South Africa: Companies from Germany lose trust in the South African ecnonomy

For nearly two decades now, the South African economy has been attracting a great deal of Foreign Direct Investments from the European Union. More than 2000 EU companies have invested over 60 billion Rand (4.6 billion Euro) Foreign Direct Investment Stock in South Africa creating over 350 000 direct jobs. But it seems the honeymoon period for the “rainbow nation” is slowly drifting away, this amid growth after nearly half a decade of global financial crisis.

The Southern African-German Chamber of Commerce and Industry (SAGCC) survey result recently paints a bleak future. SAGCC, represents major blue chip companies, including car manufacture BMW, Lufthansa, Siemens, Mercedes Benz, SAP, T-Systems, Bayer  to name but a few. The survey was done in South Africa, between February and June 2013. All SAGCC members are are active in the country. The new data create an impression that Germanycompanies find it “extremely difficult to do business in South Africa".  

Economists however are warning that German economy is heavily invested in South Africa. Over 700 German companies achieved a turnover of around 100 Billion Euros and employed about 100000 employees.

Of around 21 billion Euro German Exports to Africa were almost alone nine billion Euros - about 40 percent to South Africa.

The SAGCC survey seems to suggest among other things that German companies are pessimistic and this represents a significant loss of confidence in the work of the South African president Jacob Zuma. According to the survey German companies in South Africa are always complaining often the excessive bureaucracy in South Africa Government offices. This involves, for example, to the issuance of licenses and work visas, with the development of business local firms are required. “The strike waves following the clashes in the mining industry since August last year the South African Rand has lost ground against the Euro. The International Monetary Fund (IMF), forecasts and for this and future years annual economic growth for the country to three percent. According to the South African Government an increase of around seven percent per year would be required to the high unemployment of officially we can successfully meet about 25 percent.

SAGCC argues that besides China, South Africais the largest investor on the African continent. "If South Africa coughs, the rest of Africa gets the flu." SAGCC says the African continent needs an economically prosperous and politically stable South Africa. Neren Rau, the CEO of the South African Chamber of Commerce and Industry (SACCI) says the findings by SAGCC broadly match the experience of SACCI members.  He says SACCI is working with government to address these concerns but progress is slow. “Sometimes we use the wrong mechanism to address these concerns: case in point is the business licensing bill which would have raised the bureaucratic challenges that business would have to contend with although its ultimate objective was to deal with improperly operating business and dealers in counterfeit goods,” he said.

Following the collusion of the Sixth South Africa-European Union Summit, in Pretoria the two parties signed a number of agreements including that between Euratom Atomic Energy Community (Euratom) and South Africa on the peaceful use of nuclear energy. Both parties said the agreement between the Euratom and South Africais for cooperation in the peaceful uses of atomic energy covers most fields of mutual interest. “We agreed on a new 1.3 billion Rand (100 million Euro) support programme to blend grants with loans from the Development Bank of Southern Africa (DBSA) and European Development Finance Institutions to support South Africa's infrastructure programme. “We have agreed on a partnership in the area of rural electrification, with an initial target of 300 000 households in remote areas of South Africa.  We have launched new cooperation in the areas of maritime security and human rights,” said a join media statement by Zuma and European Commission President José Manuel Barroso and European Council President Herman Van Rompuy.

South African Department of Energy (DoE) director-general Nelisiwe Magubane told "Engineering News Online", that the country will finalise its ‘nuclear procurement roadmap’ by November,  adding that a study on the likely costs of such a programme should be completed in September. Magubane indicated that creating certainty on the approach to be adopted remained a priority for the DoE and for government, which is coordinating its decision-making through the National Nuclear Energy Executive Coordination Committee (NNEECC), chaired by Deputy President Kgalema Motlanthe.

The National Development Plan also called for greater clarity on the costs and on South Africa’s ability to afford the proposed deployment of 9600 Megawatt of new nuclear capacity, as outlined in the current version of the Integrated Resource Plan (IRP2010).

Speaking after the 6th SA-European Union Summit, Zuma said partnership with the EU has borne fruit. He said a total of 77 percent of South Africa’s total foreign direct investment stock originates from the EU. ”Between January 2008 and May 2013 a total of 350 foreign direct investment projects were recorded.  During the period, a total of 48 686 jobs were created in South Africa. During the same timeframe, a total of 46 foreign direct investment projects from South Africainto the EU were recorded, representing a total capital investment of 10.53 billion Rand. The investments by 37 South African companies in the EU countries created a total of 2371 jobs in the EU, spread over a diverse range of sectors, he said.

Data compiled by the World Bank and the African Development Bank put the number of middle class Africans at 350-million from a total population of approximately 875-million.Countries with the largest middle class populations were South Africa, Kenya, Ghana and Angola.

David Lipton, First Deputy Managing Director South African Institute of International Affairs, says that Sub-Saharan Africa stands out as a success story. “In the nearly five years since the 2008 crisis, this region has grown faster than in the years before the crisis. Regional output grew 5.1 percent last year, and should accelerate to 5.4 percent this year and 5.7 percent in 2014. But growth has been stronger in the oil-exporting and low-income countries. Middle-income countries like South Africa and its neighbors have grown more slowly -in some cases because of weaker European demand and in others because of domestic problems,” he said.

As the South African government prepares a response to the Southern African-German Chamber of Commerce and Industry (SAGCC) survey, others are seeing a booming and prosperous future for South Africa and the African continent. In his academic paper titled ‘a Pan-African Renaissance in the next 50 years?’ South African Politician and academic Joel Netshitenzhe argue that Africa, in particular the rainbow nation of Nelson Mandela is poised for exponential growth. Netshitenzhe says a Pan-African renaissance will not come of its own accord. It requires foresight in leadership, activism of society and a renaissance of Africa’s ‘think industry’. “In this regard, the successor to the Organisation of African Unity, the African Union should play a more active role particularly through bodies such as the AU Commission and the Pan-African Parliament. In partnership with the intelligentsia and the rest of civil society, these bodies can serve as critical continental thought leaders, facilitators and monitors.”

Von S thembiso Hlongwane