SOUTH AFRICA’S INDUSTRIALIZATION

AS A GATEWAY INTO AFRICA

South Africa achieved its political democracy in 1994 and with that came through the urgency and need to advance its political standing in world politics including on the continent. This initial focus bore fruits when the country started occupying various strategic positions and took advantage of the goodwill that the name Nelson Mandela, the first President of democratic South Africa bestowed on it. There were varying views as some felt that this strong focus on politics and not on transforming the economy, business ecosystem may not necessarily give effect to it being a powerhouse it should be to right the wrongs of the past including enhancing Africa as a regional economic, business bloc in the world economy.

The democratic South Africa inherited a divided society and an economy that did not receive positive linkages in world economies due to the various economic, cultural and sports sanctions due to the politics of oppression that the apartheid government practiced. This then called on the new leadership to clean its image politically and economically so that the country can start attracting trade and investment strategic alignments and programs without any hindrance. Apart from extending reach of government programs and intents including the infrastructure it had to focus on building a resilient economy that would ensure that its foreign trade in Africa and the world grows and cement it as higher than positive attraction for investment and partnerships.

The country has managed to harness various elements of its economy to ensure that it is at the core of taking AfCFTA to its eventual realization of its objectives and goals. The JSE (Johannesburg Stock Exchange) is by far the most developed, biggest bourse on the continent. The country has also positioned itself as a private equity hub because of its jurisdiction with a strong, efficient and reliable banking and regulatory institutions. The Reserve Bank has relaxed its rules to enable ease of listing locally including exchange controls which makes South Africa attractive and thus position the JSE as a gateway for investment in African stocks. Its banking and financial services landscape is underpinned and backed up but its biggest and best capitalized banks, attracting investors who want to access loans, trade finance and other products for African business

South Africa’s transport system is seen as an enabler of inter-Africa trade given its established airfreight, ports and road infrastructure into Africa. For a very long time South Africa has been the preferred transport and logistics hub for Southern Africa, thanks to its superior infrastructure and services industry with this kind of collaboration growing beyond Southern Africa. The Durban port has remained the preferred port of choice servicing even countries as far away as the Democratic Republic of Congo, and the OR Tambo Airport the airfreight of choice notwithstanding the challenges the South African Airways has faced in recent past. The country’s Airways have established a collaborative partnership with Kenya Airways to enhance its positioning into Africa noting that it has partly been privatized. South Africa’s location between Asia and Latin America makes it well positioned for airlines, shipping and logistics.

The country’s president, HE Mr Cyril Ramaphosa alluded to the strides that the government has made to position South Africa and its entrepreneurs to take advantage of AfCFTA’s strategic implementation. During his address to the Black Business Council on the 19th May 2022, he mentioned that ‘it is through South Africa in collaboration that vaccine procurement had to be centralized for the benefit of all of Africa to negate the attempts of Europe, China, USA to overcharge and not give access to these vaccines. He further indicated all liberalization initiatives are designed to bring South African businesses including women and youth to the fore to grow and scale to partake in AfCFTA.

The country’s multinationals have expanded their African networks rapidly, building businesses, partnerships and skills that foreign investors are eyeing to build their own African footprint, resulting in a significant number of mergers and acquisitions. South Africa went on an investment drive hosting investment conference wherein with the first two investment conferences, government managed to secure pledges of around R664 billion in new investments. To date, just under R170 billions of capital expenditure committed during those investment conferences has been invested in projects for construction and buying equipment that is essential to mining, manufacturing, telecommunications and agriculture. These initiatives supported by multinationals are designed to enhance the manufacturing and industrialization of the South African economy.

The country’s positioning in terms of being a member of BRICS (Brazil, Russia, India, China, and South Africa) has enabled it to be that strategic gateway of these economies as they forage into Africa. Even entities like the DBSA, IDC are principal agencies of South Africa’s economic diplomacy in Africa as both are pivotal to enable its regional ambitions, as financing cross-border infrastructure and projects highlights the country’s developmental role and opens up opportunities for South African-based companies.

It should be noted that notwithstanding the opportunities, even member countries within BRCIS at times prefer to use specific countries as gateway even though from a policy point of view they may be positioning South Africa as a gateway and thus the country needs to rise up to building its infrastructure including enabling and enhancing liberalization Geography and logistics play an increasing role in multinationals’ business decisions.

Making sure that its local economic landscape is stable noting the impact of the pandemic, which would then propel South Africa to continue to make an impact on the continent, is critical. This is borne by the four pillars designed and elevated as part of the country’s Economic Reconstruction and Recovery Plan. The plan highlights the need to get the economy back to work, ensure that people get back the employment opportunities they lost due to the pandemic and This means unleashing the potential of the economy by, among others, implementing necessary reforms, removing regulatory barriers that increase costs and creating inefficiencies in the economy, securing energy supply, and freeing up digital infrastructure. Some of the challenges the country has to address are exchange controls, which are hardly present in other African countries, including the financial centers of Mauritius and Botswana; declining industrialization, as exporters struggle with high business costs, a volatile currency, onerous empowerment quotas, skills shortages and rising labor costs

South Africa has the opportunity to influence and make an impact in driving higher trade and investment in Africa, but this should be viewed from the realization that the African economy is huge and therefore building strategic relations and making sure that its infrastructure, industrialization strategy becomes pragmatic to take advantage of its available opportunities. AfCFTA has shown that the top 10 developed economies have a role to play, a collaborative rather than a competitive role.