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Negative messages

A RANGE of different news reports this week give a good indication of where the South African economy now stands.

On the positive side, the international banking group Goldman Sachs produced a rosy report about the state of our economy. Inflation went down from an average 14% in the 20 years preceding 1994 to 5.7% last year. The country’s domestic gross product tripled.

As if this was not enough, the report also found that 4.5 million people had escaped from crippling poverty, and that 10 million people had moved into a middle class status.

The fact that most of these upwardly mobile people are blacks is of great political and socioeconomic importance.

But there were also less positive developments. For instance, the government terminated a bilateral investment agreement with Germany.

The Southern African-German Chamber of Trade and Industry protested, and even the German and Swiss ambassadors issued warnings - highly unusual in diplomatic intercourse - that the economic relations between the countries may be disadvantaged.

It is also a fact that those in the Brussels headquarters of the European Union who deal with African relations have cocked an eyebrow on learning of the South African move.

Minister of Trade and Industry Dr Rob Davies defended the move by saying that the presence or absence of bilateral investment agreements did not deter investors from other countries.

True, officials in Brussels say, but allowing the agreement with Germany to lapse is an initiative which sends out a certain message as opposed to simply perpetuating the absence of an agreement which did not exist in the first place. The message is negative and is interpreted as being in line with the ANC’s general antipathy towards Europe and the West.

This may hurt South Africa in the future.

The country’s net inflow of foreign direct investment never fulfilled the big expectations of 1994, but could, on the whole, have been worse. From an outflow in the second half of the 1980s, it jumped to an inflow of 6.14% of the net domestic product in 2001 and 1.44% in 2011.

The government will have to be very careful not to make things more difficult for potential investors.

The rand’s currency rate against the dollar, euro and pound may serve as a relative barometer. And the rand’s value is at the moment very near an all-time low.

Of course, many factors impact on the rand, especially the eroding trust in emerging markets in general. But to a certain extent, a country’s currency exhange rate may be seen as a kind of share price.

With Europe hesitantly emerging from a long and deep crisis, the world clearly expects the EU’s economy to recover enough to make investment there a good proposition for profit. Therefore, the EU’s “share price” is increasing, while South Africa’s is decreasing.

Why is this? Well, first and foremost, I believe, is the utter lack of trust in the ANC government and, more specifically, in President Jacob Zuma as an individual. In the almost six years that I have been stationed in Europe, I have seen the Europeans’ confidence in the ANC (and, by extention, the South African economy) slide ever further down the scales.

The frenzy with which the media reported on South Africa in the late 1980s and early 1990s is gone. News reports appear only seldom, and then they would be mainly about events like the Marikana shooting, Nkandla, corruption, etc. Positive reports are scarcer than men on the moon.

In so far as people do take notice of South Africa, the general perception is of a typical African nation full of corruption and violence. I am not saying that this is an accurate perception, merely that this is how people view the country.

Just the other day I spoke to a well-informed television journalist. “I would very much like to visit your country,” he told me. “But one hears so much of rampant crime and corrupt policemen; one doesn’t know if one would survive a visit.”

Exaggerated? Undoubtedly. But sadly, not a unique view.

The fact is that the South African government is not doing very much to market our country in Europe (I don’t know how they are doing in other parts of the world).

Perhaps it won’t matter all that much as long as the cloud of corruption is hanging over Zuma and many government members, as long as crime remains high, as long as the bulk of the poor have no hope for a better future, as long as unemployment remains as high as it is, as long as protests and strikes are accompanied by the kind of violence Cape Town saw last week.

Investors want a stable and relatively honest environment. Otherwise they simply invest somewhere else. Nobody owes us anything. It is our duty to attract them here, and at present we are not.

 - Fin24

*Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.
 
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