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This is the required return on investment for an international investor who is considering investing into this country (or another country). The hurdle rate increases as the perceived political risk and economic risk associated with the country rises. So, in the case of South Africa, key elements of our hurdle rate are the current problems with Eskom, uncertainty surrounding certain legislation such as the mining charter and the level of violence and corruption. Another major factor in some industries is the expectation of protracted or violent union action. Overseas investors look at these factors and try to assess (1) how safe their investment will be from such political moves as nationalisation or BEE; (2) how long it will take to get a return on their capital and how large that return will be. In the past the hurdle rate for South Africa was between 10% and 15% per annum. It was recently reported that Sibanye is now looking at a hurdle rate of around 25% because of such factors as the uncertainty surrounding the third mining charter. This obviously means that they are far less likely to invest in this country as opposed to other countries.

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