The recent visit by South Africa's Deputy President Paul Mashatile to the United Kingdom was framed by the South African government as part of an effort to attract foreign investment and strengthen trade relations.

At JP Morgan’s London headquarters, Mashatile talked up the Government of National Unity (GNU), and their promises to address poverty, fix economic growth, and create an ethical, developmental state, by pushing for greater public-private partnerships.

However, underlying the optimistic public narrative lies a growing sense of skepticism from key Western financial institutions, reflecting a broader concern about the country’s economic and political stability under Mashatile’s leadership.

Mashatile is widely seen as the leading challenger to Cyril Ramaphosa, and given that Ramaphosa’s 2017 leadership victory in the party relied to a great extent on money from Western institutions and local oligarchs to lubricate the subcommittees in the party, Mashatile will naturally be keen to ally their fears.

While Mashatile aims to reassure investors and secure partnerships, recent events involving his close associates and major banks paint a picture of waning confidence, if not outright mistrust, in his ability to steer South Africa’s economy in a positive direction.

His faction’s belligerent actions in Pretoria, where they kicked out the DA mayor, may have rung a few alarm bells, but it is likely that he is already known to be a friend to the radical exiled factions of the party, embodied by the MK and EFF.

One of the starkest indicators of this negative sentiment is the recent decision by Investec, a major bank with a significant presence in South Africa, to close the accounts of Mashatile’s associates after raising concerns over questionable transactions. The bank’s move followed its inquiries into an R85 million transfer from Qatar to Aventro, a company linked to Mashatile's associates, during his tenure as ANC treasurer. The funds were purportedly intended to support entrepreneurs and contribute to the ANC, yet the lack of transparency surrounding the transaction triggered reputational concerns for Investec.

The scrutiny Investec applied to Aventro goes beyond typical regulatory compliance. The bank’s request for detailed documentation—ranging from conflict of interest declarations to inquiries about directorships held by key figures in Aventro—signals a deeper unease. The nature of the transactions raised red flags, leading the bank to eventually sever ties with the company, citing a risk-based assessment that concluded the relationship posed too great a reputational risk. Such decisions are not made lightly, especially when involving prominent figures like Mashatile.

The timing of the closure, amid Mashatile's efforts to court international investors, underscores the contradiction between the deputy president’s rhetoric and the reality perceived by financial actors on the ground.

Financial institutions are increasingly risk-averse when it comes to political figures and their associates in volatile economies like South Africa's, but it is not standard practice for them to debank criminal organisations without court orders, which suggests that this is likely a political decision.

Furthermore, Mashatile’s current tour in the United Kingdom, which includes meetings with high-profile financial institutions such as Bloomberg Media, JP Morgan, and the London Stock Exchange, also came at the same time as the announcement by two major foreign banks—BNP Paribas and HSBC— that they intend to exit from South Africa. Both banks cited strategic realignments, but the timing of the announcement, particularly during Mashatile's UK tour aimed at boosting investor confidence, raises critical questions about whether South Africa can continue to attract and retain foreign capital.

Their departure signals that the perceived risks in South Africa have now outweighed the potential returns for these institutions. Moreover, their exit puts pressure on local banks to fill the void, but as industry experts have noted, domestic banks are unlikely to fully compensate for the lost foreign capital. Without the infusion of international investment, the prospects for economic growth and job creation in South Africa become even more tenuous.

The financial world is deeply interconnected, and the perception of risk in one area can quickly spread, affecting investor confidence globally. The fallout from Investec’s actions, coupled with the withdrawal of BNP Paribas and HSBC, suggests that Mashatile’s warm handshakes are not enough to reverse the tide of skepticism from Western financial institutions. Indeed, his efforts to promote South Africa as an attractive investment destination are increasingly overshadowed by doubts about governance, accountability, and transparency within his own political sphere.

Aside from Mashatile’s political alignments, one of the key challenges facing the investment drive is the perception of corruption and political patronage that continues to plague South Africa's ruling elite. The revelations surrounding Aventro’s questionable dealings, and the involvement of Mashatile’s close associates, reinforce the view that political connections often dictate business outcomes in South Africa. This perception is particularly damaging in the eyes of international investors, who prize stability, rule of law, and predictability in their investments.

Geopolitics may also be a part of this, since the financial sector has a rather close relationship with the state. South Africa’s positioning within the BRICS bloc, and its increasing alignment with non-Western powers such as China and Russia, raises questions about its commitment to Western norms of governance and transparency.

While South Africa seeks to balance its relationships with both the West and emerging economies, this balancing act is fraught with challenges. Western financial institutions, which operate under strict regulatory frameworks aimed at preventing money laundering and terrorist financing, are particularly sensitive to signs of political instability and corruption.

With the clout of the financial sector leaning in a decidedly partisan direction, we may feel the effects rather acutely if Ramaphosa is to face a leadership challenge in 2027.

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