Major investors are ditching us

About a year ago I was watching US TV personality Charlie Rose interview IT company Cisco's CEO, John Chambers.

At the time Congress was debating America's high unemployment levels and the vast number of manufacturing jobs lost because domestic producers had found it more cost-effective to build factories elsewhere.

Though, at present, low energy costs, competitive wage structures and skilled talent are attracting manufacturers back onshore, Chambers stood his ground, revealing the many benefits Cisco had gained from outsourcing its production outside the US. When asked which country offered the best breaks, Chambers identified Canada as the standout host nation, explaining the lengths to which government went to ensure the success of Cisco's venture.

Our own Sasol enjoyed a similar welcome from the state of Louisiana when it built an ethane cracker and gas-to-liquid facility in Westlake that could cost between $16-billion and $21-billion, half the chemical company's current market capitalisation on the JSE and the combined value of our three major listed platinum producers. The ethane cracker plant will produce ethylene, an important ingredient for the petrochemical industry, and the gas-to-liquid plant will be the first in the US, a game changer for America's energy future.

Sasol is taking a mighty bet on the future of the petrochemical and diesel industries. The more immediate challenge for management, financiers and shareholders is the prudent design of the plant and the engineering team's ability to construct the unit in time and within budget.

In Sasol's favour, it is erecting the plant in a society brimming with technical skills, which is also mindful of the laws of contract, awash with bankers eager to provide finance and appreciative of the downstream gains the investment will generate. The project will initially create 7000 construction jobs, and, once completed, 1200 permanent positions. The US Federal Government and the State of Louisiana will profit from income taxes, and the state's economy will also earn from the purchase of goods and services estimated to exceed $160-million a year.

Still, there are immense risks associated with endeavours of this scale that only elevated returns to investors could justify, and taking freeloaders on board would intensify the perils of the project and possibly frustrate its success.

Sasol is not the only major quoted entity growing its operations abroad. In its half-year results released recently, Aspen Pharmacare announced it was extending its market presence to Russia and other former Soviet republics, and adding to its existing business in Asia and Latin America. A total of 70% of the group's revenue was earned outside South Africa compared with 47% three years ago, a trend likely to continue as local manufacturing operations battle soaring input costs and lagging regulatory price increases.

AECI also intimated it would probably use the R1-billion realised on the sale of its Modderfontein Property for foreign investment opportunities. Standard Bank, FirstRand, Sanlam, Imperial and Nampak were among other JSE-listed companies that disclosed similar ambitions .

While the private sector patently promotes its agenda of expanding its business outside our borders - the upshot of sterile growth, government meddling, power constraints, labour unrest, shoddy service delivery, decaying infrastructure and inferior skills - our administration bumbles on, rushing through changes to mining and petroleum laws that would give the government a free 20% stake in new projects with a call on the balance of the venture at an "agreed price".

Major oil and gas companies have voiced their disapprova,l but in true anti-business rhetoric, Mineral and Resource Minister Susan Shabangu has told them to go packing, warning that the South African mining and petroleum industry is on a changing path. Change is painful when you're stuck in the past, she cautioned. We add it's even more painful when you have to beg for investors.