What's so good about South Africa?

Published: 01-MAR-03

Bad news often defies gravity and travels faster than good tidings. Many South Africans are aware of the lingering media image of their country as crime ridden and HIV Aids infest- ed.

This slanted image is often reported in the con- text of a continent that is deeply corrupt, disease laden and war mongering. A group of South Africans are now fed up of this bad image and have done some- thins about it. South Africa - The Good News is a remarkable new book writ- ten and contributed to by 50 highly regarded South Africans.

Their believe is that the good news in the book will help to balance or change perceptions of the country. Business in Africa has read through all 27 chapters of the book. We are reproducing two of the articles, "Growing assets - diminishing liabilities" by Anna Starcke, and "Ham- burgers and Economic Health" by Mike Schussler of Tradek.

The New South African (NSA) was born eight years ago with an unusual, though not unique, mix of excellent and abominable genes, mirrored by first class assets and frightening liabilities. If NSA was a firm, a report card today might read "This company has made terrific progress, but needs watching for lingering problems. In global context its potential is exceptionally promising."

This is the close to how Mark Mobius, president of the Templeton Emerging Markets Fund, describes SA Inc. Mobius focuses on corporate governance and quality of management in the stocks

South Africa's ugly/beautiful, cowed/triumphant, murderous/forgiving heritage gave birth to what international experts acknowledge as the most progressive Constitution on Earth.

selection for a $6b emerging markets fund that has, since its inception in 1987, outperformed the Dow Jones Industrial Index ... and the biggest investment slice (13 per cent) is in SA. He recently pronounced that South Africa is "on the right track" on corporate governance and that the quality of management in its leading companies is to be consistent with "world class."

Unpacking a miracle

South Africa's genes were the subject of President Thabo Mbeki's most celebrated parliamentary speech to date when, on adopting the country's new constitution, he declared, "I am an African." The African of whom he spoke has both the

"If South Africa had not democratised when it did, Mark Shuttleworth would not have travelled in space, the country's ports would be derelict and its exports would amount to nothing, with the world and the majority of South Africa's people united in wanting to overturn the situation. Therefore I say, the new SA with all its problems... is a much better place than it would have been."

sins and the glory of ancestors of African, Far Eastern and European origin in his/her veins. An African shaped by wars through centuries, most recently less than 10 years ago, and with the genes of a people who humiliated and killed in the name of racial superiority. Whose nation of self-worth had been pulverised and whose negative influence still spooks the current generation. But, ultimately, and African who over- came both natural and man-made obstacles.

Assets to be proud of

South Africa's ugly/beautiful, cowed/triumphant, murderous/forgiving heritage gave birth to what international experts acknowledge as the most progressive Constitution on Earth. It underpins a democracy that has its problems, but is conceded by even the most strident critics as being "better than what went before".

And well they might: they too enjoy Africa's only fully-functioning constitutional state. One in which basic rights and freedoms are enshrined and ordinary citizens can take their government to court and, if their case is constitutional and Government's is not, expect to win.

Some of us balk at the legislative labour framework that seeks to redress three centuries of disadvantage, topped by 40 years of ruthless discriminations; but it has bedded down well with the majority of big company employers and was amended to afford flexibility to the small firms most in need of it.

Transparency became a concept we learned to appreciate, even as we cringe at revelations of corruption that, in Old SA, remained out of sight. As SA Inc prepared for globalisation, tariffs tumbled, large chunks of exchange control (all of its foreigners) were scrapped, much of the airwaves were privatised and the media was freed from constraints.

Assets Inherited

South Africa has the continent's most powerful industrial base and a run- down but extensive transport infrastructure (15 times the African average in paved roads per land mass, 10 times the average of railway tracks); and an electricity grid producing more than half of the continent's power more landline telephones than in the rest of sub-Saharan Africa put together; a net- work of shopping malls even Americans gawk at and food self-sufficiency with surplus agricultural production.

We also have teaching hospitals of world standard, a range of internationally renowned universities, an awesome defence force, a mature trade union movement unequalled elsewhere in Africa, and a cadre of mostly white professional managers second to none.

Inherited Liabilities

The worst wasn't the country's debt, although that turned out higher than anything the ANC in exile had imagined. It wasn't that most rural households had neither water nor electricity, that healthcare for blacks beyond the big cities was scarce, not that the physical education infrastructure for blacks was either in tatters or non-existent. The incoming Government already knew that.

More of a shock was that the state apparatus was nothing like the well- oiled machine it thought to take over and that the kitty was empty. The worst liability might have been AIDS but, in 1994, few inside Government or society at large took it seriously.

But, no. The worst was the unready state of mind of its citizens, black and white, those "products of our immoral and amoral past", as Mbeki called them. And he had more to say: "It wasn't just that the majority was badly or not at all educated, the result of the ravages of both apartheid and the freedom struggle. It was that most New South Africans remained emotionally living in the old apartheid country: blacks frozen in victim mentality, whites hankering after an artificially sheltered world gone for- ever. The freedom dividend was slow in coming."

Eight years on

The real South African miracle is still in the making but, considering the handicap at birth, is making remarkable progress and is full of good news.

The world's 20th largest economy out of 230 countries (according to GDP measured in US dollars purchasing power parity) has, in the past eight years, provided access to clean water to seven million more of its citizens, made 3.5 million new electricity connections, built more than 1.2 million new houses, redistributed 440 000 hectares of land and settled 29 000 land claims.

That translates to 77 per cent of South Africans who now own their homes, up from 66 per cent, despite an additional 1.5 million households in the 8-year period; 76 per cent of households with Water, up from 68 per cent; 80 per cent of homes electrified, up from 58 - rural areas a staggering 264 percent improvement.

According to SA Advertising Research Foundation (from whose AMPS-based Development Index all but the land figures have been extract- ed) electrification led to a buying spree in electrical appliances from hot plates to stoves and microwaves; fridges; hi - ffs and music centres; with TV sets now in almost 45 per cent of rural house- holds and 84 per cent of urban homes.

As U2 rockstar Bono, travelling with the world's most powerful finance minister through Africa has just reminded us, transformation on the ground first and foremost means water where there was none.

In NSA the consequence is hundreds of thousands of rural women whose quality of life - including their health, earning capacity and life expectancy - has been enhanced; and tens of thousands of prematurely-old rural men, whose self-esteem and dignity have been restored because they are able, for the first time, to provide for their families by growing fruit and vegetables and raising chickens.

Where they have electricity and telephones as well - apart from water, essential prerequisites for commercial activity, self-improvement and communication - new sources of income have become a reality for millions of South Africans. That probably helps explain why, with an estimated unemployment rate of 29.5 per cent, more people appear to cope than these horrific figures would seem to indicate.

With some 10-million cell (mobile) phones (21 per cent of South Africans, up from four per cent in 1994), SA is among the top 20 of 170 countries with mobile networks.

Income distribution

While still one of the most skewed internationally, the distribution of income has improved. In 2001, 18 per cent of households earned monthly incomes of R6 000 and above, up from 10 per cent in 1994; those earning R2 500 - R5 999 constituted 20 per cent, the category of households earning R2 499 or less decreased from 74 to 62 per cent, within that last group, those classified as "the poorest of the poor" decreased from just under 20 per cent in 1994 to five per cent in 2001. Among those in the top per cent of earners, non blacks were last year, for the first time, in the minority.

Among the way we notched up one of the most stable real GDP growth records (an average 2.7 per cent a year) among emerging markets and one of only a few whose growth never went negative in that eight year period.

The Johannesburg Securities Exchange (JSE) is among the world's top 15 by size and, in the year to date, has been the fourth best performing among 27 emerging markets, 33 per cent up in US dollar terms.

NSA's financial management, with a budget deficit firmly below three per cent of GDP, is held up foe emulation elsewhere by the International Monetary Fund and World Bank. Labour productivity has exploded, with only China, Sri Lanka, Taiwan and Korea still rated as more productive by the Inter- national Labour organisation.

According to a 29-country study by the US bureau of Labour Statistics, SA's manufacturing labour costs, which, 20 years ago, were 260 per cent that of the average Asian emerging economy, are now down to half the costs in those countries. Likewise, as Tradek economist Mike Schussler has reported, "SA hourly labour costs in dollars have seen the biggest fall of any country in the 29-country survey, having declined by around 40 per cent since 1995.

"This", says Schussler, "gives evidence of an extremely flexible labour market."

The contribution of GDP of different sectors of the economy

This is also changing towards the pro- file of a rapidly-industrialising nation, with two-thirds of contribution shifting from primary to tertiary sectors and the exports mix from primary to manufactured goods, reflected in a 330 per cent increase in earnings from merchandise export earnings since 1994, rose from R60 bn to R240 bn.

The first quarter of 2002 saw an increase of 45 per cent in vehicle exports and a 51 per cent surge in that of clothing and textiles. One of the biggest changes took place in deregulated agriculture, run by a new breed of entrepreneurs, white, black and increasingly female.

Right now, the tourism sector is the star turn and SA is the only tourism destination in the world to have expanded markets after 9/11, the country viewed as a safe tourist haven by international tour operators and their clients. In the first quarter of 2002, total hotel income was up an average 18.6 per cent, that of 5-star hotels by 38.4 per cent. There's also medical tourism: apart from glamour tours for cosmetic surgery with a game reserve thrown in, the British government is now sending us its heart patients, generating funds

"I believe business has a good future in Africa�rates of return can be 20 to 25 per cent. In Australia you will get about half that. You have an entire continent in which to do business. If you want a little excitement in life, you should stay in SA."

for better health care for poor South Africans.

Overall, Black Economic Empowerment (BEE) has been a disappointment to Government and emerging business alike, not least because the early efforts were fundamentally flawed in structure and selection.

This is predicted to change, partly due to lessons learnt, partly because of upcoming legislation, mostly perhaps because a new generation of Afro- South Africans is coming into its own.

Already BEE gained 60 per cent last year on deals in 2000 and empowerment mining company, ARMgold, recently became the first new gold mining entrant on the JSE in 15 years. Elsewhere, empowerment has proceed- ed steadily: 23 per cent of senior management in the private sector and above 50 per cent in the public sector, including the Defence Force (which is now nearly 75 per cent black overall) is Afro-South African. The only brake to faster growth in black participation is too few skills on offer. And there's the rub.

The downside

Topping international lists is AIDS. As matters stand, anti-retrovirals are not widely used except in mother-to- child transmission. There is no vaccine. South African's life expectancy at birth has fallen from 65 to 47.8 years according to UNAIDS. This outlook could change again within five years or so.

While a widely- usable vaccine is estimated to be at best seven to 10 years away, massive use of anti-retrovirals (which, it must be said, is controversial way beyond the views expressed by President Mbeki) and, importantly, a large- scale change in behaviour, may reduce new infections.

Topping the domestic list of grievances are crime and unemployment. Along with other societies repressed for generations - think Russia and all its previous satellites, several of the latter having erupted into civil wars - liberation in NSA saw the violence, previously confined to the vast urban ghettos, spilling over the whole country. A generation abused by perverted law had bred, in Mbeki's words in 1996, "killers who have no sense of the worth of human life; rapists who have absolute disdain for the women of our country; animals who would seek to benefit from the vulnerability of the children, the disabled and the old; the rapacious who brook no obstacle in their quest for self-enrichment."

The vast majority of victims then, and now, are black. But it was and is Euro- South Africans, the previously sheltered, on whom the effect was devastating. Many, too many, emigrated, and still emigrate ironically, now that the most serious types of crime tops the list of grievances in electorates from Scandinavia to the Mediterranean.

Crime and unemployment are related to the other major handicap of NSA - lack of capacity, a fancy term for too few people with the right skills to do what needs to be done. Lack of skills is. in fact, the single biggest constraint on the economy, on job creation and not least, on the delivery of services to people crying out for them.

These were in short supply to start with but emigration, coupled with throttled immigration, together with a dramatic shift in the skills composition of production and, according to Government, a reluctance to train by the private sector, have resulted in vacancies of between 200 000 and half-a-million skilled to highly-skilled positions right now, depending on whose figures one believes.

With the Minister of Trade and Indus- try calling for "clear state interventions" as a matter of urgency, there's hope that a newly-botched immigration bill will be fixed. Here are great possibilities for business and government.

For the longer term, education intervention is required. We can't rely on incremental change. In the past eight years South Africans with matric have increased from 14 to 23 per cent overall, 29 per cent in urban areas (up from 20). Literacy improved from 87 to 92 per cent. Not good enough to make the miracle stick.

And yet, there are sufficient signals from a plethora of sources, big and small, that most of us have "emigrated home" into the NSA. Portents of new mindsets, they may advance us faster on the road towards realisation of a country like no other - SA Inc, African by geography, global in outlook, rich in human diversity, a happy marriage between ubuntu and patriotic capital- ism. For a country that has produced mark Shuttleworth, the world's first Afronaut, and discovered in its midst the world's oldest art object - an engraved stone dating from 77 000 years ago - its certainly within the possibilities.

In any case, however long it takes, even the run-up will be pregnant with opportunities.

"I believe business has a good future in Africa rates of return can be 20 to 25 per cent. In Australia you will get about half that. You have an entire continent in which to do business. If you want a little excitement in life, you should stay in SA." Former Australian High Commissioner, David Connolly.

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