Look beyond bias to explain investment dearth

Who benefits from weak and corrupt governments? Companies that require cheap production and every opportunity to circumvent statutory obligations.

The lack of both foreign direct investment and domestic capital expansion in SA confounds many dinner-table discussions.

After all, over the past decade we have achieved what most Afropessimists considered impossible. We have responded positively to all the protocols of the International Monetary Fund, the World Bank, the rating agencies, and formal and informal opinion-making institutions.

Our national debt, budget deficit and inflation have been systematically reduced over the past 10 years. In addition, we have embraced tariff reductions and welcomed a more liberal trading environment.

Labour stability has improved remarkably, and work days lost have been considerably reduced each year since 1994. The consistency of macroeconomic policy has also been commendable, although there are differences between South African stakeholders on what the ideal economic policy should contain.

Political violence has not reared its head since 1994, and our neoliberal constitution continues to be used as a benchmark for emerging democracies.

Yet large South African companies have opted to nail their colours to foreign masts, and foreign investors remain on the sidelines of the economy, waiting for additional reasons to invest.

Many plausible reasons are given to explain this investment inertia . Afro pessimism or global racism is often cited as one of the main reasons. In essence, SA has been lumped together with the “basket case” called Africa.

I believe that this uninformed and lopsided view of Africa does exist, although one could argue that much of the continent’s misery and corruption is directly a result of our economic legacy and perpetuation of certain practices by our northern masters.

It suits certain interests to perpetuate the high levels of economic dependency that exist, not to mention the entrenchment of corruption. The question is: who benefits from weak and corrupt governments on the one hand and soft currency environments driven by hyperinflation and national debt on the other? Companies that require cheap production and every opportunity to circumvent statutory obligations.

After all, it is cheaper to purchase the loyalty of political leaders than to have to service the more onerous tax and compliance costs. Ultimately “it takes two to tango” in any transaction that involves corruption.

Africa remains the “sweatshop” and supplier of cheap resources to the world. How can Angola, the biggest recipient of foreign direct investment in Africa, have such high levels of unemployment and remain a net importer of goods and services?

All the blame for this sorry state of affairs is placed at the door of African leaders, informed by some perverse anthropological assumption that Africa is inherently backward and that we should be more realistic in our expectations of the continent.

Although this mentality is still pervasive it is losing ground as a credible analysis of why we are the recipients of lacklustre investment. The New Partnership for Africa’s Development has also begun to counteract this body of reasoning through a series of governance protocols that demand accountability from the private and public sectors.

Those who, for instance, blamed the woes of the rand crisis on the Zimbabwean situation in early 2002 have to think again. Investors are now able to differentiate between economically and politically diverse regions and nation states on the continent. If their rationale for the collapse of the rand were credible, it would have continued its demise in tandem with the ever-deepening financial crisis in Zimbabwe.

Yet the opposite is true. The rand’s fortunes have seemingly been reversed irrevocably over the past 30 months, and it has made substantial gains against the entire international basket of currencies. A 30-year trend of rand depreciation has been halted and all this while the prevailing business mood on the situation on Zimbabwe worsened.

Although it is critical for all patriotic business representatives in SA to challenge some of the fatally flawed assumptions of Afropessimists, it is also incumbent on all of us to begin to unravel some of the other underlying factors that make this country less attractive as an investment destination.

Tim Wakeford, Business Day (Johannesburg), August 12, 2004

Categories: Corruption, Odious Debts

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