Gateway to Nowhere

Windhoek – South Africa’s claim to being “the Gateway to Africa” is an inaccurate depiction of that country’s economic reach, analysts contend.

The analysts say while South Africa economy is the continent’s largest, and it has the best physical and financial infrastructure in Africa, its influence on economic developments beyond its borders remains quite limited.
The South African economy’s failure to shed its apartheid roots, a fact that the ruling ANC bemoans frequently, means it is still regarded as “less African” across the continent.
“Can we please stop using this term (Gateway to Africa) because it does not pay any dividends to what we are trying to do. In fact, it does the reverse. It would get on my nerves as well if I weren’t South African,” Elias Matsilela, CEO of Public Investment Corporation (PIC) told the Reuters Africa Investment Summit a week ago.
Other big economies such as Nigeria, Angola, Kenya and Ghana are experiencing a boom in infrastructural investments and could actually have more economic influence than South Africa.
These are the economies “which are offering more to multinational businesses than 10 years ago”, according to the CEO of mobile giant MTN, Sifiso Dabengwa.
Reuters reports that South Africa’s days as Africa’s biggest economy could, in fact, be numbered with Nigeria, the continent’s biggest oil producer, due to rebase its GDP figures in 2014.
Reuters reports that the recalculation is expected to place the size of the West African nation’s economy at US$350 billion up from US$250b, putting it only a shade behind South Africa’s US$385b.
If Nigeria maintains its annual growth rate of nearly seven percent – against South Africa’s three percent – it will lay claim to being Africa’s top economy in less than three years, Reuters says.
However, South Africa’s trade in SADC and across Africa has been growing over the past decade, surging almost 300 percent to R150b since 2001.
Standard Bank research last year said that South Africa’s trade with the continent is sizeable and the country also runs a trade surplus.
There are currently more than 100 large Johannesburg Stock Exchange (JSE) companies with multi-country operations across Africa.
Much of the JSE firms’ footprints are in Southern Africa, with a few in East Africa while in West Africa, South African firms are prominently invested in Nigeria and Ghana.
Multinationals such as Lafarge, Wal-Mart, Kraft Foods and Kimberly Clark have been at the forefront of taking South Africa across the continent.
Despite this, in June 2012 Standard Bank concluded that South Africa’s overall commercial prospectus in Africa remains somewhat limited, as the economy does not trade enough with the rest of the continent.
“South Africa’s trade and investment profile in Africa is clearly geographically constrained, casting doubt on the country’s legitimate ‘gateway’ status and ability to participate in rest of Africa’s improving growth prognosis,” Standard bank said.
“South Africa’s weak economic diplomacy hinders more fluid, deeper Pan African, commercial gains,” the analysts said.
For example, in 2011, South Africa exported 24 percent of its products into Africa, a figure which analysts say is ‘substantially inferior’ to total exports to Asia and Europe.
South Africa’s imports from the continent are also limited, further impinging deeper bilateral trade volumes, the analysts say.
The reasons South Africa has not penetrated the African market range from the continent’s demand dynamics and barriers to trade such as poor infrastructure across the continent.
South Africa’s failure to flex its corporate muscle across the continent is also to do with its falling competitiveness.
Sub-par domestic growth, declining productivity, rising labour costs and policy uncertainty have conspired “to alter course-particularly in light of improving fundamentals across competing emerging world economies”.
“South Africa’s ability to attract investment and competitively produce the goods for which there is increasing consumer demand in the rest of Africa is waning,” the Standard Bank analysts said.
The analysts also argued that South Africa’s trade and investment profile across the continent is geographically constrained with 90 percent of its exports getting absorbed within Southern Africa.
South Africa is poorly aligned to most of the large and fastest growing economies across the continent, the analysts said, and correspondingly, none of Africa’s large economies are prominent exporters to South Africa.
The analysts compared South Africa’s penetration of the continent to state-led penetration of African markets by China and Brazil, countries which they say have been successful at leveraging political connections on economic affairs.
In fact, South Africa’s shortcomings are highlighted by China’s relative success in penetrating some of the fastest growing economies on the continent.
“South Africa simply cannot pretend to offer consistent access to the rest of the continent.
“Gateway status is realistic within a clear arc of competitiveness in SACU, Zimbabwe, Mozambique, Malawi and Zambia-and to an extent southern DRC, Angola and Tanzania.
“South African firms have carved out important market share in the region, yet most of the continent’s large and fast growing economies remain elusive,” the analysts said.
 

April 2013
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