‘Post-Zuma South Africa set to explode,” declared the headline on News24, one of the country’s most popular media outlets. “With former president Jacob Zuma having taken his last gasp,” the article continued, “South Africa is bursting with opportunity for economic resurgence and political healing”.
Financial markets roared their approval last week as Zuma left office. The rand had already risen by a fifth against the dollar since mid-December, when Cyril Ramaphosa replaced him as leader of the African National Congress party. When Zuma finally resigned on Wednesday, the South African currency hit a three-year high. The Johannesburg Stock Exchange Top 40 index surged 5 per cent, with broad-based gains ranging from banks to mining stocks.
HIV/Aids rates fell under Zuma and his plans for infrastructure development won widespread support. But annual GDP growth averaged just 1.5 per cent, with unemployment now a heartbreaking 27 per cent. Public debt spiralled, from 31 per cent of GDP when Zuma took office to 54 per cent. Successive budget deficits, and the sacking of two respected finance ministers, resulted in a sovereign credit rating downgrade to “junk”.
The big problem with Zuma, though, was the stream of corruption allegations. Charges were first brought in 2005 but dropped in 2009 when he became president. A businessman with links to Zuma, Schabir Shaik, was sentenced to 15 years in prison for soliciting bribes from a French arms company. In 2016, a court finally convicted Zuma of using government money to upgrade a private residence — which he was forced to repay. Last year, South Africa’s public protector called for a judge-led inquiry into allegations Zuma profiteered from his relationship with the wealthy Gupta family. Zuma denies these allegations, as do the Guptas. But Ramaphosa was still elected ANC leader last year on an “anti-corruption” platform.
The idea of investing in Africa is often met with laughter or furrowed brows. Western impressions are often unfavourable — driven by intermittent media coverage dominated by disease, famine and war. This is outdated and misguided. South Africa, with its modern infrastructure and highly developed legal system, has long been a honey pot for foreign capital. Boasting a world-class stock exchange and multitude of listed companies, it is a relatively mainstream investment choice. In recent years, nations as diverse as Rwanda, Kenya, Mauritius and Morocco have also had considerable success marketing themselves to international investors.
Just as in previous centuries, Africa’s natural resources are the main draw. The continent has almost two thirds of the world’s diamonds, two fifths of all phosphate and a tenth of known oil and gas.
But the modern African investment trend goes beyond commodities, with institutional investors tapping in to a growing demand for consumer goods, financial services and infrastructure. We’re talking about the world’s second biggest continent, with the second biggest population — and incomes are rising. South Africa, with its well-educated population and stunning natural resources, should be a hugely successful economy. There is an air of genuine hope Ramaphosa will guide the country along a new path. “We are entering a new era,” he said, pledging to crack down on corruption. The same applies to Zimbabwe, where 93-year-old autocrat Robert Mugabe stepped down last November, his successor Emmerson Mnangagwa also promising to “tackle corruption”. With its coal, copper, iron, diamonds, platinum and famously fertile soil, Zimbabwe should also be thriving.
Beijing’s influence
A key question now, for South Africa and Zimbabwe, is the future role of China. The People’s Republic is already the biggest trading partner of both countries, as well as a leading source of investment funds — not just in extractive industries, but telecoms, manufacturing, energy, infrastructure, agriculture, finance and media.
In 2015, China and South Africa did a three-year currency swap, to facilitate bilateral trade and investment. The Bank of China (Johannesburg branch) was designated Africa’s first official Chinese bank. By 2016, Chinese investments in South Africa totalled over $40 billion (Dh146.8 billion).
Beijing’s influence across Zimbabwe is even deeper. While buying a third of Zimbabwe’s exports each year, China is financing a new 650-seat parliament in Harare. Chinese money is reviving Zimbabwe Iron and Steel Company, which ceased production in 2008, while also boosting thermal and hydro electricity generation capacity.
China now has far more influence across Africa than Britain, France or the US. And having invested hundreds of billions of dollars, Beijing wants to see political stability and property rights maintained across the continent. It is striking that China recently deployed troops to its first overseas naval base in Djibouti, on the Horn of Africa. Beijing’s ambition, though, doesn’t extend to African democracy. It wants peace and order, however achieved.
There is fatigue across much of Africa with the West, fatigue at its failure to tackle the grotesque agricultural subsidies and other protectionist measures that prevent African farmers from bestriding global markets. There is impatience, also, at the western media’s negativity. This is the power vacuum China has exploited for several decades now — particularly over the last 10 years. And despite many misgivings Africans feel about China, many of the continent’s leaders have made a hard-nosed calculation they can benefit more from closer relations with China than the West.
However Ramaphosa runs South Africa, the rainbow nation will continue to “pivot East”.
— The Telegraph Group Limited, London 2018
Liam Halligan is a British economist, journalist and broadcaster who writes a column in The Telegraph.
