This week, it was revealed that $110billion (R1.63 trillion) is leaving South African shores, courtesy of African tech giant Naspers, which is listing a significant portion of its business on a European bourse.
Does this make a complete mockery of President Cyril Ramaphosa’s drive to attract foreign direct investment to boost economic growth in the country?
In the next month or so, Naspers is set to list its technology investment unit in Amsterdam, Netherlands.
According to writer Alex Webb from Bloomberg, the new company will have a market capitalisation that’s likely to top $100bn, a valuation derived entirely from its 31% stake in Tencent Holdings.
Insiders close to the transaction have confirmed that the company will be taking a major chunk of its internet businesses and linking them all in Europe.
Usually, 25% of its business would come from South Africa while another 25% would stay in Amsterdam.
In this scenario, however, what is likely to occur is Naspers will remove its South African assets in 25% tranches and, once each asset is gone and listed elsewhere, not a single cent will flow back into South Africa.
This could be the biggest con to ever take place in our country; it is essentially Steinhoff all over again, but on a more sophisticated level.
In doing so, Naspers has effectively delivered the biggest vote of no confidence in South Africa’s political direction and hope for a stable economic future.
This could be the death knell for Ramaphosa in attracting direct foreign investment.
After all, who would bring money into the country when its largest listed company (some 19% of the entire JSE), has decided to go elsewhere?
The answer is a no-brainer.
The South African economy has been on a downward trajectory for some time, even before Ramaphosa’s massive investment drive began early last year.
He has had some success but not enough to fend off downgrades for much longer.
What is most disturbing about this flight of capital to Amsterdam is that the move could never have been done without political approval.
Given the current number of commissions of inquiry into corruption and impropriety, I have to ask, who approved this transaction and why? What was in it for them?
What impact will it have on the rand? Will there be other such transactions?
Equity flowing into the JSE keeps the rand alive and without capital flows to corporations like Naspers, the rand will depreciate.
It will become more costly to import goods and prices on just about everything will rise.
The result will be inflation and before long, we could be facing a situation like that in Venezuela or Zimbabwe.
Forget about a recession. At this rate we are in for a more bumpy ride as South Africa could experience a Great Depression or worse.
The saddest part is that Naspers was built in South Africa, by South Africans. With R1trillion leaving there are not many who can plug a large hole.
* Ayanda Mdluli is content editor: business & investigations at Independent Media.