of positives, but it will take time,” Landman explained.

“Development through the private sector is not just a possibility; it’s a certainty,” Landman added, hinting at similar changes in the water sector that have yet to make headlines.

Landman also highlighted three significant, positive, transitions that have started to emerge as a result of the loadshedding crisis:

1. Moving beyond government monopolies in water, transport, and electricity.
2. Transitioning from regulated pricing to competitive markets in the above and other areas.
3. Shifting from high carbon to low carbon energy sources.

Isaac Matshego, Senior Economist at Nedbank, provided an economic update, suggesting that the issue that is constraining investment isn’t liquidity but rather confidence. “Private sector investors are eager for opportunities to invest in public infrastructure,” Matshego said. He anticipates growth in fixed investment, initially spurred by renewables, will increase as the private sector expands its productive capacity, buoyed by the ongoing gains in the stabilisation of network industries such as electricity, rail and ports. “The next growth phase must be driven by the private sector, as consumer finances have been weakened by high interest rates and subdued real income growth,” he added, expressing belief that interest rates have peaked.

Head of Cash Solutions at Nedgroup Investments, Quaniet Richards, said that corporates can ensure they are being efficient and smart with their cash balances, while awaiting the right opportunities, by using tools like investment funds that retain liquidity to park the funds.

The roundtable also featured insights from Keorapetse Leballo, Fixed Income Portfolio Manager at Taquanta Asset Management, on the Nedgroup Investments Core Income Fund. The Core Income Fund has consistently outperformed its benchmarks despite the challenges posed by trade wars, political uncertainty, and complex financial markets. “Over 86% of active equity managers worldwide struggle to outperform,” Keorapetse highlighted, “yet our Core Income Fund has achieved consistent annualised outperformance in excess of 100 basis points.”

The fund’s success is attributed to its ability to take on more term risk exposure (up to 7 years) while ensuring capital preservation and liquidity.

Ends