http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 0.16Change: 0.00
R/$ = 0.14Change: 0.00
Au 1291.15 $/ozChange: 0.00
Pt 1076.00 $/ozChange: 0.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Letters About Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Jul 20, 2012

Africa – a tale of three regions

Back
Africa|Environment|Finance|Power|Sustainable|System|Africa|China|Kenya|South Africa|Zimbabwe|Beneficiation Infrastructure|Energy|Food|Services|Infrastructure|Middle East|North Africa|Sub-Saharan Africa
Africa|Environment|Finance|Power|Sustainable|System|Africa|Kenya||Energy|Services|Infrastructure|
africa-company|environment|finance|power|sustainable|system|africa|china|kenya|south-africa|zimbabwe|beneficiation-infrastructure|energy|food|services|infrastructure|middle-east|north-africa|subsaharan-africa

By: Ridhwaan mayet

The African continent can be primarily divided into three regions: North Africa, sub-Saharan Africa (excluding South Africa) and South Africa.

North Africa received a disproportionate share of investment into the continent prior to its political ‘spring’. However, it proved the correlation between political instability and foreign direct investment/economic growth over the course of the last two years. North Africa is now rebounding as political stability returns to the region. But it has lost the number one ‘hot spot’ of the continent status to sub-Saharan Africa owing to commodity development and emerging market investor confidence in sub-Saharan Africa. The shift towards sub-Saharan Africa is also fuelled by the reluctant return of investment as North Africa is still in unproven political infancy with more than just a sore molar tooth worth of teething problems, further fuelled by broader concerns in the Middle East and North Africa region.

Sub-Saharan Africa has seen several commodity ‘breakthroughs’ in recent times and has gained popularity among emerging investors. Forced economic reforms owing to debt-relief requirements have created a market not too different from post-1978 China.

To achieve sustainable economic reforms, a country requires high economic growth. Such economic growth does not come from economic reforms (though it is aided by economic reforms), but from something much larger (in this case, commodity boom plus middle-class consumer demand). The challenges that exist include inability to harvest full rents from commodities in an equitable market system owing to the lack of beneficiation infrastructure, wage drain created by insufficient skilled labour to harvest ‘commodity wage rents’ and inflationary pressures.

Banana republics have wised up to beneficiation and are seeking to maximise in this area to varying degrees, depending on the country. The challenges of lagging employment growth and inflationary pressure on spending power mean that we sit on fine ice. If all goes well, economic growth, fiscal management and employment growth reinforce greater political stability which, cyclically, results in more investment, growth, and so on.

If employment and inflationary pressures (especially those related to energy and food) increase (this can also be fuelled by poor commodity prices) then we create a negative environment that will lead to a negative cycle (the inverse of the above-mentioned cycle).

What sub-Saharan Africa has that allows for this growth, compared with previous periods, is a combination of an urban population with significant spending power, commodities and market reform. One cannot reverse market reform and urban population growth very fast; therefore, the probability of sub-Saharan Africa growing, rather than continuing along the past economic underperformance trend line, is greater.

South Africa should be looked at through the following lens: a political system with fiscal duties towards the entire popula- tion was born only in 1994, whereas most African economies received freedom 60 years ago. While South Africa stands on a far higher base than most sub-Saharan African countries in many respects, it must not be forgotten many post-colonial (colonialism also employed a public finance management system that was selective in its perceived duties) enjoyed far better infrastructure and economic conditions than their Asian counterparts imme- diately after independence.

In the first few years of demo- cracy, we prioritised economic reform; however, we lacked the growth to create employment. We now have a backlash that is analogous to the rumblings of the Greeks and the Spaniards at the thought of austerity. The only difference between economic reform and austerity is that, in the former, what was ‘released’ by the State was taken up by the private sector and was run in a more productive manner (you can only do this when there are growth drivers) and, therefore, exceeded the State’s welfare abilities through a fiscally prudent method (job creation).

South Africa has failed to find the driver to soften the soil of economic reform. Now we stand with a disgruntled population that is looking for ‘economic deform’ towards a State-dominated system, assuming that this is the only solution to improving economic welfare (since the market system is not succeeding).

This sounds similar to sub-Saharan Africa in the 1980s! Zimbabwe and Kenya were great economies in sub-Saharan Africa when the ‘winds of change’ swept the continent – let us not think South Africa is too big to fail. South Africa’s only hope is to look at piggybacking on sub-Saharan African growth by providing services and strong economic leadership that is apolitical and has the patience to see through the free market system.

South Africa’s ranking as the fourteenth-best prospective foreign direct investment host country reflects the foreign sentiment towards using South Africa as a hub which services other African growth stories. However, failure to create a social system through employment will result in a demand for State welfare, which will reverse foreign investor sentiment towards South Africa.

 

Mayet is CEO of Mayet Economics - ridhwaan@mayeteconomics.co.za

Edited by: Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here
 
Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other News This Week News
The two spent-fuel pools at Eskom’s 1 800 MW Koeberg nuclear power station, in the Western Cape, will be full by 2018, increasing the urgency on the State-owned utility to begin pursuing alternative storage options. Koeberg has, over the past 32 years, accumulated a...
South Africa lacks the skills necessary to implement the government’s plan to build 9.6 GWe of new nuclear energy capacity, warns nuclear-qualified Quality Strategies International CEO David Crawford. “Apart from the concern about the affordability of the programme,...
DOROS HADJIZENONOS The 700-series devices provide network security monitoring, app control, URL filtering, VPN security, antivirus, antispam, antibot, and advanced intrusion prevention and detection functionality
Cybersecurity multinational Check Point has released its latest 700-series cybersecurity systems for small businesses, which draw on its international threat intelligence to provide up-to-date cybersecurity, says Check Point South Africa country manager Doros...
More
 
 
Latest News
Environmental Affairs Minister Edna Molewa
Cabinet has extended the contract of Department of Environmental Affairs (DEA) director-general Nosipho Ngcaba and approved the appointment of Limpho Makotoko as the new DEA COO.     “Under the leadership of Ngcaba, the DEA has consistently received clean and...
Mzwandile Masina
The Department of Trade and Industry (DTI) has invited companies to participate in a trade and investment mission to Ghana and Nigeria from August 8 to 12.   Companies in the agriculture and agroprocessing sectors, built environment professionals, automotive and...
Cabinet has approved the Industrial Policy Action Plan (Ipap) 2016/17 to 2018/19, which seeks to achieve a higher-impact industrial policy in difficult economic circumstances, including the difficulties faced by the domestic steel industry and the drought which has...
More
 
 
Recent Research Reports
Automotive 2016: A review of South Africa's automotive sector (PDF Report)
Creamer Media’s Automotive 2016 Report provides an overview of South Africa’s automotive industry over the past 12 months. The report provides insight into local demand and production, vehicle imports and exports, investment and competitiveness in the sector, as well...
Energy Roundup – April 2016 (PDF Report)
The April 2016 roundup covers activities across South Africa for March 2016 and includes details of a North Gauteng High Court Judge’s dismissal of a court application to postpone the 9.4% electricity tariff increase, which the National Energy Regulator of South...
Electricity 2016: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2016 report provides an overview of South Africa’s electricity sector, focusing on State-owned power utility Eskom and independent power producers, electricity planning, transmission, distribution and the theft thereof, besides other issues.
Energy Roundup – March 2016 (PDF Report)
The March 2016 roundup covers activities across South Africa for February 2016 and includes details of the Department of Energy’s plans to announce the preferred bidders for the first tranche of the coal independent power producer procurement programme; the Council...
Steel 2016: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2016 Report examines South Africa’s steel industry over the past 12 months. The report provides insight into the global steel market and and particularly into South South Africa’s steel sector, including production and consumption, main...
Construction 2016: A review of South Africa's construction industry (PDF Report)
Creamer Media’s Construction 2016 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; key participants; local demand; geographic diversification; corporate activity; black economic...
 
 
 
 
 
This Week's Magazine
The two spent-fuel pools at Eskom’s 1 800 MW Koeberg nuclear power station, in the Western Cape, will be full by 2018, increasing the urgency on the State-owned utility to begin pursuing alternative storage options. Koeberg has, over the past 32 years, accumulated a...
South Africa lacks the skills necessary to implement the government’s plan to build 9.6 GWe of new nuclear energy capacity, warns nuclear-qualified Quality Strategies International CEO David Crawford. “Apart from the concern about the affordability of the programme,...
DOROS HADJIZENONOS The 700-series devices provide network security monitoring, app control, URL filtering, VPN security, antivirus, antispam, antibot, and advanced intrusion prevention and detection functionality
Cybersecurity multinational Check Point has released its latest 700-series cybersecurity systems for small businesses, which draw on its international threat intelligence to provide up-to-date cybersecurity, says Check Point South Africa country manager Doros...
Daimler Trucks and Buses Southern Africa (DTBSA) saw a marked slip in new-vehicle sales in 2015 compared with 2014, with sales dropping from 5 897 units to 5 300 units. The decline came as the South African new truck and bus market declined from 31 558 units in 2014...
Group of 20 (G-20) economies threatened to penalise havens that don’t share information on their banking clients after the leak of the Panama Papers provoked a global uproar over tax evasion. The G-20 will consider “defensive measures” against financial centers and...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks
Subscribe Now for $149 Close
Subscribe Now for $149