At the end of 2011, and the beginning of a new year, Europe is in a mess and likely to get much worse before it gets better. Africa, by contrast, is solvent. Africa is already into a growth cycle. Africa – certainly sub-Saharan Africa – is politically stable. And Africa is open for business.
This positive attitude is reflected in the latest edition of The Economist, with a cover story “Africa Rising”. According to The Economist, “Over the past decade six of the world’s 10 fastest growing countries were African. In 8 of the past 10 years, Africa has grown faster than East Asia, including Japan.” And separately, the International Monetary Fund (IMF) says the continent’s GDP grew on average 5.5% a year between 2000 and 2010, compared to a global average of 4.4%. The IMF predicts the economies of sub-Saharan Africa will grow by an average of 5.5% next year. Several countries, including Botswana, Nigeria and the Republic of Congo, are likely to hit growth rates of 8 – 9%. More than 10 sub-Saharan African economies have expanded by more than 6% a year for 6 or more years.
This is all startlingly positive stuff. But as the The Economist cautions: “Optimism about Africa needs to be taken in fairly small doses – for things are still exceedingly weak in much of the continent.” The publication makes the point that some countries, that have begun to get political development right, such as Rwanda and Ethiopia, have become politically noxious.
Developments can disappoint – as is the case with the recent elections in the Congo. Zimbabwe is a “scar on the conscience of the rest of southern Africa”. And then – what is very pertinent – is The Economist’s judgement on South Africa “which used to be a model for the continent, is tainted with corruption; and within the ruling African National Congress (ANC) there is talk of nationalising land and mines.” This is something which The Economist goes on to develop because of its obvious importance to investor perceptions and decisions. In fact, generally speaking, 2011 has been an indifferent year for South Africa. To highlight in no particular order some of the key developments and events:
- South Africa becoming a member of the BRIC nations – although it’s not clear what the benefits to the country will be other than raising South Africa’s profile.
- The sacking of two ministers, the suspension of the police chief and the imprisonment of the former police chief, all on grounds of corruption. And President Zuma’s appointment of Menzi Simelane as National Director of Public Prosecutions (attorney general) was seriously questioned on ground of competence and suitability by the High Court.
- President Zuma’s announcement that the controversial “arms deal” was to be investigated by a panel of judges. The multi-billion dollar arms deal involved massive corruption and has insidiously poisoned South African politics for years. President Zuma’s action was in response to certain decisions of the Constitutional Court and expected consequential action. In other words, he was more or less forced into taking action.
- Much of Africa’s impressive economic performance in 2011 has been attributed to the rise in commodity prices and therefore the productivity of mining. South Africa, regrettably, has missed out on this boom mainly because of populist talk of nationalising the mines.
- Walmart, the American mass marketer, invested into South Africa – no doubt a positive development from an external investment point of view but nonetheless highly controversial as seen by the trade union movement.
- Service delivery, particularly in predominantly black residential areas and in rural towns, remains inefficient, uneven and often non-existent, leading to public protests and demonstrations which have sometimes seen serious violence.
- Most consumer-orientated South African companies are looking – if they have not already done so – to expanding their footprint elsewhere in Africa.
- Two big positive drivers of growth in South Africa and elsewhere in Africa are the spread of technology and the growth of African middle-classes. These were pin-pointed by former UK Prime Minister Tony Blair in an important interview in Cape Town recently when he forecast that the 21st century would be the “African Century”.
- Energy and water remain big concerns in South Africa and elsewhere in Africa. Eskom, Africa’s biggest power generator, still develops most of its energy from coal. It has now turned to encouraging renewable sources – providing enormous scope for international investment. Shell is ready to explore and develop what is widely believed to be a substantial source of natural gas under the Karoo.
- An important factor influencing also South Africa is the discovery of significant sources of natural gas in Mozambique and Angola.
- Authoritative international organisations predict a global increase in food production between 2010 and 2020 – except for Africa, where food production is predicted to decline. South Africa and the rest of Africa offer significant opportunities for foreign and international investment in agriculture and the improvement of food production and food marketing, etc.
- The Oppenheimer family, who contributed so much to the development of South Africa and Africa, sold its family interests in De Beers and in Anglo American. They will apparently continue to focus on Africa but through equity investment. This represents the end of an era. Could it be the beginning of a new Oppenheimer?
- Party politics in South Africa during 2011 have been unsettled. Except for brief moments, President Zuma has proved to be a poor leader. He clearly lacks vision with the result that the ruling African National Congress (ANC) has been at six’s and seven’s. Riven with factions, internal ANC politics have revolved around whether Zuma should have a second term or not, and if not who should succeed him.
- On the positive side was the electoral performance of the Democratic Alliance (DA), the main opposition party, which dramatically increased its share of the electorate in the local government elections in May. Although the elections were local, the campaigns were conducted at a national level and the result accordingly strengthened multi-partyism in South Africa.
- Originating in poor appointments and judgement calls by President Zuma, the judiciary at the higher levels has been involved in having to sort out issues which have been at odds with the Constitution – with the result that tensions have run high between President Zuma and the executive and the courts. 2012 will be a very worrying year in this regard.
- The government proved to be absolutely intent on passing the Secrecy of Information Act – which, if made into law, will have a seriously limiting effect on freedom of information and freedom of expression, the bedrock of any constitutional democracy. If the measure is passed into law, it is bound to be taken to the Constitutional Court.
- 2011 was a year in which the print media in this country was seriously challenged – but rose to the occasion. Civil society also showed its strength. Both will be even more severely tested in 2012 – which promises to be a very heavy year.
- 2011 saw the Public Protector and her office establishing, in very difficult circumstances, her autonomy and the authority of the institution she leads – a major victory for South African constitutionalism.
The year ended with the release by former minister of finance Trevor Manuel of his Department’s National Development Plan – Vision for 2030. Since it took office, the ANC government has produced several economic plans – both macro and micro – but little has come of them. Manuel’s plan is farsighted and the main problems facing the country are all clearly stated. The explanations are there. The rationale is there. And so are the policy proposals in what is an eminently, well-considered and readable document. It poses a creative challenge to both the public and the private sector, to academia and the media and the professions – to understand it, to support it and to build on it. Aside from having an enormously positive value, if this plan and its proposals are allowed to whither, South Africa will be in real trouble – because much of what passes at present for public policy is economically and socially unsustainable.
Denis Worrall is the chairman of Omega Investment Research. He can be contacted at: [email protected]