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The World Cup message: Africa is solvent, upbeat and open for business

15th July 2010

By: Denis Worrall

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The World Cup - the vuvuzela World Cup - having given enormous pleasure, has come and gone and in the process raised the hopes and expectations of many billions of people around the world and then dashed most of them - because in the nature of things there can be only one winner. Congratulations Spain!


For South Africans, for whom more importantly than anything else, was that the World Cup took place in our country, and it was unquestionably a smashing success - in fact, some experts say the South African World Cup has set new standards for this major international event. Apparently over 500,000 visitors came to South Africa in June, most of them football fans; and according to South African Finance Minister Pravin Gordhan the event added some US$6 billion to South Africa's economy this year - about the same amount spent to host the tournament - but not taking into account the longer-term benefits in the form of new airports, roads and transport systems, and stadia - some of the best in the world. The event certainly raised the bar for all South African politicians: if we can deliver on a world event like this on this scale, why can't we deliver on housing, schools, hospitals and education or on water purification and power g eneration.

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Psychologically, the World Cup helped unite South Africans. But another, almost as important psychological consequence of the World Cup is that it profoundly changed Africa's relationship to the world. Aside from dramatically increasing Africa's future tourism potential, with the very apparent warmth and friendliness of the South Africa people, it put to bed the Afro-pessimism which existed when in Zurich on that 15th day in May 2004 Fifa President Sepp Blatter announced that South Africa had been awarded the world's top sporting event. Remember the questions at the time? Could they build the stadia in time, etc.? Shouldn't an alternative venue be ready - Australia?


So perhaps the biggest legacy of the World Cup is that it has dispelled the "deepest, darkest Africa" myths about this continent. And while South Africa is understandably the beneficiary, the rest of the world (and Ghana!) share in this glory.

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This paradigm shift comes at precisely the right moment - when as The Economist editorially declares: "The world centre of economic gravity is shifting towards the emerging markets." The Economist is not alone in holding this view. It is very much an authoritative opinion. And as far as Africa is concerned, and South Africa in particular, this implies a fundamental change in its relations with Europe - involving both negative and positive causal factors.


As European governments battle with their economies - and one might add increasingly with their voters - emerging markets are already in a growth cycle with huge parts of Africa, according to the World Bank, looking to 5% economic growth this year. And African markets which until very recently, were thought to be too small to be of interest to investors, are now reaching respectable levels even in global terms. Nowhere is this better illustrated than in southern Africa. Ten years ago the Angolan economy's value was less than US$5 billion. It is now a US$70 billion economy. And this is repeated across southern Africa in, for example, Botswana, Mozambique, Zambia and Tanzania. The key point is that this region is now achieving economic levels of activity that can no longer be dismissed as insignificant in global terms.


In contrast to developing economies, according to the International Monetary Fund (IMF), there's not been a single systemic banking failure in Africa. And South Africa's banking system is rock solid.


Given the unique global exposure which it gave South Africa and Africa, the World Cup's message to investors all over the world is - Africa is solvent, upbeat and open for business. And vuvuzela's will remind the world of this in Brazil in 2014!

 

Written by: Denis Worrall,
Chairman,
Omega Investment Research

Cape Town, South Africa

www.omegainvest.co.za

 

 

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