from Africa in Transition

Optimism Opens the New Year in South Africa

January 03, 2013

Blog Post

More on:

Sub-Saharan Africa

South Africa

Elections and Voting

Politics and Government

Capital Flows

This is a guest post by John Causey, a private equity consultant based in Cape Town, South Africa. He specializes in sub-Saharan Africa transactions, with investors mainly from the EU and US.

Last year, the rainbow nation further solidified its status as an asterisk to the Africa growth story.

High unemployment of 25 percent persisted, companies horded more than ZAR 520 billion, foreign investment was down, and a general malaise engulfed much of the country. South African corporations are among the most efficient and profitable in the world, leading many to blame–perhaps incorrectly–the government for the nation’s economic woes.

In spite of this, in quiet corners of South Africa’s business community, cautious optimism is beginning to resonate around the prospects for 2013.

In my opinion, the burgeoning optimism is attributable to a realization that the government was more efficient in 2012 than the media allowed, and to the improving collaboration between big business and government.

South Africa in 2012 was marked by the muting of a vocal and potentially explosive opposition voice in Julius Malema; big issues such as mine nationalization, the seizure of white-owned farms, and a business super tax have all been taken off the table; the unions are increasingly having difficulty materially influencing pivotal issues such as the e-toll debate; and the country weathered a series of devastating and debilitating mining strikes. South Africa survived a difficult year, and given the inter-country dynamics, probably did so with aplomb.

Perhaps the most promising development for 2013 is that the tone of the dialogue between big business and government has suddenly improved. Recently, thirty-three prominent business figures in South Africa called for unity to halt South Africa’s economic decline. In a country with an especially cozy relationship between big-business and government, such pronouncements shed light not only on the thinking of private sector participants, but also on new government objectives and party platforms.

The well-publicised election of Cyril Ramaphosa as deputy president is another encouraging sign of the times. Ramaphosa was favored by Nelson Mandela, has extensive private sector experience, and a strong track record of driving results with corporate partners. He sits on the board of SABMiller, is the non-executive chairman of MTN, and is married to the sister of Patrice Motsepe, South Africa’s only black billionaire.

An initial test of this new optimism may well be the adoption and implementation of Planning Minister Trevor Manuel’s national development plan. The plan has the support of both President Zuma and Cyril Ramaphosa. If pushed forward, parts will likely be fiercely opposed by various special interest groups. The outcome of these skirmishes will illuminate how committed the government is to this new way forward.