World Cup boosts South African Confidence

FIFA President Joseph Sepp Blatter, left, and South Africa's President Jacob Zuma address a World Cup crowd last month.

WSJ article on successful World Cup symbolizing South Africa’s ambition to unite the continent economically.

Hosting the World Cup has given the continent’s largest economy a huge shot of confidence, which the government and South African companies are expected to parlay into a bigger role reshaping trade and investment across the continent.

“It’s not so much the new infrastructure, the tourist and credit-card spending. The World Cup offers the intangible effect of giving South Africa the benefit of the doubt,” says Razia Khan, regional head of research at Standard Chartered in London. “South Africa, like the rest of Africa, has really suffered from perceptions.”

South Africa now could be in a position to help change those views by helping to pull African countries and markets into a stronger, more cohesive continental market.

South Africa’s trade ministry is now promoting an Africa trade zone that will stretch from Cape Town to Cairo, with the goal of knitting together three different regional trade groups over the next year. The Johannesburg Stock Exchange, by far the largest on the continent, is targeting company listings from other African countries rather than those from Europe and the U.S. And South African companies have ramped up investment in other African countries as an alternative to the traditional expansion route outside the continent.

We have had insufficient cooperation,” Rob Davies, South Africa’s trade minister, said in an interview. “There needs to be a bigger agenda.”

Since it began to dismantle its white-minority regime in the early 1990s, South Africa’s socialist-leaning government has struggled to win the trust of investors. Debates over nationalization of local and foreign-owned mines haven’t helped. Nor have race tensions, corruption scandals and high rates of violent crime.

But South African officials believe it has changed a lot of minds during the World Cup, including those of its own people. The month-long tournament was free of significant security lapses or major organizational mishaps. South Africans are now aglow with that achievement.

“All those prophets of doom have seen the light,” says Russell Loubser, chief executive of the Johannesburg Stock Exchange.

South Africa’s new optimism is important for Africa. It has long had the continent’s most liquid markets, among its richest resources and superior infrastructure. What it has lacked is the chutzpah to take a more active leadership role on the continent, and to push plans for economic integration.

Africa is poised for better things, because it escaped the financial crisis and because it’s sizable middle class continues to emerge–and spend.

But beyond South Africa’s ambitions, there are other reasons why African-to-African trade is poised to take off. Unlike Europe and the U.S., Africa has largely shaken off the global economic turmoil. The International Monetary Fund recently raised its growth forecast for sub-Saharan Africa to 4.5% from an earlier projection of 4%, a pace that trails only China and India for major economies.

At the same time, the economic and business climate in African countries are generally improving. Many African governments have improved transparency, reduced trade tariffs and simplified tax regimes.

South Africa still has some problems before it can fully provide uncontested leadership for Africa under its growing influence. Problems like lack of infrastructure across the continent means less trade among African nations. This is hurts nations because the entire place is built to move commodities to the coasts. Trade among fellow nations hasn’t increased fast enough like that with China.

The increased self-confidence that is being shown is a big deal, because South Africa has the biggest and most liquid financial markets on the continent, so everything has to start there.

Before South Africa can provide genuine leadership, it has to invest and build up at home, and around its neighborhood.

Bookmark and Share

Advertisements

2 comments

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s