Foreign Direct Investment (FDI) is critical to the development of the South African economy and some innovative thinking from the Department of Trade & Industry (DTI) has turned the recent Gazette amendments regarding the Youth Employment Service (YES) into an additional arrow in their quiver on a recent roadshow to attract FDI from the EU.

This is the view of Tashmia Ismail-Saville, the chief executive of the Youth Employment Service (YES), the not for profit initiative aiming to improve youth employability in the country. YES was presented as part of a package, where B-BBEE Legislation has been turned into an opportunity for multi-national businesses to invest further in South Africa.

Stephen Koseff, former Investec CEO and current Co-Chair on the YES board commented “South Africa has a well-developed financial system and offers foreign investors an attractive access point to the African economy. For a long-time, we were a favoured destination for multi-national companies looking for a springboard into the rest of Africa. However stagnant economic growth, B-BBEE ownership regulations and other concerns such as visas, have played their part in discouraging foreign investment over the last couple of years.

YES helps foreign investors deal with some of the more difficult aspects like ownership and around becoming compliant.”

Ismail-Saville points out that we are facing increasing competition from the likes of Kenya, Rwanda and Ghana who are all jostling for their share of FDI. In the recent RMB “2019 Where to Invest in Africa” report, the bank highlights how some of the smaller countries like Guinea and Cote D’Ivoire are attracting FDI through pro-business policies.

Data collected by the 2018 Unctad World Investment Report points out that FDI flows into Africa are down 21% from 2016. This has primarily impacted the commodity exporters with South Africa being singled out for a major decline due to perceived political uncertainty.

B-BBEE legislation is sometimes a challenge for multi-nationals coming into South Africa, particularly when it comes to ownership and scorecard performance. The good news is that recent amendments in the YES B-BBEE gazette and practice note are changing this.

Ismail-Saville says that the DTI and YES are cognizant of these challenges and encourage multi-national companies to see YES as an opportunity to improve their B-BBEE status levels by either 1 or 2 levels by implementing YES in their business and assisting with youth employability.

The solution is already being applied by big business:  To date 6 businesses – 3 of these are multi-nationals – have already been able to improve their B-BBEE rankings using this tool. A further 4 are on track for similar scorecard improvements.

Not only are they benefiting from a scorecard perspective, but they are creating further investment in the South African economy through job creation, skills development, physical infrastructure and financial investment in youth salaries.

This kind of FDI is the kind of investment that we as a country require.

For this reason, the DTI presented YES as part of a roadshow to businesses in the European Union (EU) and they are catching the eye of major foreign investors interested in furthering their footprint in Africa.

“On the investment road to Europe the YES initiative was welcomed and supported by multi-nationals in Switzerland, Germany and France. Companies such as Volkswagen and Siemens recognized YES and are supportive of and want to partner with the program,” said Yunus Hoosen.

Hoosen is the Acting Head Investment South Africa from the Department of Trade and Industry, his role includes increasing the quality and quantum of foreign and domestic direct investment into SA, providing a One Stop Shop for all investors.

Mr Hoosen added that the DTI’s Bilateral Meeting with Swiss Department of Economic Cooperation in Berne as part of Investment roadshow was well received.

Ismail-Saville concludes: “Government often comes in for a lot of criticism for not taking steps to improve the investment climate in South Africa, but here is a clear example of decisive decision-making which is not only playing an active role in creating a more flexible environment for multi-nationals and improving FDI flows into the country, but also facilitating this investment into a priority area, youth employment.”