Friday, October 28, 2011

New rail project a game changer in southern Africa

Botswana, through Zimbabwe and into Mozambique and Malawi could prove a game changer in regional logistics and exports and challenge South Africa's dominance in this area.

The proposed 1 100km southern African rail network, which has many links to it, will connect to Ponta Techobanine, a proposed deep-sea port in Mozambique that could compete with the congested Richards Bay Coal Terminal, presently used as the main port for exporting commodities from ­southern Africa.

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Thursday, October 27, 2011


Zuma helped our democracy pass a crucial test this week

By Steven Friedman

DESPITE the hand-wringing in much of our national debate, our democracy is in much better shape than many people imagine. That is the message of this week’s Cabinet reshuffle and the announcements that accompanied it.

The firing of two ministers and the suspension of the national police commissioner are important steps forward for democracy, which may make it easier to fight corruption. They also highlight flaws in the way many of us understand our politics.

Three ways in which President Jacob Zuma ’s announcements are being analysed all say something important about how not to understand our current condition.

First, some cling doggedly to the stock explanation for anything Zuma or the government does — that it must aim to influence the African National Congress (ANC) leadership election in Mangaung next year.

When Zuma announced an inquiry into the arms deal, or promised to release the Donen report on oil-for-food transactions, we were bombarded with analysis explaining how this was all about strengthening his position and weakening his enemies. This was despite the fact that, in both cases, a much more obvious explanation was available: the government faced court action and may have decided to deflect it. That this was what was happening seems now to be confirmed — the arms deal inquiry will last two years, and so it cannot be used to influence a leadership election only 15 months away.

Nor is there any clear link between the reshuffle and the ANC election. Despite Zuma’s usual attempt to ensure that every faction has been accommodated, none of the changes seems likely to help him.

It remains a mystery why he insists on playing musical chairs with some of his ministers, but it is hard to see how doing this aims to get him re-elected.

ANC presidential politics are important. But they — and the ANC — are not the only political game in town. There are many other factors in our democracy that shape what the government does: citizens’ groups, the media, public opinion and the institutions set up by the constitution. The obsession that everything the government does must be linked to Mangaung ignores the many forces with the power to shape our society.

The reshuffle and the other announcements responded to pressures from society and the institutions — they were not an attempt to influence Mangaung.

While most of this response was positive, some may be less so: a two-year commission may be used to deflect pressure on the arms deal. But they are reminders that we need to take all the forces that shape our democracy seriously and not project all our anxieties onto the majority party.

Second, some reduce what happened to a debate on the virtues and vices of the president. They are divided between those who wax lyrical about his statesmanship and those who grumble that he could have done more, sooner. This repeats another of our fallacies — the obsession with "leadership" and the belief that our future depends entirely on the merits or otherwise of the people in political office.

Zuma did not "do the right thing", to use the public protector’s phrase, because he is a fearless fighter against corruption. If he was, he would have acted far sooner and he and his colleagues would have made it clear that the ministers acted improperly and that the commissioner may have done the same.

It was not easy for him to act: he is of that generation of ANC leaders that is used to showing loyalty to each other in the face of external attack. He is rooted in the politics that allows figures such as Winnie Madikizela-Mandela and Manto Tshabalala- Msimang to win large shares of the vote at ANC elections because they ran afoul of the media or the courts, even though few in the ANC thought they should be leaders.

Zuma has also packed the government’s security cluster with allies from his home province — police commissioner Bheki Cele is one. Until now, members of this inner circle have been guaranteed their positions, whatever else changes in the government.

And so it must have been particularly hard to suspend — and perhaps jettison — Cele.

Zuma acted, then, not because he wanted to but because he was convinced that he needed to act.

But why should this matter?

The issue is not whether Zuma is "good" or "bad". It is that the system worked. That it did so in the face of presidential reluctance makes what happened on Monday more, not less, momentous: it may show that some democratic principles are becoming so ingrained that a president who would have preferred to stand by his colleagues felt he could not.

If constitutional government is indeed taking root, that is far more important than the qualities of the president.

The second lesson, then, is that we need to base our assessment of how the country is doing on whether democracy is taking root, not on whether we have found a super hero to lead us.

Third, there is the "take it for granted" brigade for whom no democratic advance is good enough because we don’t look like an idealised version of western Europe.

Nothing much has changed, they insist, because Zuma did only what he was forced to do and he did not root out every single vestige of corruption.

But the government did not have to do this. Legally, it could ignore the public protector’s reports or denounce them as smears. The ANC would still have won the next election if it did that. That the government listened despite this was remarkable.

There is nothing automatic in any society about the idea that political office-holders should listen to public protectors or, indeed, public opinion.

If this accountability is achieved at all, it requires trials of strength between the political power-holders and those who hold them to account. Any new precedent that makes the government account is a step forward, even if the gain is limited. That a reluctant government with a secure majority agreed to be held to account is a huge step forward for democracy and accountability, even if it did it so half-heartedly.

The public protector clearly understands the limits of her office better than most commentators. Thuli Madonsela is our most active public protector yet and she understood that there was nothing automatic about the accountability her office is meant to instil. She seems to have concluded — accurately — that her only credible weapon was public opinion. Through road shows and media briefings, she galvanised the citizenry — or those sections able to make politicians take notice — and this must have played a key role in Zuma’s decision.

So the third lesson is that democracy does not spring fully formed from a new constitution. It will always be tested as power- holders try to remain as unaccountable as possible and, each time we pass a test, democracy is more secure.

For all the imperfections of Zuma’s announcements, our democracy has passed an important test and this will make it more difficult in future for people in high places to abuse public trust.

Much work remains to be done if democracy is to take root and the government is to account to citizens. But this week’s presidential decisions have made the task more than a little easier.

• Friedman is director of the Centre for the Study of Democracy.

Thursday, October 13, 2011

SA Census begins

 The third census since the end of apartheid began on Monday (10 October 2011) and continues to; Census 2011 got underway this week.

The nation-wide headcount will be carried out by 120 000 South Africa fieldworkers and targets 14-million households. The final bill is estimated to be around R2-billion.

A South African census is undertaken every 10 years, in line with international standards.

Residents –citizens or not – are legally obliged to answer the 75 questions in the 14-page form. The questions focus on demographics, migration, health, income, education, employment, fertility, mortality and access to services.

The final data will guide the allocation of state resources and provision of services such as health and education.

First to be counted were the homeless and children born in hospitals from midnight onwards on 10 October.

More difficult to count will be Zimbabwean nationals, many of whom reside illegally in South Africa. The Home Affairs department instituted a four-month Zimbabwe Documentation Process, which ended in December last year, in an attempt to regularise the residence of as many as 1,5-million Zimbabwean migrants. A moratorium – since lifted – was placed on the deportation of illegal Zimbabwean immigrants for the period.

The registration process met with limited success: only 275 000 Zimbabweans applied for residence permits. This can be partly attributed to distrust, widespread in Zimbabwean expatriate communities, of South African immigration and law enforcement officials.

The estimated million-plus illegal Zimbabwean immigrants are therefore likely to avoid the headcount – despite the legal obligation to answer the questions, and a statutory undertaking that no information can be shared or used for other purpose.


Tuesday, October 11, 2011

Investing in Africa: All to Play For

Just five years ago nobody would have described Africa as a safe haven. But as accepted safe havens such as the US and European government bonds and equities continue to provide disappointing returns — and the prospect of far worse than that — global investors have been forced to cast their nets wider.

Some of the obvious destinations, such as the popular Bric quartet of Brazil, Russia, India and China, are looking expensive now, though there have been opportunities for quick- witted investors to buy in recent market dips, particularly in India.

SA has been one of those pricey emerging markets, upheld until mid-September by a strong rand.
People in search of high returns now have to look at what are termed frontier markets. These include many countries on several continents, such as Africa’s Nigeria and Kenya, South America’s Argentina, Europe’s Romania and Central Asia’s Kazakhstan.

It should be as natural for SA investors to invest elsewhere on the continent as it is for the British to invest in mainland Europe or Americans to invest in Canada and Mexico, but it is not.

The legacy of the apartheid years means Lagos and Nairobi remain far less known to SA fund managers than London, New York or Hong Kong. SA pension funds can now invest a further 5% of their assets in the rest of Africa, on top of the 25% overseas allowance, but few have taken up the offer. There are some structural issues that make it difficult (see page 36), notably the lack of liquidity in all African stock markets other than the JSE itself.

Eric Kibe, who manages Sanlam’s African Frontier Markets fund from Nairobi, Kenya, says African markets have taken a beating over the past three months. “But this has been due to factors outside our control. The risk appetite of international investors has been reduced because of the threat of a double-dip recession in the US.”

Nothando Ndebele, head of sub-Saharan African research at Renaissance BJM, says that 40% of Africa’s GDP is made up by agriculture yet it is hard for a global fund manager to invest into this sector. “There are parts of the Democratic Republic of Congo that are so rich they can grow three crops a year.”

Mark Mobius, chairman of Templeton Asset Management — once called the Indiana Jones of emerging markets — says that investing in the second tier (the frontier markets) is worth the effort.
In Africa markets are at different stages of development, ranging from Zimbabwe, which opened its first stock exchange in 1896, to Angola, which has a spanking new stock exchange building but no listings yet. Brian Mugabe, head of Africa research at Imara Securities, says SA is the outlier as it is struggling to grow at 3,5% — half the rate of the rest of the continent.

“Angola is growing even faster than the rest so you can appreciate how much excitement the listing of a blue chip such as Sonangol, the national oil company, would create.”

Plus the jobs created for firms such as Imara to trade shares at a generous commission.
Investor relations are also starting to become more professional across the continent, and most listed companies now look to the Big Four auditing firms, plus a few reputable cottage firms such as Grant Thornton, to audit their books.

Nigeria is one of Goldman Sachs’s “next eleven” countries — those it considers to have the potential to become economic giants along with Egypt. (SA didn’t even make the cut.)

“Frontier markets, generally, have companies that are oriented towards their respective domestic economies rather than the global economy, so we believe that they have less correlation to global issues,” says Mobius.

He says Templeton, an early adopter of new markets, is looking at lesser-known economies such as Nigeria, Egypt, Kenya, Botswana, Ghana, Morocco and Tunisia. But though markets in some African countries are developing quite rapidly, they have a long way to go before their potential is fully realised, he adds.

Meanwhile, private equity investments present an alternative channel for direct foreign investment , and private equity companies are looking more closely at the continent . Carlyle, one of the big three global players, recently set up offices in Johannesburg and Lagos.

Within a generation there will be 1,5bn people in the whole of Africa, and China’s population will be in decline.

Ndebele says that financial services will become more sophisticated. There is already a large banking sector in Africa, which dominates most stock exchanges, but very little mortgage finance, while short-term and life insurance are both at an early stage in their evolution.

Though the African Union is not held in high esteem by the outside world, and does not seem to have done a great deal for unity, there is a greater realisation among Africans that economic and political co-operation is necessary and will further the national objectives of all countries on the continent.
Still, there are a lot of negatives , and SA is by no means immune to these.

Ndebele says that in many African capital cities, power cuts are a regular feature. The power infrastructure is awful, she says. “We hear that hydroelectric power is the answer, until the next drought.”

Porous borders and corruption affect SA, but it does not have one of the violence- prone governments that still rule by force on much of the continent. As we know, this has led to poverty and the deterioration of health among segments of the population in certain areas.

But there are some positive developments. Reforms are moving ahead and market economies have been growing and prospering in a number of countries. Ghana, the first in Africa to win its independence, back in 1957, is now, after several false starts, one of the best examples of this. Even blighted Rwanda has had two successful new listings this year.

Mobius argues that the long-term outlook for the continent is bright: “With its substantial wealth in natural resources such as gold, oil, platinum, iron ore, copper and large areas of arable land, Africa is well placed to benefit from increased growth and higher demand in emerging markets such as China and India.”

In 2010, Anand Sharma, India’s minister of commerce & industry, announced that his government planned to invest US$1trillion in Nigeria and other parts of Africa during the next decade.

In Angola, Nigeria and Ethiopia, rapid economic growth has resulted in better living conditions, lower child mortality, higher primary school enrolment and greater access to clean water.

The headline numbers on economic growth are compelling.

The continent, outside SA, is expected to grow more than 7%/year in the next 20 years, due to an improving investment environment, better economic management and China’s rising demand for its resources. SA, if it is lucky, will grow at about half that rate.

More than 100 African companies elsewhere in Africa have revenues in excess of $1bn. Africa also has impressive stores of potential resources, not only in minerals but also in food — 60% of the world’s uncultivated arable land is found on the continent north of SA.

The Bric countries have shown heightened interest . These emerging countries need resources and are willing to invest in infrastructure, which will help African economies.

It sometimes looks as if China may be trying to take over all the plum resources . Mobius says Chinese investments in Africa were subjected to intense media scrutiny in the past, but it only accounted for 2,6% of Chinese outbound investment . More than 70% of its outbound investment was still within Asia in 2009, while 13% was in Latin America.

According to an Ernst & Young survey of African investments, China was one of the top five foreign direct investors in just two sub-Saharan African countries, Ethiopia and Zambia.

Increasingly, Africa is not seen simply as a resources play. The most valuable shares on the exchanges are subsidiaries of the multinational consumer companies such as Unilever Ghana, Heineken’s Nigerian Breweries and Diageo’s East African Breweries.

The big disappointment recently has been Vodafone’s Safaricom, by far the largest IPO in Africa over the past five years. That was mainly because its margins were cut to the bone after a price war with Bharti Airtel.

The demographics are also favourable for growth. No less than 45% of the 1bn -strong population on the continent as a whole is aged between five and 24.

“The rising number of Africa’s youth could have vast potential, if they improve their education and skills. They could be a great asset to drive and sustain the continent’s growth and development ,” says Mobius.

The growing population is by no means an unmixed blessing.

The World Bank estimates that enrolment in secondary education in Africa is between 20% and 35%, compared with 40% in East Asia and 55% in Latin America.

And it is worth remembering that Africa (including SA) accounts for just 1,8% of world GDP — by 2015 it will have crept up to 2,4%. Australia’s share of world GDP will be similar.

GDP per capita in Africa, including SA, will still be only 40% of East Asian levels , though at independence in the 1960s this continent had a higher per capita income than Asia. In 1960 Ghana had a higher income per capita than South Korea.

It will take years to erode the perception that Africa is not a go-ahead continent.

Source: Financial Mail

Thursday, October 6, 2011

South Africa targets $17bn investment bonanza

South Africa expects 115 billion rand ($17 billion) worth of investments flowing into Africa's biggest economy over the next three years, the trade and industry minister said on Tuesday. 

Rob Davies told parliament the figure was a “realistic target” and the deals would come from the emerging market BRICS powers as well as Japan, Germany, France, the United Kingdom, the United States and countries in the Middle East. 

“We anticipate that this work programme will translate over the next three years into an investment pipeline of projects valued at R115 billion,” he said. 

The past year saw investments worth 28 billion rand flow into South Africa, creating approximately 13,000 jobs. 

Foreign investors have been cautious about sending capital because of growing concerns over corruption and the country's rigid labour market, which makes producing goods more expensive when compared to other emerging economies. 

Turning to international trade, Davies said the stalled Doha Round of talks could collapse. “Renewed efforts to conclude the Doha Developmental Round this year appear to have come up against major, and perhaps fatal, obstacles,” he said. 
Major stumbling blocks include bigger economies wanting greater access to developing countries in the areas of industrial tariffs and services, while emerging states are wary of acceding to this demand without reciprocity.
South Africa recently joined the BRICS grouping that also includes Brazil, Russia, India and China.

Source: Reuters