Hands Across The Water

/in /by

Profound political transformation has been underway in South Africa since 1990 when the dismantling of the entrenched apartheid system began, and Nelson Mandela was released from prison after 27 years. The democratic growth of this nation has continued with the election of President Mandela and the instalment of the South African Government of National Unity.

 This pivotal change in South Africa has clear and positive implications for the financial future and stability of the country. The shift towards democratic government led to the lifting of US economic sanctions which, in tum, fostered a new atmosphere in which both the United States and South Africa could build stronger economic and commercial bonds. The people of South Africa have undertaken a magnificent and far reaching challenge. They are building a new political, economic and social foundation of non-racial democracy. They are working to construct an economic system to ensure economic independence and free enterprise access to all South Africans. The South African Government of National Unity at all levels has sent a consistent message to business audiences around the world: South Africa wants needs and welcomes foreign private investment. It is estimated that the economy has the potential to expand at the rate of 5 per cent annually. The country is finally emerging from a lengthy recession, registering positive growth in 1993 for the first time in four years. But the long legacy of apartheid continues to have severe repercussions. South Africa suffers from a 45 per cent unemployment rate, as well as the need for massive electrification, education, housing, sanitation and health care access. The US and South Africa are committed to working together to confront the enormous economic challenges posed by these conditions. Since the removal of US sanctions, nearly 60 US firms have returned to South Africa. Their decision is the best testimony that the South African government is creating the necessary enabling environment for foreign investment over the long term. The fiscally conservative, non-inflationary budget introduced this summer is the best indication thus far that the South African government is serious in its economic commitments. Specific steps are being taken by the United States to promote trade and investment in South Africa. Under President Bill Clinton’s leadership, various actions have been taken to promote bilateral trade and investment relations with South Africa including the US commitment to immerse our private sector in the construction of a new South Africa after the lifting of sanctions and the President’s emphasis on assisting the emerging black private sector in South Africa. The enactment of the South African Transition to Democracy Support Act; my trade and investment mission in November 1993; and the heightened US financial profile in South Africa are proof of this unwavering pledge of support. The delegation of US government and high-level private sector leaders that I led on the trade and investment mission was requested by President Clinton to explore business opportunities, particularly with South Africa’s black private sector, and to work towards creating an environment in South Africa conducive to foreign investment. This mission paved the way for the signing of a bilateral operating agreement with the South  African government on behalf of the Overseas Private Investment Corporation (OPIC), to permit the application of OPIC programs there. The United States Department of Commerce is especially committed to South Africa’s economic reconstruction. We have launched a five-pronged initiative to promote trade and investment in South Africa:

  • I personally have appointed Millard Arnold as the US and Foreign Commercial Service Minister Counsellor for Commercial Affairs in South Africa, our highest ranking

Foreign Commercial Service Officer;

  • I have designated South Africa as one of the world’s 10 Big Emerging Markets – a distinction that means added importance to the country’s bilateral trade picture with the United States and a concentration on trade advocacy and focus;
  • A United States-South Africa Business Development Committee has been created to expand bilateral commercial dialogue and partnerships;
  • A major market research program has been initiated in South Africa to assist US firms in introducing their products;
  • A major trade promotion program has been designed to last at least through the next two years.

This is the first time in 30 years that an aggressive US trade promotion program has been planned around South Africa. In addition to teleconferences and trade missions in regard to housing, health care, telecommunications, electrification and investment and financial services sectors, a department of Commerce certified trade exhibit, the “Made in USA Trade Expo,” will showcase a broad range of American products and services in Johannesburg. Specific steps also are being taken to encourage joint ventures between US business people and disadvantaged business people in South Africa. The Department of Commerce initiative has two parts:

  • I personally have appointed Millard Arnold as the US and Foreign Commercial Service Minister Counsellor for Commercial Affairs in South Africa, our highest ranking Foreign Commercial Service Officer;
  • I have designated South Africa as one of the world’s 10 Big Emerging Markets – a distinction that means added importance to the country’s bilateral trade picture with the United States and a concentration on trade advocacy and focus;
  • A United States-South Africa Business Development Committee has been created to expand bilateral commercial dialogue and partnerships;
  • A major market research program has been initiated in South Africa to assist US firms in introducing their products;
  • A major trade promotion program have been designed to last at least through the next two years;
  • A partnership with OPIC to introduce US investors to appropriate majority South African  business persons; and
  • A planned “Minority Matchmaker” trade mission to South Africa to meet with South African counterparts.

The Department of Commerce is not the only US entity that is involved in the promotion of private enterprise development in this area. The US Agency for International Development has pledged over $400 million to develop an overall strategy that targets key housing and electrification needs and growth of the black private sector through several initiatives. These efforts are designed to improve the availability of affordable housing; expand electrification in disadvantaged areas; and provide working capital and equity capital through credit guaranty mechanisms and an Enterprise Fund, as well as provide technical assistance.

With the lifting of trade sanctions by other African countries, South Africa, where exports and imports account for more than 50 per cent of the country’s gross domestic product, is being viewed by both foreign and domestic companies as the springboard to southern African regional markets. International financial institutions are very optimistic about mounting major development programs within South Africa and providing much of the capital needed for social programs. At least three American financial groups have raised private capital funds for investment in South Africa. Although the South African economy is moderate by international standards, it is the largest and most widely developed on the African continent. It has a modern infrastructure and its financial, legal, communications, energy and transport sectors are well-developed. The economy, based on manufacturing, mining, agriculture and services, boasts a global trade surplus of almost $1 billion. The Johannesburg Stock Exchange ranks among the top ten in the world. The United States recognizes that South Africa, as the economic superpower of the African continent, has the potential to overhaul its economic system, open its import market, expand its export market and become more internationally competitive. A clear commitment to stimulate the return of American firms to the South African market has been expressed by government officials and political parties in South Africa. The focus of these and other groups has been to generate a shared vision of the path for economic growth and to confront the socio-economic disparities created by apartheid. On my visits to South Africa, both on my official trade and investment mission and as part of the official United States delegation to the inauguration of President Mandela, I found most South Africans positive and optimistic about the future. The steps being taken to repair the economic state of the country – the breakdown of the apartheid system, the lifting of sanctions, the emergence of South African   products in world markets – all are signs that a new era is dawning. As the South African market continues to grow, the possibilities of fortified commercial ties with the United States also continue to expand. The Clinton Administration strongly supports this new relationship.

South Africa, The Journal of Trade, Industry and Investment
Publisher, David Altman
Writer, Ron Brown

Steadying the Ship

/in /by

South Africa’s new Government of National Unity moved quickly to re-appoint Chris Stals for a five- year term as governor of the South African Reserve Bank. His re-appointment underlined government’s determination to win investor confidence by retaining the services of a tough central banker renowned for his dedication to fiscal discipline. Stals were first appointed governor in the twilight days of the old National Party government. His appointment followed the death of the widely respected Dr Gerhard de Kock. Holding interest rates relatively high when many economists we’re calling for an easing in monetary policy, Stals may not have won too many new friends but he has certainly won respect for his determination. Considerable attention is now being focused on whether he will be able to maintain his stance under a new government which is committed to increased social spending on programs to uplift communities disadvantaged during the apartheid era. Stals should know what he is up against. From his years as director general of the Finance department prior to becoming governor, Stals is all too well aware of spending pressures from government departments.

 

Simon Segal spoke to him on future prospects.

When other emerging economies present attractive investment opportunities, why should foreign investors be interested in South Africa!
Now is a good time. There are plenty of opportunities to benefit from an expanding South African economy and export to Africa through South Africa. Africa cannot compete internationally. South Africa can help. We anticipate GDP growth of 3 to 4 per cent this year and next. Underpinned by expansion in fixed investment, our economic growth now has its own momentum. But to achieve a higher growth rate of, say, 5 per cent requires a net capital inflow of around $1 billion. This will only happen when government’s policies are accepted as credible and responsible. 

Are you confident that the new government’s economic policies will help sustain such growth?
In its economic statements so far government has not put a foot wrong. The three-year constitutional transition did the world of good in changing the economic attitudes of the Africa National Congress. Today, privatization is mentioned, no longer nationalization. Good progress towards cabinet coherence has been made at central government level. My re-appointment for a further five years is indicative of consistency and continuity in economic policy.

Yet, foreign direct investment in South Africa is still virtually absent.
There is not much evidence of foreign private sector long-term investment beyond many enquiries and the buying of existing assets. Foreigners seem to be waiting to be presented with a list of projects. But South Africa is a free market where firms ought to conduct their own research and investigations.

How disruptive is the resignation of Finance Minister Derek Keys?
The way it was handled had a negative effect on the financial markets. But this was short-lived once the new minister confirmed his aims for fiscal policy are the same as Keys’s.

A major headache is the precarious foreign reserve position, now worth less than the value of one month’s imports.
The net capital outflow over the past 15 months has been $6 billion of which $1 billion was in the first four months of this year. But since the election in April we have been encouraged by the return to South Africa of short-term money linked to trade. Now, outflows are matching inflows. This has helped in managing our foreign reserves. Long-term funds will flow into the country once an international credit rating has been obtained, probably in September. It will be better to start with a low minimum investment rating. Portfolio investment in South African equities and bonds is still volatile, unpredictable and vulnerable to political developments.

With SA vastly under borrowed, how much will the country raise offshore this year?
An amount of R1.6 billion is provided in the Budget. But no decision has been taken about how much or where the money will be raised. It depends on our rating and on market conditions. South Africa is under borrowed in terms of its $16 billion foreign debt, some 14 per cent of our GDP. But it must be remembered that there is a financial Rand pool of $15 billion owed to non-residents that is at this stage not convertible. So it is an issue.

Will South Africa go to the IMF and World Bank?
With economic growth we anticipate a surge in imports over 1995 and 1996. From historical experience imports can expand 30 to 40 percent. This means we will have to run a current account deficit. Under such circumstances the IMF provides assistance. But its conditions are stiff and serious. A budget deficit that amounts to 6 to 7 per cent of GDP, as at present, is not consistent with IMF policies and conditions. The World Bank is waiting for South Africa to submit projects. It is interested in assisting in the areas of housing, education, urbanization and development of small business. In the end, aid and donations are useful for social upliftment but cannot support long-term economic growth.

What has changed for the Bank under the new government?
In some ways our independence is now more protected than ever. The big changes are in fiscal policy through the reconstruction and development programme (RDP), not monetary policy. RDP demands can, however, make monetary policy more difficult to manage.

Are you worried about heavy fiscal demands presented by the RDP?
All over the world, needs exceed resources. This is what economics is about. Social upliftrnent is important. The challenge is to satisfy as many needs as possible within the country’s restraints.

South Africa, The Journal of Trade, Industry and Investment
Publisher, David Altman
Writer, Simon Segal

Forging a Partnership

/in /by

Following the historic election of Nelson Mandela as President in April 1994, South Africa has become one of the most exciting new markets to emerge in the global trade and investment race.

The third “Made in USA” Expo will take place in Johannesburg in October 1995. With the lifting of US economic sanctions against South Africa carrier this year, it promises to eclipse the previous two exhibitions. The second annual “Made in USA” Expo, which was held at Johannesburg’s World Trade Centre in October 1994, showcased the products of 200 US companies to more than 30 000 South African business people. In 1993 exhibitors closed deals valued at more than $300 million and dozens of US corporations signed partnerships, joint ventures and distributorships with South African firms. Companies that have used the “Made in USA” Expo as a springboard into Africa, include Microsoft, Digital Equipment, Coca-Cola, AT&T, Chrysler, General Motors and a host of medium-sized companies. These are just some of the 50 US companies to establish permanent bases in South Africa since 1991. Many will be exhibiting at the 1995 “Made in USA” Expo for the third time in a row.

The exhibition has the imprimatur of the US Department of Commerce and support from a host of South African and US government and private sector organizations, including the National Foreign Trade Council, the US-South Africa Business Council, consultants Samuels International Associates of Washington, D.C., the National African Federated Chamber of Commerce (Nafcoc), the South African Chamber of Business and several other black business organizations. “Made in USA” is the largest showcase of its kind for US companies in Africa, says David Altman, the exhibition organizer. “It opens trade and investment doors, not only to South Africa, but the whole of Sub-Saharan Africa”.

In addition to some 200 US exhibitors, the 1994 “Made in USA” Expo featured exhibits from 15 African countries eager to tie up deals with US principals. US Commerce Secretary Ron Brown commended Altman for “courageously venturing forth last year to stage a pioneering exhibition of American products in South Africa.” Although small by US standards, South Africa is a giant in Africa. Its $113 billion economy is larger than the combined economies of the 10 southern African states to the north. It is the gateway to a trade bloc that imports $55 billion worth of goods annually. It has a modem infrastructure, a world-class transport system, state-of-the-art telecommunications and a First World banking and financial services industry. Anticipating the improved political climate, the US toppled Germany as South Africa’s leading supplier of imported goods last year. The Overseas Private Investment Corporation (OPIC) recently agreed to provide trade and investment incentives for US companies dealing with South Africa while the Export Import (EXIM) Bank has already financed over $200 million dollars-worth of US exports to South Africa. Altman says US companies are demonstrating intense interest in South Africa, which imports more than $22 billion worth of goods and services a year. “This is an important market for US companies to penetrate,” he says. “The US exports more to South Africa than they do to all of Eastern Europe combined; South Africa is the gateway to Africa,” The most direct route into South Africa, and indeed Africa, is through the “Made in USA” Expo.

South Africa, The Journal of Trade, Industry and Investment
Publisher: David Altman

Standing in Judgement

/in /by

Judge Richard Goldstone is a man well acquainted with the forces of violence in South Africa. As chairman of the Goldstone Commission of Inquiry into Public Violence and Intimidation – a judicial panel spawned by a multiparty peace accord in 1991- he has developed a finely tuned understanding of the social, political and economic dynamics fuelling conflict in the country. Since its inception in 1991, the Goldstone Commission has held open inquiries into every major area of public violence in South Africa and made countless recommendations on methods to control it. With the noticeable downtrend in politically related bloodletting since South Africa’s democratic transition in April, the Goldstone Commission’s work is tailing off and the judge is heading to The Hague to become chief prosecutor of a UN tribunal on crimes against humanity in Bosnia. Helen Grange spoke to Goldstone about his perceptions of violence in South Africa and the likely path head.

There has been much emphasis on political violence in South Africa, but to what extent has it been driven by economic factors and what will future trends be? The figures speak for themselves. Eighty eight per cent of the violence over the past four years has been economically or non-politically driven. Political violence has accounted for about 12 percent. In the post-election period, political violence has dropped very significantly. I don’t think political violence is going to be a serious factor anymore. However, in common with many countries, we’ve got a lot of work to do in dealing with the root causes of violence caused by economic considerations. What are the causes of non-political violence? 34 Unemployment and unsatisfactory living conditions, but also, there is a lot of criminal violence such as hijackings and bank robberies. I don’t believe these criminals have starving children. Given this reality, however, the percentage of people who resort to criminal violence is small. There’s only one way to stop criminal conduct of-any kind and that’s through good policing, and 1 have no doubt that is going to improve considerably over the short to medium term with an acceptable, legitimate police force. How long will it take for the new police force to accomplish real legitimacy? It’s a lot easier for the police to handle Jaw enforcement now than it was before the election. The great majority of South Africans are going to have more and more confidence in the legitimacy SOUTH AFRICA and acceptability of the police and it will become more difficult for people to operate outside of the police as self-appointed law enforcement agencies. Regarding ANC-aligned self defence units which were formed to protect township communities against covert police action in the old South Africa: is there potential for them to form gangs and become organised criminals? The continued existence of self defence units is a specific society problem in the areas east of Johannesburg. It shouldn’t be blown up into a national illness. I see these areas improving, not getting worse, because the fundamental causes prompting the formation of the self defence units have been removed and it will become more difficult to operate outside of the police force.

Do you think the new government has the full co-operation of its security forces in cracking down on violence and crime? People act in self-interest and it’ll be in the self-interest of the security forces to protect themselves and do what the government wishes. There is fear that government’s new reconstruction and development policies have created unrealistic expectations. Do you think this could lead to frustrations which could fuel violence? I’m not pessimistic because the African National Congress was commendably restrained in not making promises which can’t be realized. Expectations are obviously high, so for that reason I hope the housing development plans come to fruition and get to sufficient people. As long as people see things happening, even if it’s not happening to them but they know they will get assistance somewhere down the line, they will be satisfied. Violence in Natal has been more continual than the wars which have erupted at intervals in the East Rand townships. What is the nature of the Natal violence and will it end? There are ethnic and tribal aspects to the violence in Natal, but on balance, it is more about basic economics – the battle for resources. It has decreased significantly and can be further contained. How has the Goldstone Commission’s work helped create a bulwark against violence? The most important achievement was the agreement we clinched with the political parties in July 1992 on guide lines for mass marches and demonstrations. It SOUTH AFRICA has saved countless lives. There’s a fairly sensible attitude which has emerged on all sides since that agreement. Do you think South Africa still needs to have extra-governmental bodies like the Goldstone Commission to deal with violence? No. I optimistically believe it is not necessary. If there is a political flare-up, it should be handled by the democratic government’s security forces. Criminal conduct should also be dealt with in the same way. It’s no longer a situation of transition, and the authorities must exert their authority. You seem to be very optimistic about the future. Are you? To be pessimistic is against the weight of evidence. If I had told you four years ago where we are now, you would have said: Please God, let it be.

South Africa, The Journal of Trade, Industry and Investment
Publisher: David Altman
Writer: Helen Grange

Long Reach

/in /by

The honeymoon is over. It began when President Nelson Mandela addressed the world from the United Nations in October 1993 and called for the lifting of sanctions against South Africa. Since then the country has been bathed in a warm glow of political and commercial goodwill. Thousands of prospectors have visited the country, exploring the plethora of potentially profitable opportunities which clearly exist in South Africa. But the fact remains that since the lifting of sanctions, there has been virtually no significant direct foreign investment in the country. To an extent, this is not surprising. Investors usually follow traders, and there is no doubt that trade is picking up nicely. But it is at this point that the honeymoon has ended. Our cover story, The Risk You Take (page 6), clearly spells out to South Africans what the world expects of them before the international investment community will put its money where its mouth has been. As Gail Leftwich points out in her column, The Hard HiJrk ofBeing Ordinary, on page 5 of this edition: “The new world which South Africa has joined is an economic playing field featuring single-mindedly focused participants in a game with unforgiving rules. No longer may South Africans rely on their former friends, all of whom are competitors, to smooth the way for them, or accord them special, protected status.” Fortunately, South Africa’s new Government of National Unity seems to have taken this point to heart. As our cover story points out, analysts who have recently rated South Africa in terms of its investment risk, acknowledge that government has made considerable progress in meeting many investor expectations. Indeed, it is not surprising that they have done so. President Mandela and his Cabinet don’t have to look too far to see the growing unemployment queues and to realise the importance of job- and wealth-creating investment. What the world now wants to test is the degree of government’s commitment to fiscal and monetary discipline as its long disadvantaged constituency inevitably begins to demand faster progress in the provision of basic needs. The honeymoon is definitely over.

From this edition, SOUTH AFRICA, The Journal ofTrade, Industry & Investment, will be offering our advertisers added value through an expanded distribution. The magazine, which is published in New York, has until now been distributed mainly in the United States, but many advertisers have indicated that they would also like access to European and Asian market’. We are therefore expanding our distribution into these areas. In addition, international advertisers have suggested that we should develop a South African distribution to offer them access to the local market. The magazine will therefore be distributed through South African news agents who will also ensure that it reaches branches and associate distributors in southern Africa. We can say we are the most widely distributed magazine on South Africa in the world.

South Africa, The Journal of Trade, Industry and Investment
Publisher: David Altman
Writer, David Altman

Africa: Why Bother?

/in /by

Has Mr Mandela’s understanding of political and economic trends in the region been clouded by the euphoria of South Africa’s extraordinary transition to democratic rule?

By Witney Schneidman, Senior Vice President, Samuels International Associates, with assistance from Zafar P Mawani, Associate, Samuels International Associates, Washington D.C.

 

“African renaissance” is a phrase rarely used to describe the state of affairs on the African continent.

Yet, in a video-taped message that opened the recent White House conference on Africa, South Africa’s president, Nelson Mandela, asserted unflinchingly that the “African renaissance is felt not only in the corridors of power, but by an emerging partnership between the state, the private sector and the populace at large”. Has Mr Mandela’s understanding of political and economic trends in the region been clouded by the euphoria of South Africa’s extraordinary transition to democratic rule? Or, does he have a realistic view of regional trends that is obscured by international reporting on Africa’s various civil and humanitarian crises? Recent events in Rwanda and elsewhere notwithstanding, there are some evidence to suggest that Mr Mandela may be closer to the mark than first appearances would indicate. The collapse of communism and the end of the Cold War has had profound implications for the African continent. Perhaps most significantly, Marxist economic policies have been replaced by new economic thinking and a commitment to economic reform in nearly 30 countries. A significant number of governments are openly supportive of market-orientated policies and a reduction of the state’s role in the management of the economy. While the World Bank and the IMP have been influential in this process, these policies have been embraced by indigenous elites in government, the private sector, and various sectors of civil society. Africans across the continent are also demanding a higher standard of governance, and leaders who genuinely represent the people whom they govern. As a result, the political reform movement is taking hold throughout Africa. According to the US State Department, multiparty elections have been held in 26 countries since 1989, with a dozen more expected by 1996. Two-thirds of the initial democratic elections were judged to be free and fair, and incumbents were unseated in South Africa, Zambia, Malawi and in nine other countries. Clearly, the process is incomplete. Countries have implemented economic reforms to widely varying degrees of success, and most experiments in multipartyism are fledgling at best. Progress is further encumbered by the states in Africa that have essentially collapsed and the continent’s other endemic problems, including environmental degradation and high population growth. Nevertheless, a new economic and political reality has taken hold in much of sub-Saharan Africa. Not only has this helped to stem economic decline and lessen political uncertainties in many countries, but it has also created new economic opportunities throughout the region. This reform movement is most pronounced in parts of southern and east Africa and in Ghana. In fact, there is a corridor of countries, ranging from South Africa to Ethiopia, that have yielded to popular demands for more representative governments. A new generation of leaders such as Jerry Rawlings of Ghana, Meles Zenawi in Ethiopia, Yoweri Museveni in Uganda, Sam Nujoma in Namibia, Frederick Chiluba in Zambia, Bakili Mulizi in Malawi not to mention Nelson Mandela in South Africa – share a determined commitment to reverse their predecessors’ autocratic and misguided policies. Progress is evident in such countries as Zimbabwe, Tanzania, Uganda, Kenya,

Zambia and Namibia. These governments are in the process of achieving sustainable reductions in their fiscal deficits and have adopted non-inflationary means of financing government expenditure.

Tax systems are being overhauled to increase the efficiency of revenue collection while preserving business incentives. State owned enterprises are either being sold to the private sector, or liquidated if inoperable. Exchange rate controls have already been lifted in Kenya, Uganda, Zimbabwe and Tanzania and progress is being made in several other countries. More open trade systems have increased incentives for domestic producers to export and foreigners to invest.

And finally, financial sector reforms in Uganda, Kenya, Tanzania and Mozambique have put in place the rudiments of an efficiently functioning banking system. Some investors in the United States and Europe are beginning to see opportunities in parts of Africa due to these changes. In the US alone, at least four portfolio investment funds with a total capitalization of approximately $500 million are prepared to invest exclusively in African stock markets. These investors anticipate that privatization and financial sector reforms will make capital markets larger, more liquid and accessible to global traders. In addition, close to 20 Africa focused venture capital funds of various sizes, based in the United States and Britain, have been established. While the existence of such portfolio and venture capital funds does not necessarily guarantee that foreign direct investment is around the comer, they do represent the first major capital inflows to the continent in a generation, and are likely to increase the attention given to Africa as an emerging market. Success is by no means guaranteed, but the political and economic reforms being implemented are creating the underlying conditions necessary for a period of sustained growth. In addition to foreign portfolio investment, the process of capital flight – which accelerated during the I980s – appears at long last to be reversing. This is a strong indication that Africans are beginning to show more confidence in their governments’ policies than at any time since the 1970s. Tbis has not gone unnoticed by multinational corporations, investors and traders based in the US. While continuing conflicts in Rwanda, Liberia, Sudan and Angola may transmit signals of a continent adrift, these new trends will not be lost on savvy investors who seek undiscovered areas of future profitability. Perceptions of Africa as a continent of despair obscure the current opportunities for business.

 

South Africa, The Journal of Trade, Industry and Investment
Publisher, David Altman
Writer, Witney Schneidman

 

 

Enter Senator Helmes

/in /by

So, the Republicans have captured control of Congress for the first time in 40 years amid promises to reshape the American body politic. Does this mean a change in American policy towards Africa? Is the honeymoon over? Witney Schneidman looks at prospects.

South Africa has established a niche for itself as one of the top 10 American foreign policy issues.

President Mandela is perceived by Democrats and Republicans alike as a symbol of stability in a continent too frequently characterised by despair. The extraordinary bipartisan respect that Nelson Mandela commands in Washington is illustrated by the rare privilege he has had to address Congress twice in the last three years. US-South Africa relations do not revolve around personality factors alone, however. Over the last two years, a number of US government agencies – the Departments of Commerce, Agriculture and Energy, the US Information Agency, OPIC, and the Export-Import Bank have developed South Africa-specific programmes (details of which appear elsewhere in this publication). Moreover, the Clinton Administration has developed a three-year, $600 million aid programme which is two-thirds the size of the entire US aid programme in Africa. The American business community, especially African-American entrepreneurs, are examining closely the prospects of investing in the South African economy. An array of non-government organisations have also initiated programmes in South Africa, and the Peace Corp is likely to begin sending volunteers in 1995. Over the next two years, Washington will look to South Africa as its pre-eminent partner in fostering military and political stability and promoting economic development in Africa.

Perhaps the most immediate question posed by the Republican takeover is whether the Senate, led by the new chairman of the Senate Foreign Relations Committee, Senator Jesse Helms (R-NC), will try to cut the Clinton aid programme to South Africa. The viscerally conservative Helms is no admirer of foreign aid, and is likely to review all aid programmes including those for South Africa.

One of his priorities will be to investigate allegations that the Agency for International Development has improperly sought to exclude non-black groups in the US and in South Africa from participating in agency programmes. Helms will also be publicly critical of South Africa’s relations with Libya, Cuba, Iran and other “pariah” states. In general, however, Helms will have difficulty in altering the contents of US South Africa relations, especially the assistance package. The lion’s share of the aid programme is devoted to urban housing and infrastructure, black enterprise development, job skills training, and the strengthening of democratic and political institutions. These programmes contribute to economic growth and development and, as a result, create potential opportunities for American investors and exporters. This has obvious appeal to both Republicans and Democrats. Moreover, South Africa has influential Republican friends on the Senate Foreign Relations committee, such as Senators Lugar and Kassebaum, who would oppose actions that would harm the bilateral relationship. Indeed, over the last several years, Nelson Mandela ha<; carefully cultivated

relations with Republican and Democratic leaders, and has been noticeably bipartisan in his public comments. President Clinton will fight hard to maintain both his South Africa policy and his good relationship with President Mandela. Not only is the President less encumbered by Congress in the conduct of foreign policy than in domestic policy, but identification with President Mandela can only be to Clinton’s political benefit. Moreover, he will be assisted by Vice President Al Gore who, with Deputy President Thabo Mbeki, is creating a cabinet- level committee that will deal with issues such as democratisation, curbing the flow of narcotics in the region and peacekeeping.

The bilateral relationship will also benefit from the establishment of the US South Africa Business Development Committee, under the guidance of Secretary of Commerce Ron Brown and Minister of Trade and Industry Trevor Manuel, which hopes to reduce obstacles to bilateral trade and investment. Finally, a presidential visit to Africa in 1995 is still very much on the minds of senior administration officials and, clearly, South Africa would play a prominent role should President Clinton visit the region.

While the fabric of US-South Africa relations will probably strengthen over the next several years, a Jesse Helms-led Foreign Relations Committee nevertheless will try to recast the thrust of American policy toward sub-Saharan Africa. He and his like-minded Republican colleagues in the House may achieve some success in this respect notably in eroding support for broad-based aid programmes.

Over the last decade, Western governments and the multilateral donor agencies have shared a common approach to development that has been predicated on strengthening the “enabling” environment in order to make African governments self-sufficient. Thus, donor agencies have supported a wide range of activities, such as reversing environmental degradation, controlling population growth, human capacity building, and enhancing the role of women in development. These are considered to be preconditions for social stability and economic progress in Africa.

More recently, the enabling environment approach to development has broadened to address other issues such as the creation of regional peace keeping forces and international monitoring of peace agreements and elections. Senator Helms, on the other hand, represents a neo-isolationist view of the US role in the world. As a result, he is likely to reject the enabling environment paradigm of development in favour of a much more limited US role in Africa. Inevitably, this will translate into efforts by Helms and his colleagues to cut the size of the US aid programme to Africa, and to challenge other programmes, such as the US contribution to the replenishment in 1996 of the International Development Agency (IDA), the concessional lending arm of the World Bank and the IMF’s Enhanced Structural Adjustment Facility (ESAF). IDA and ESAF have played important roles in offering African governments support for economic reforms. Helms will also be an aggressive opponent of US funding for the United Nations, especially the creation and deployment of international peace keeping forces. This will impact on efforts to deploy troops to police the fragile peace in Angola and to prevent a new outbreak of atrocities in Rwanda. Despite Helms’ extremist rhetoric, he is only one voice – albeit influential- among 535 Congressional legislators. The real burden will be on the Clinton Administration to argue that foreign assistance continues to make sense on economic, humanitarian, security and fiscal grounds. The administration’s battles on foreign aid will be in the various committees and subcommittees in the Senate and House, where budget decisions are made. Although the Democrats will encounter a sceptical, conservative Republican majority, it nevertheless would be premature to judge the outcome. For the last 50 years, since the foreign assistance program was launched by President Truman, Republican and Democratic administrations have accepted that foreign aid, even modest amounts, is an essential tool of American foreign policy. Nevertheless, to ensure that this bipartisan support continues, it would be prudent for the American business community – especially organisations in Washington such as the Corporate Council on Africa and the US-South Africa Business Committee – to become an advocate of the enabling environment, especially if US businesses hope to maximise the commercial opportunities that are now emerging in Africa.

Witney Schneidman is Senior Vice President 01 Samuels International Associates, Washington DC

South Africa, The Journal of Trade, Industry and Investment
Publisher, David Altman
Writer, Witney Schneidman

 

Manuel’s Moves

/in /by

As Minister of Trade and Industry, Trevor Manuel epitomizes the transformation that many have undergone as South Africans nurture their new government of national unity. President Mandela surprised many when he appointed Manuel to one of the most senior ·posts in his cabinet. Manuel had no formal experience in economics or finance, but this former African National Congress activist has diligently applied himself to his task. Gone is the activist’s rhetoric. In its place are measured pronouncements which are increasingly being heard with respect in the chambers of the IMF, GAD and World Bank. Simon Segalbriefly caught up with him for his views on future relations between South Africa and the US.

 

How would you like to see relations between South Africa and the US evolve?
The US accounts for 15 per cent of South Africa’s total two-way trade. This is well below the 50 per cent accounted for by the European Union. We want a greater spread, and, therefore, an increase

in the 15 per cent contribution from the US. However, the quality of this volume is important. We want to move away from our traditional trade structure that exports raw materials and imports machinery. South Africa must export more manufactured goods.

 

What products can South Africa manufacture competitively?
We cannot be specific. But there are sectors where we are competitive such as manufacturing certain earthmoving equipment and tank containers.

 

What concessions or favorable treatment is South Africa looking for from the US and visa versa?
Both countries comply with the recently concluded GAIT agreements. This restricts any favorable treatment. Earlier this year the US granted South Africa status under its General System of Preference. This will allow South African exporters to benefit from lower tariffs on certain goods. On South Africa’s side, government has committed itself to reducing tariffs over the next five to six years, from an average of 28 per cent to 18 per cent depending on the industry. There are no specific benefits to US exporters, but they will benefit from these lower tariff.

 

What advantages and opportunities does South Africa offer US traders?
Now that sanctions imposed on South Africa have been lifted, whole new markets open up for traders, both in South Africa and neighboring states. Also, South Africa has mineral resources which generate demand for all sorts of services that international corporations can supply.

 

South Africa and its neighbours might have big populations, but do they have the markets?
The South African economy is growing. This should impact on the region.

 

What are South Africa’s problems in trading with the US?
South Africa can compete globally only on a limited basis. There are enormous constraints around human resources, infrastructure and technical and technological capacity. Apartheid has distorted

South Africa’s regional development. There is also an anti-export bias from the days when the exchange rate was overvalued. This has now been partly corrected but attitudes take longer to

change. The over concentration of the South African economy has also contributed towards higher prices. Finally, small business has difficulty in getting access to facilities such as credit and technical and marketing support.

 

What structures or bodies do you foresee facilitating trade between South Africa and the US?
The inter-governmental US-SA Business Development Committee has just been established between South Africa and the US. The objective is to accelerate the normalization of US-SA trade relations with the emphasis on promoting black economic empowerment in South Africa. So trade relations

will be through the normal inter-governmental trade representatives – South Africa has five trade offices in the US – and organised business groups such as the South African Chamber of Business, South African Foreign Trade Organisation and other industry representative groups.

 

South Africa, The Journal of Trade, Industry and Investment
Publisher, David Altman
Writer, Simon Segal

Paradise Gained

/in /by

One of South Africa’s most vital industries is also its most hazardous. The mini-bus taxi industry provides public transport to a majority of South Africans and purchases vehicles, fuel and components in large volumes. But it is also in a state of chaos. Wessel Ebersohn reports on attempts  to bring order to the industry.

The organisation at the centre of South Africa’s most volatile industry has a new leader who is determined, as he puts it, “to sort out the mess”. Paradise Mahlangu, the man who has taken over the reins as president of the Southern African Black Taxi Association (Sabta), faces a task of formidable dimensions. The association is all but bankrupt and the level of violence in the industry is frighteningly high. Attacks and counter-attacks between rival groups, resulting from severely overtraded conditions, while not as frequent as in 1993, had nevertheless resulted in 80 deaths by October. In one attack in the Western Cape 33 people were gunned down, of whom 10 died.

Police picked up 162 bullet cases at the scene. Even policemen investigating the killings risk their lives. A warrant officer was shot at point-blank range in his home by two men posing as carburettor salesmen and died instantly. The difficulties of brokering peace between rival groups have been complicated by the emergence of an assassination industry that now co-exists with the taxi industry. “When we tell people to stop fighting we are telling the hit man to close up shop,” says Mahlangu. ‘This is how he earns his living. He does not want us putting him out of business.” In June 1994 two drivers who defected from the South African Long Distance Taxi Association had warned that shootings in some Johannesburg ranks were caused by “mafia style” operations within that organisation. Despite its problems, the black taxi industry is of immense importance to the community from which it comes. It has been estimated that it is responsible for one quarter of the informal sector’s contribution to gross domestic product. Almost 50 per cent of all black commuters use taxis, more than double the number that use buses, the next most popular form of transport.

Within the communities they serve the taxis are commonly known as lola Budds because of their tendency to crash, the South African athlete of that name having been involved in a famous track collision in the Los Angeles Olympic Games. The industry started in the 1960s with ordinary sedans as the vehicles of choice. It was only in the late 1970s that the mini-buses that have since spread to most of Africa took over. Mahlangu’s career is almost a mirror of the industry’s growth. His first taxi in 1970 was an old Dodge Monaco. When the change to mini-buses came he went with the flow. In 1978 he was a founder member of the Pretoria United Taxi Association out of which Sabta grew.

An extraordinary young wheeler dealer by the name of James Chapman, at that stage running a filling station for his family, was brought in by Mahlangu as adviser. He set up a marketing company called Taxi SA Marketing (Taxsam) to run parallel with the association. Through Taxsam Chapman negotiated deals for finance and insurance, both of which had been almost completely unobtainable for taxi owners. He showed the taxi owners that their united buying strength gave them power in the market place. Chapman had resigned from Taxsam in 1992, but the return of Mahlangu has brought him back as well. As in the old days Mahlangu will be looking to him to lead Sabta out of the mire. With over 100 000 taxi operators in the country it is likely that more black South Africans have been empowered by this industry than any other. In recent years the buying power of the industry has led to the creation of other more formal black-owned enterprises. Future Bank originally went into operation to finance taxis, Afsure and African General Insurance to insure them… All agree that the primary cause of the violence is severe overtrading helped along by the deregulation policies of the old government. In the mid-l 980s, for example, the Pretoria City Council issued 300 permits for taxis in one year and 6000 the next. A 1986 letter from Sabta warning government that their policies would lead to chaos and disorder had been ignored. “At least now we have a government that is sympathetic,” says Mahlangu. “We will be working closely with them to sort out the mess.”

Mahlangu came to his position in a peculiarly African way. He had resigned as public relations officer of Sabta in mid-1994, disenchanted with the way the association was being full. A few months later a delegation of close to 100 taxi operators arrived at his home. “You must come back,” he was told. “We made you what you are. You have to be at our disposal.”

Wessel Ebersohn is a specialist writer on emergent business.

South Africa, The Journal of Trade, Industry and Investment
Publisher, David Altman
Writer, Wessel Ebersohn

Dem Bones

/in /by

South Africa has underground treasures which outshine its gold and diamonds. Anita Allen shows how they can be explored through the fascinating world of archaeo-tourism.

It is 70 years since the February 7, 1925 edition of Nature, the journal of the Royal Society, published an article by a little known professor of anatomy at a fledgling medical school in a rough and ready gold mining town called Johannesburg. The article shook the world with its claim that Africa was the cradle of humankind. Professor Raymond Dart retrieved the rock containing a child’s fossil skull from a limestone quarry near Taung in the arid Kalahari region of South Africa in 1924. At the time, the widely held view was that modem man descended from ancestors in Asia.

Dart realised that the Taung skull was unlike anything previously discovered. It was neither man nor ape, but something in between which had walked upright a real missing link. Australopithecus africanus, as Dart called it, opened a new chapter in the search of man’s origins, but it also brought an avalanche of criticism. His claim that the Taung skull represented a new species in the line of human descent was considered heretical. His view that it confirmed Charles Darwin’s 1859 prediction of the African origins of man was greeted with shock and derision. Echoes of this are still heard from time to time. For 25 years Dart was virtually alone in upholding his views, but by the early 1950s, due to the uncovering of the Piltdown hoax, the human-like status of Australopithecus was established. In the next 30 years it became universally accepted as a member of the hominids, distinct from the pongids or apes, and recognised as one of the earliest primates to embark on the line of humanising changes that spawned modern man. As many more African hominid fossils were unearthed, evidence accumulated that they were more primitive and more ancient than the oldest fossils found in Asia. “Whichever hallmarks of hominization we may regard as signifying the Garden of Eden, the record of the rocks points unerringly to an African locale, long before the corresponding features were found anywhere else in the world,” says Professor Phillip Tobias, South Africa’s most respected palaeo-anthro-pologist and Dart’s successor at the University of the Witwatersrand Medical School. “Africa, as the greatest piece of real estate straddling the equator, was ideally placed to become the crucible for the greatest human experiment.” Men like Dart and Tobias belong to a select band who changed the way we think about ourselves, but beyond their fellow palaeo-anthropologists they are as little known to the outside world as is South Africa’s rich fossil heritage.

However, this is changing. South Africa’s international acceptability following its transition from apartheid to democracy is helping to position the country as a premier destination for archaeo-tourists. About 50 per cent of all early hominid fossils originate in South Africa. Much of the work is concentrated among scientists attached to, or graduates of, the faculty established by Dart and expanded under Tobias. Johannesburg’s University of the Witwatersrand, or simply Wits, controls the world’s single richest hominid fossil site, Sterkfontein – a mere 45 minutes’ drive from  Johannesburg. Sterkfontein lies in an ancient valley thick with dolomitic caves. Seven other sites in the area are being excavated by scientists of Wits’s Palaeo-anthropology Research Unit (PARU). All the sites have yielded hominid fossils. Work at Sterkfontein began in 1936 under another world renowned paleoanthropologist, Dr Robert Broom. His most famous find was the almost complete skull of what has come to be known affectionately as Mrs PIes, a name derived from what Broom at first judged was a new genus and species, Plesianthropus transvaalensis. The fossil has since been recognised as the same species as the Taung child, Australopithecus africanus. Excavations at Sterkfontein have yielded over 600 000 fossils, the oldest dating back 3.5 million years. Among these are no less than 700 hominid fossils, making it the richest source of early hominid fossils on the planet. Finds include the remains of the earliest member of humankind’s genus, the first tool user, Homo habilis, which means handy man.

In October two astronauts from the National Aeronautics and Space Administration notched up a first when they stepped out of the Space Age into the Stone Age at Sterkfontein. Winston Scott and Sam Gemar, who were in Johannesburg for the “Made in the USA” Expo, were given a private tour of the excavations and workstations by fellow American Dr Lee Berger, who was recently awarded his doctorate from Wits. Berger, a charismatic and energetic 28 year-old from Savannah, Georgia, has been in South Africa since 1989. In that short period, he has made the headlines with his discoveries at Gladysvale, which lies within a privately-owned game reserve close to Sterkfontein. Berger began excavations at the site in 1991, and has uncovered over 50 000 fossils. At another site near Sterkfontein, called Kromdraai (crooked bend), Broom discovered the first robust type ape-man, Australopethicus robustus, in 1938. This type of hominid has enormous teeth and jaws with huge chewing muscles for processing plant material. Robustus is recognised as belonging to a side branch of human evolution that became extinct about 1 million years ago. Yet another cave in the  Sterkfontein area, Swartkrans (black gorge), has yielded not only hundreds of hominid fossils, but also the earliest evidence of the use of fire some 1.5 million years ago. South Africa’s potential for yielding new information about man’s earliest ancestors has been re-emphasised in the past year, with the opening of seven new excavations, and there are close to 100 other known sites waiting to be opened. Tobia and Berger are prime movers behind the fostering of archaeo-tourism. The vision that is being put into practice is one where tours are conducted by well-known scientists who travel to the famous and historic caves near Johannesburg and to more distant sites. Makapansgat, Cave of Hearths, Buffalo Cave, Ficus Cave and Peppercorn Cave all lie amid beautiful bushveld surroundings in the northern Transvaal, near the famous Kruger National Park, where the buffalo – and elephant, lion, cheetah, rhino, and leopard – roam. “Fossils, not gold and diamonds, are South Africa’s crown jewels – the country’s real underground treasure,” says Berger. ‘They don’t represent the history of a single race or culture or civilisation, rather the history of every human being on the planet. The genetic make-up of every person who walks on earth today is in these fossils. “South Africa can take pride in being recognised throughout the world as not only the birthplace of the science of palaeo-anthropology, but also as the place that may be able to claim to be the birthplace of all humankind.”

Anita Allen is the science correspondent of The Star; Johannesburg

South Africa, The Journal of Trade, Industry and Investment
Publisher, David Altman
Writer, Anita Adams