"No African country - including South Africa - has any long term prospect of growth on its own", declared South Africa's Minister of Public Enterprises, Alec Erwin, on Friday.
Speaking at a session on the final day of the African Economic Summit in Maputo, Erwin, and several other speakers, noted the smallness of African markets, if each country was looked at individually.
This led to the need for a regional approach. "Hence our commitment to NEPAD" (New Partnership for Africa's Development), said Erwin.
Attracting investment into Africa "requires determination and stability of purpose", he added. "We get too much advice, and we chop and change our policies. In the absence of policy stability, investment is limited to extractive investment".
The session was considering why Africa's share of the world's Foreign Direct Investment (FDI) is so low. The moderator, Augusto Lopez-Claros, Chief Economist of the World Economic Forum lamented that Africa's share of global FDI had fallen from an average of two per cent in the 1989-1994 period, to 0.7 per cent in 2000. Furthermore, just five countries - South Africa, Morocco, Angola, Algeria and Nigeria - accounted for 70 per cent of all FDI in Africa.
But the numbers did not worry all participants. "If you look at FDI flows now, Africa is getting 2.5 per cent of GDP in inflows", said Alan Gelb, a senior World Bank economist. "In East Asia, the figure is 3.1 per cent. So the figure is lower but not that much lower. And in some countries the flows may be underestimated".
David Bridgman, programme manager for the World Bank's Multilateral Development Guarantee Agency (MIGA), thought "Africa is getting about as much investment as you would expect given its place in the world economy".
Furthermore, the statistics were heavily dependent on the two giants - South African and Nigeria. Bridgman pointed out that if they did not attract non-extractive investment, then the figures for all of Africa would be skewed.
Portuguese banker Miguel Marques noted that in the past two years South Africa had obtained only one fifth of the FDI that had flowed into Brazil. He suggested that investors perceived Africa as high risk, and that the risks "are not commensurate with the returns".
But do the potential investors even know what the returns are ? Lopez-Claros pointed out that US companies enjoy a higher rate of return on their operations in Africa than anywhere else in the world.
Marques was not convinced, believing that this figure is dominated by investment in oil and gas "where the return is very high indeed".
Erwin said that the South African government has a target that FDI "should be about two per cent of GDP, and we're 0.5 per cent short of that".
Gelb claimed that South Africa is not competitive in any labour intensive sectors of the economy. Erwin agreed, but rejected any hint of cutting real wages.
"South Africa cannot return to a low wage economy", Erwin said. "And in any case wage rates are now rising in China and India" (the two countries often mentioned as taking investment away from Africa).
Erwin pointed out some of the less well known aspects of post-apartheid South African reform. One is a far-reaching shake- up in agriculture. Commercial farmers, like their counterparts in Europe and the United States, used to enjoy a wide range of subsidies, and these have now all been withdrawn.
The result of removing subsidies and price support was not a collapse, but instead a healthy diversification into new crops and new exports (such as horticulture).
"We unshackled agriculture", said Erwin. "But the European subsidy system remain a major constraint on African agriculture. It's wrong for the whole world economy".
Erwin also warned against giving special preference to foreign investors. The need was for both local and foreign investment, and sets of rules should be created that apply to all investors.
Alongside investment, there is the question of savings. Gelb noted that in East Asia the savings ratio was 30 per cent of GDP, in Africa it was 5-6 per cent. "No country has ever grown on that basis", he warned.
South Africa does rather better. Erwin put its savings ratio at 15 per cent of GDP, and he immediately conceded that this was too low. "We attribute much of this to unequal income distribution", he said.
The problem could be resolved by tackling the iniquities of the past. Under apartheid, he noted, African townships "had lots of people, but no businesses". In the past ten years of democracy, businesses have been encouraged to move into the townships, "and those that have set up there are doing very well".
Fonte: AIM
