It’s ironic, but business’s grasp of the importance of the rest of Africa to South Africa’s growth fortunes seems to be firmer under the Presidency of the relatively parochial Jacob Zuma than it was under Thabo Mbeki, despite all of his “I am an African” efforts.
South African companies are increasingly working on longer-term ‘Africa strategies’, rather than merely viewing the markets as places to dip into when the going is good and to make a hasty retreat, when it’s not – hitherto, the default position.
There is most certainly a growing con- versation about the need to enhance intra- African trade, which remains modest, and to put in place the project finance and technical resources necessary for trade- and investment-enhancing cross-border energy and transport infrastructure.
A leading proponent of this vision is Business Leadership South Africa chairperson Bobby Godsell – a valuable champion, especially given that the 80-member organisation he leads comprises the largest 50 listed companies on the JSE, as well as large multi- nationals, black economic-empowerment enterprises and the leading State-owned enterprises.
These companies increasingly believe that greater continental business activity has to be at the very centre of any plan to transform South Africa from a developing country into a developed one by 2040. The reason? A hunger for new customers beyond 50-million South Africans, only ten-million of whom have considerable buying power. Broadening that potential to a market comprising the countries of the Southern African Development Community and the Common Market for Eastern and Southern Africa, which, together, represent 500-million people and an economy with a combined gross domestic product of $800-million, is a key, albeit challenging, target.
The problem for South Africa is that the competitive pressures are rising – pressures that threaten the country’s already tenuous regional importance. Countries such as China and India are pursuing long-term and increasingly aggressive African growth strategies and increasingly have feet and finance on the ground.
It would also be unwise, observers such as Global Pacific & Partner CEO Dr Duncan Clarke warn, to discount the aspirations of countries and companies from the European Union, many of which have a deep knowledge of and experience in the rest of Africa – not to mention the Americans, the Russians and the Brazilians, all of whom are hungry for a piece of the African action, especially in the resources milieu, and who are increasingly willing to take a bet on the continent’s future.
One problem, it seems, is that South Africa’s diplomatic corps is still not fully alive to this competitive threat. There is, thus, little or no urgency being shown to transition South Africa’s politically biased African agenda to one that focuses primarily on economic aims.
By all accounts, despite this country’s large diplomatic footprint in the rest of Africa, far too little information is flowing back on emerging contract and business opportunities.
One can only hope that Zuma’s decision to include new Pan-African responsibilities in the portfolio operated by his economically inclined Minister in the Presidency, Trevor Manuel, will inspire a much-needed shift in emphasis.
Hopefully, this shift will also find some form of expression in the so-called ‘multidimensional’ growth recovery package currently being forged to deal with South Africa’s critical economic challenges of unemployment and poverty, as well as to help it cope with prevailing global economic imbalances, including destabilising capital inflows.
Finance Minister Pravin Gordhan has revealed that the package will draw on a “full range of tools”, not just “macro-prudential” ones, and would emerge “sooner rather than later”.
Details of the plan, which will be aligned to the country’s emerging New Growth Path, will be communicated during his February 23, 2011, Budget address to Parliament.
The measures will reportedly seek to elevate South Africa’s growth rate to around 7% a year over a sustained period and will involve both macroeconomic and microeconomic policy measures, including industrial-support programmes and job-support programmes.
“Those are the discussions that we are having currently,” Gordhan revealed at a recent briefing on the outcome of a Group of 20 (G20) summit, held in Seoul, Korea, earlier in the month.
South Africa’s growth trajectory is well below that level and also has some way to go to recover to even prerecessionary levels. It is anticipated that the economy will expand by 3% in 2010, rising to around 4,4% in 2013.
“But I must stress that there is no single magic bullet,” he added, noting, too, that there were no simple solutions to dealing with the current “global imbalances”.
In fact, there was widespread disappointment the recent Seoul meeting failed to deal with these imbalances, with some describing the final communiqué as inadequate and containing watered-down commitments from key pro- tagonists, such as China and the US.
But the G20 Leaders’ Declaration did acknowledge that, where countries were experiencing “overvalued” exchange rates, “macro-prudential measures” could be deployed to mitigate the adjustment burden.
Gordhan reports that South Africa is studying additional options to weaken the rand, but cautioned that the current “massive flows” would not last forever. Therefore, government would tread cautiously before introducing any further measures, such as inflow taxes.
In the coming months, government will also seek to “disaggregate” the current inflows into their underlying components in a bid to improve its understanding of “how much is coming in, how long it is staying and what it is actually going into”.
The assessment will also consider whether the flows are contributing to the country’s borrowing requirement and whether some of the flows could even be diverted into longer-term assets, such as infrastructure.
“Then we will ask the question about what kind of overall controls, or policy measures, need to be put into place,” Gordhan said, adding that the analysis would also seek to understand the nature and level of outflows.
In the meantime, the South African Reserve Bank will step up its purchases of foreign currency and will sterilise inflows associated with foreign direct investment by using foreign exchange swaps. Government will also pursue short-term measures to reduce restrictions on capital outflows to encourage an increase in foreign assets.