The violent unrest that engulfed KwaZulu-Natal and parts of Gauteng is unlikely to result in an exodus of large foreign companies from SA, but they may think twice about future investments.
Angela Russell, CEO of the American Chamber of Commerce in SA (Amcham), said that while US companies with operations in SA were committed to the country and unlikely to leave, there was now a "credibility question mark" that could affect future investment in SA. The initially slow response from the state's intelligence and security forces compounded this, she said.
Amcham, which advocates for US businesses in SA, has about 200 members, including Pfizer, Apple, Ford and PepsiCo.
Russell said Amcham was concerned about the unrest, after "untold destruction to some of our members' property, loss of stock and business interruption", and "although some organisations weren't directly impacted ... they were impacted from a business interruption point of view".
There are about 600 US organisations, including companies, with a presence in SA, either directly or through a distributor.
Amcham will be on a conference call this week with the US Chamber of Commerce where head-office staff of companies with interests in SA will raise questions on safety. "It will affect investor sentiment. How can it not?" Russell said.
The European Union Chamber of Commerce and Industry of Southern Africa (EU chamber), which represents European business interests in southern Africa, said the "nature of much investment" in SA meant that "it cannot be divested at short notice".
"But there is no doubt that it will be more difficult now to promote SA as a competitive destination for investors," it said.
"Respect for the rule of law is fundamental for the business community in any country and is a critical factor for investors. Looting, violent protests and disruptions to logistics increase the cost of doing business. With higher risks, there are higher capital costs that constrain the ability of investors to expand their existing operations and set up new projects."
But the EU chamber said European business interests in SA supported President Cyril Ramaphosa's goal of attracting "new investment that contributes to inclusive growth" and had "engaged in constructive dialogue" with the South African government to strengthen partnerships.
Martyn Davies, the managing director of emerging markets and Africa for Deloitte, said the "extremity" of what had gripped SA was "certainly unique".
"I've never seen people destroy so much economic infrastructure in such a short period," he said, adding the unrest could be seen as an "extreme wake-up call" for the government to press the "control alt delete reset reform button" and start delivering much- needed structural economic reforms.
Davies said the economic scars from the pandemic would "manifest themselves in all sorts of political and social instability" around the world, and what had happened in SA could happen elsewhere.
"I would not be surprised if similar type protests and looting takes place in other countries, such as Brazil, where increasingly there is a frustrated population and a state that cannot deliver basic public goods and services."
When Ramaphosa met the CEOs of 90 South African companies this week, he said the country needed "united action" to "drive investment and inclusive growth". He said the government, business and labour had to "work jointly" to promote "investment opportunities" in SA.
Cas Coovadia, CEO of Business Unity SA, said whether confidence could be rebuilt, investors retained and new ones attracted, depended largely on the government's reactions now. "So the president has said there were instigators looking to destabilise the country and that they have 12 to 13 names. Investors would like to see these people arrested, put on trial so the government can get to the bottom of it," he said.
Investors also wanted to see the government announcing a plan in the next few months to prevent unrest like this from recurring, he said.
Alan Mukoki, CEO of the South African Chamber of Commerce and Industry, said SA was "creating conditions that will make it very difficult for us to either retain or attract foreign investment".
"We haven't had anyone approaching us saying we want to pull out of SA, but it is definitely a concern. People have not said so formally but informally they have raised concerns about the investment environment."
Mukoki said most international companies were considering "curtailing investment" and some were considering other "domiciles" because the stress of operating in SA was getting "too much".
Global logistics giant Dubai Ports World declined to comment on its R12.7bn takeover bid for Imperial Logistics.
Heineken, which showed interest in buying a majority stake in Distell, did not respond to a request for comment.
Ford's GM of communications, Minesh Bhagaloo, said the company was "100%" still committed but was concerned about violent unrest because it "slows down the SA economy and general recovery in SA".
After speculation over Toyota's continued presence in SA, after it had to close its operations in Durban during the unrest, Toyota SA Motors said there had been positive engagement with the government which had gone a long way to allay fears.
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