Gigaba warns SA losing out to China and IndiaPosted on Friday, May 20th, 2011 by Blaine,Sue (Business Day, Johannesburg) in News
South Africa should work with Chinese and Indian investors expanding into Africa, or risk losing out on opportunities on the continent, Public Enterprises Minister Malusi Gigaba said on Thursday.
SA’s investment in Africa lags far behind the estimated US$3 billion that Chinese and Indian companies poured in last year.
“If we let (China and India) enter Africa on their own’ we may find it is not only our mineral resources that are dominated by foreigners, but also our infrastructure,” Gigaba said at a meeting in Johannesburg with the South African Chamber of Commerce and Industry.
Africa’s economy is likely to grow 5% this year, says the 2011 Economic Report on Africa, produced by the United Nations Economic Commission for Africa (UNECA) and the African Union. Rising commodity prices, growing demand for exports, increased aid and more investment in extractive industries such as mining are the key reasons, it found.
Gigaba said SA has 80% of Africa’s rail infrastructure, produced and consumed two-thirds of its energy, and has “responsibilities that extend beyond ourselves”. Instead of competing with Chinese and Indian companies already operating in Africa, SA’s state-owned enterprises should look at collaborating with them before they saturate the market.
“We need to develop proper plans to participate in Africa, especially because of the role the president has as infrastructure champion for the North-South Corridor,” he said. This programme, aimed at reducing costs of cross-border trade in sub-Saharan Africa, came out of a 2008 summit of the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Community (SADC).
Gigaba said while the necessary financial muscle was not guaranteed in the region’s governments, financing had to be found so Africa can cooperate with China, India and Brazil on an equal footing.
Steven Ombati of Frontier Advisory, which advises on emerging markets, said on Thursday that the government should start by ensuring good political relationships with other African countries. Angola has been a budding infrastructure market for a while, with Luanda, designed for 500 000 inhabitants, is home to more than 10 times as many.
“For a while our relations with Angola were not so great. Look at the way China engages. It often starts with the political relationship,” he said.
Econometrix chief economist Azar Jammine said SA’s parastatals have to move into Africa as SA needs to ensure Africa achieves anticipated economic growth rates. This would not happen without South African investment in African infrastructure, particularly electricity. “If we want to be part of the African growth story, we have to contribute.”
Gigaba said Air France and Emirates were “beating us hands down” by investing in Africa, and SA would look at creating two new air traffic hubs servicing East and West Africa. South African Airways would expand its regional short-haul reach, he said.
Arms manufacturer Denel, which earlier this week announced plans to expand into Africa, would explore non-defence capabilities, he said.