A Journal of Foreign Policy Issues
As an emerging economy, South Africa has not remained completely unaffected by the turmoil in other emerging economies world-wide, especially in Asia, and lately also in Russia. This negatively affected investor confidence in these countries.
The fact, however, that we were able to weather this storm so successfully, including an assault on our currency, reflects positively on the inherent strength of our economy; on the soundness of our economic and fiscal policies; and above all, on the political stability in South Africa.
South Africa's peaceful and stable transition to democracy, universally recognised as one of the major achievements of the 20th Century, is not a coincidence or a mere short-term success: the realities in South Africa, which made this miraculous transition possible, are still in place and guarantee future stability. Political stability is the key to investor confidence, especially in today's world. It is, therefore, essential to take a closer look at those factors, external and internal, which are guaranteeing continued political stability in South Africa.
INTERNATIONAL DIMENSION
Besides large-scale foreign investment in South Africa, there are also vested foreign interests in various other fields which ensure continued foreign involvement in South Africa. Let me mention a few examples:
a) Large and longstanding investments by leading European companies and increasingly
also from the USA, guarantee the continued interest and involvement in developments in South Africa by the international community.
Noteworthy is the fact that major concerns, who have been involved heavily and over a long period, and who are therefore well-acquainted with the realities in South Africa, are in the forefront as far as new investments in South Africa are concerned (the German company BMW is a prime example).
Coupled with this are the large and well-established foreign communities in South Africa, especially from Europe (such as Greece, Portugal, the UK and Germany), which represent a further guarantee for continued international interest and involvement in South Africa.
b) Due to South Africa's strategic and geo-political importance in a regional and global context, a high premium is placed on its stability by the international community. In view of factors such as South Africa's leading and stabilising role in a regional context and the positive global impact of South Africa's democratic miracle, the international community has more than a passive or passing interest in the future stability of South Africa. There is just too much at stake.
INTERNAL DIMENSION
Fundamental political transitions are almost inevitably volatile. It therefore comes as no surprise that the period since the April 1994 elections saw–amid the overall sense of achievement and increasing goodwill–moments of political uncertainty and tension. In general, however, political stability increased as constitutional democracy became more entrenched. This is illustrated by:
- The adoption of the new constitution in 1996: the new constitution, which became supreme law of the land on 4 February last year, is a model of democracy, and entrenches a separation of powers and fundamental human rights. Furthermore, the negotiations towards its adoption confirmed the ability of South Africans to resolve their differences peacefully and their commitment to make the new democracy work.
- The successful local government elections: voters in seven provinces elected their local representatives in a calm and well-structured process in 1995. In 1996 local voters in the strife-torn Kwazulu-Natal Province went to the polls as political obstacles prevented them from doing so in 1995. This Kwazulu-Natal local government election became yet another chapter in the South African democratic miracle. Not only was it procedurally smooth, but it produced significantly diverse results amid a very low incidence of political violence.
- Developments around the ANC leadership: over the first three years of post-apartheid South Africa, local and foreign observers repeatedly expressed fears about the process of succession, and uncertainty about the country's prospects thereafter during the so-called "post-Mandela era".
These concerns have since abated. The governing party has shown itself to have
a talented leadership potential beyond the Mandela generation. More specifically, Deputy President Thabo Mbeki–the leading contender for the presidency after Mandela, who has already taken over the presidency of the ruling ANC from President Mandela–has gained the confidence of the business community and other stakeholders, not only in South Africa, but world-wide. President Mandela personally confirmed on more than one occasion that Deputy President Mbeki is already de facto running the day-to-day business of government. Continuity of government policies is thus assured.
-l Politics is not everything: top-level appointments of talented politicians, such as Mr. Cyril Ramaphosa, in the private sector highlighted that the career paths of capable leaders are not confined to politics, the bureaucracy or the military. This sets South Africa apart from many other developing countries, enhancing political stability in the sense that politics is not a zero-sum contest. Supported by assertive black empowerment strategies–spearheaded by black leaders themselves–this feature of the emerging social structure of South African society also augurs well for the contribution of the private sector to economic development.
- A strong spirit of reconciliation: President Mandela personifies the remarkable reconciliation and nation-building which has characterised South Africa's transformation. This spirit is, however, evident throughout political and everyday life. Examples include the normality of parliamentary politics and open debate, national and community processes of co-operation, and the gripping process of soul-searching and reconciliation through the Truth and Reconciliation Commission.
- Declining political violence: increasingly, South Africa is becoming a stable country, with a significant reduction in politically-related violence. Since 1994, which recorded about 3,794 politically-motivated fatalities, that figure has declined to about 683 in 1996. The trends in Kwazulu-Natal are particularly significant. In 1994, 1,464 recorded fatalities in the province were linked to political violence, compared to 347 in 1996. This positive trend is continuing.
- The fight against crime: the crime wave that seemed insurmountable by mid-1996 is also on the decrease. The South African government, with the full support of the people as well as big business, is facing this problem head on as a matter of priority.
THE ECONOMIC DIMENSION OF POLITICAL STABILITY
Political change is an empty phrase if it is not accompanied by changes in the socio-economic sphere, leading to meaningful changes in the quality of life of the ordinary citizen.
Another reason behind the continued political stability in South Africa is the fact that the new South African government never neglected the socio-economic dimension: on the contrary, economic growth and socio-economic progress occupy the centre-stage of the policy objectives of the South African government. This is reflected in GEAR (Growth, Employment and Redistribution Strategy) and RDP (Reconstruction and
Development Program), both fundamental policy declarations that address economic growth designed to support socio-economic progress.
GROWTH, EMPLOYMENT AND REDISTRIBUTION STRATEGY (GEAR)
The government announced GEAR as the cornerstone of its macroeconomic policy in June 1996. GEAR is a total strategy aiming at a competitive, fast growing and job-creating economy; redistribution of resources and creation of opportunities for the poor as well as provision of accessible health, education and housing facilities. The strategy entails budgetary reform and deficit reduction; trade liberalisation and tariff reform; flexible labour market strategies; renewed infrastructure investment; tax incentives to attract investment; and a commitment to co-ordinated policies.
The main players in the economic field have already shown that they have both the right attitude and the will, two factors which are vital to the successful implementation of GEAR. Let me provide a few examples:
- The private sector fully supports the broad principles of GEAR such as the emphasis on budgetary reform and fiscal deficit reduction; consistent monetary policy and trade liberalisation; and investment-friendly strategies.
- Trade unions remained committed to a social compact between government, labour and employer organisations, despite certain reservations they had about GEAR. This opens the way for a largely negotiated resolution of disputes, even though a fair degree of tension around aspects of the strategy, such as privatisation, could still be expected. The smooth passage of new labour relations legislation and the establishment of the Commission for Conciliation, Mediation and Arbitration (CCMA) also reflect maturity in labour relations. This is underlined by the dramatic decline in the number of man-days lost through strikes over the past three years. Throughout the 1980s and until 1994, these consistently totalled more than 3 million and often even more than 4 million man-days per year. This figure has declined to 1.7 million man-days in 1996 and the downward trend is continuing.
- The government remained committed to meeting its budget deficit targets: planning for a 4 percent budget deficit in 1997-1998 started as part of an overall strategy to ultimately move the deficit to 3 percent by 1999 and to reduce government's "dissaving" in 2000 to 0.6 percent. So far this strategy is on target.
- New tax incentives were introduced to support fixed investment and restructuring in manufacturing in order to: boost competitiveness; facilitate higher labour absorption; and encourage small and medium-sized manufacturing. The incentives are equally accessible to local and foreign firms and their favourable impact on investment returns promises to stimulate investment in South African manufacturing.
- As far as trade liberalisation is concerned, the average import protection in the manufacturing industry has been reduced from 19 percent in 1994 to 10 percent in 1996. The aim is towards 8 percent in the year 2000.
A FIRM ECONOMIC FOUNDATION
These concrete examples illustrate the degree of identification of the main players in the economic field with the aims of GEAR. But the successful implementation of GEAR does not only depend on the attitude and the will of the main players–it is backed up by a firm economic foundation.
South Africa's economic fortunes have improved dramatically since 1994: in fact, the signs of an economic turnaround are already evident. The stagnation, isolation and lack of investment inflows which marked the apartheid years have made way for consistent growth and an upsurge in new investment. The following trends suggest that increased growth and an increase in the quality of investment in the medium-to- longer term will be realised.
- Economic growth–as measured by the GDP–continued throughout 1996 at around 3 percent. This is particularly significant if compared with the negative growth rates in 1990 and 1991. The low price of the rand and improved agricultural conditions boosted exports. This, together with a firm agricultural output and manufacturing growth on the back of import replacement and higher exports, should ensure that GDP growth will remain robust. GEAR sets a target of up to 5 percent growth by the year 2000.
- Inflation has remained remarkably under control, despite the depreciation of the rand. Inflation has remained at single-digit figures since 1994. Compared with such high inflation rates as 18.6 percent in 1986 and 13.9 percent as late as 1992, this reflects the commitment of the new government to fiscal and monetary discipline.
- Fixed investment has consistently increased over the past few years, reaching 18 percent in 1994 and 20 percent in 1995 compared with only 3 percent in 1993. The manufacturing sector accounted for some 46 percent of the total fixed investment over this period. The high rate of fixed investment in the leading export-orientated manufacturing industries like food, metals, and chemicals suggests that these industries are becoming more competitive. The upward trend in investment spending is continuing.
- Direct foreign investment has totalled more than 18 billion Rand between the April 1994 elections and late 1996. Since the elections, South Africa visibly broke through the shackles of economic isolation as companies from several countries invested in the country.
Direct foreign investment also manifests in a concrete way South Africa's growing participation in the global economy.
- Employment: The growth in investment has generally not yet resulted in formal sector employment growth. This remains one of the major economic challenges, and requires a concerted effort on the part of industries, labour and government to attain more productive labour utilisation. GEAR addresses this issue very specifically at the policy level and aims to facilitate the creation of an additional 409,000 jobs by the year 2000.
- South Africa's economic infrastructure represents one of its most important competitive strengths. The country produces 50 percent of Africa's and 87.2 percent of Southern Africa's electricity–and its roads, railways and telephones stand out within an African context. The prices of most of these services (e.g., electricity) are also highly competitive.
RECONSTRUCTION AND DEVELOPMENT PROGRAMME (RDP)
Underpinning the macroeconomic policies of the new South African government is the Reconstruction and Development Programme. This program, which has been initiated by the new government, is of vital importance to political and social stability, since it specifically aims at disposing of the backlogs in the provision of services to the previously disadvantaged communities. The following achievements illustrate its progress:
- Water: Since 1994, 640,000 households have been provided with clean, piped water. If present progress continues, some 5 million people will benefit from about 500 projects by 1999.
- Housing: During 1994-95 only 12,000 units were delivered. By 1996, more than 10,000 housing units were being delivered per month. The prospects are good for 150,000 units in 1997. Central government has allocated R1.8 billion for housing. It has a three year plan to spend 525 million Rand for high-density housing and 200 million Rand for upgrading hostels.
- Health and Nutrition: The introduction of free primary health care in April 1996 has led to a four-fold increase in the number of rural people treated between 1995 and 1996. In 1996, more than 400 clinics were either built or upgraded, including significant numbers in poorer provinces. A project to provide food for school children reached 9,000 schools and 3.5 million children in 1996 at a cost of 972 million Rand.
- Electricity: Since 1991 1.5 million households were connected to electricity. The target is to reach 80 percent of households by 2005.
- The municipal infrastructure programme's budget for 1996 was 751 million Rand, geared towards expanding access to affordable municipal services. By September 1997, an additional 8.5 million people had access to municipal services that they could afford.
- Transport: At least six cross-departmental corridor projects are planned and some tenders have already been awarded on the 5 billion Rand Maputo corridor, linking South Africa to Mozambique, and the 1 billion Rand Johannesburg-Durban national road. The Department of Transport has launched 20 major road projects worth 1.9 billion Rand and 40 RDP-funded small road projects.
- Land Reform: Aiming to ultimately benefit some 40,000 households, the land reform programme is well under way. The Department of Agriculture has also spent more than 200 million Rand to advance black small-farming development related to the programme.
- Small Business Development: The Department of Trade and Industry allocated R87 million for assistance to particularly disadvantaged groups. It intends to augment this with a further 945 million Rand, including 100 Rand from foreign donors.
- Social Infrastructure: Between 1994 and 1996, 2,500 schools were being renovated at a cost of 300 million Rand. A one billion Rand plan to construct new schools was approved in April 1996. 200 million Rand have been made available for the establishment of integrated community service centres; another 95 million Rand for the establishment and upgrading of police stations; and 250 million Rand for community policing in 1996.
REGIONAL STABILITY
The South African government, however, also realises that political and economic stability in South Africa is directly linked to political and economic stability in the whole region. No country can survive as an island of prosperity, in a sea of poverty.
In the regional context, there has accordingly been significant progress towards South Africa's political and economic integration into the Southern African region within the framework of SADC (Southern African Development Community). Economic policy reform, greater political stability and co-operation, and joint participation in global trade and tourism, are now common items on the development agenda of South Africa and its neighbours. South Africa plays a leading role in SADC, which has become the key integrative mechanism in the region.
GROWING STABILITY ON THE AFRICAN CONTINENT
Further afield, the general improvement in the democratic environment, combined with structural changes in the economic sphere on the African Continent as a whole, bodes well for political stability and economic growth on this neglected continent. The South African Deputy President Thabo Mbeki, who is a respected advocate of peace and stability on the continent, refers to this development as the "African Renaissance".
The recent historic visit of President Clinton to various African countries, including a first ever visit by an American President to South Africa, underlines the growing political and economic importance of this neglected continent. The pro-business philosophy of the Clinton Administration in their foreign policy objectives is well known. During his visit, President Clinton echoed the views of the South African Deputy President on the "African Renaissance".
I believe that business always follows politics. The stable political environment in South Africa itself, and increasingly so in a regional context as well as on the African continent as a whole, brought with it a positive re-appraisal of business opportunities in our part of the world. According to the US Department of Commerce, Africa, with a population of nearly 700 million people, is the most profitable place in the world. In South Africa itself, we are already experiencing an upsurge in foreign investment.
BI-LATERAL ECONOMIC TIES
As far as Greece and South Africa are concerned, we are encouraged by the increase of high level political visits from Greece to South Africa as well as by the upward curve in bi-lateral business activities. The latest examples are the visit of the Greek Minister of Mercantile Marine, Mr. Soumakis, to South Africa earlier this year to sign the Shipping Agreement; the second visit of Deputy Minister Kranidiotis, who attended the N.A.M.
Conference; the expected visit of Foreign Minister Pangalos to South Africa later this year; and the recent announcement of a large investment by the Greek food company PALACE S.A. of Kyriakos Filippou in South Africa. These are further illustrations of the close interaction between politics and business.
There are also clear indications that the Greek government is at present focusing on improving ties with Africa as a whole. In view of the strong and longstanding ties between Greece and South Africa; the strong and active Hellenic Community in South Africa; as well as South Africa's position as the gateway to Southern Africa, South Africa presents itself as a natural and important partner to promote Greek interests in Africa.
On the other hand, Greece is well placed to serve as a platform for promoting South African business interests in the Balkan countries. This is one of the main reasons why the embassy participated once again at the International Trade Fair, HELEXPO, in Thessaloniki last month. The potential role of Thessaloniki as the industrial centre of Northern Greece speaks for itself. South African participation in this trade fair has the added advantage of exploring and developing this potential on the spot. One of the concrete results of our participation last year, was the visit of a high-level business delegation from Thessaloniki to South Africa under the leadership of Mr. Vassili Takas, President of the Federation of Industries of Northern Greece and the South African Honorary Consul General in Thessaloniki.
TOURISM
Tourism provides another potential area for closer co-operation between South Africa and Greece, since our industries are not in competition, but, rather, complement each other due to the difference in seasons. We are furthermore facing similar challenges and opportunities in our respective regions, such as increasing competition from other tourist destinations in the region, but at the same time also opportunities for closer co-operation in regional context.
According to the World Tourism Organisation, Africa–in a global context–registered the highest growth rate of tourist arrivals of all regions, boosted by the buoyant results in South Africa and Morocco. In 1997 there was an overall increase in arrivals of 9.2 percent to more than 23 million tourists. Southern Africa displayed the second highest growth rate of arrivals (+ 9.5 percent), largely determined by the healthy growth of international tourism in South Africa which accounted for 77.5 percent of the total increase in arrivals.
The large Hellenic community in South Africa also contributes to a healthy two-way flow of tourists between South Africa and Greece because of family ties.
Tourists from Greece are attracted by the more exotic items, especially wildlife and African culture. The South African "wine culture" is another attraction for the Greek tourist; and for a small, exclusive group, big-game hunting. South African game reserves are the biggest attraction for visitors from Greece, while the South African beaches exert a strong pull during the European winter months.
A bi-lateral Tourism Agreement between South Africa and Greece has been finalised and is awaiting signature.
CONCLUSION
All the ingredients are there for a successful economic partnership between South Africa and Greece, not only in the bi-lateral field, but also in a regional context. We have reason to believe that our presence at the Thessaloniki International Trade Fair has served once again to further cement existing economic ties, but also to explore new opportunities to the benefit of both our countries.