BEE Partner, South Africa Economy Watch

Scenario No. 5

At the end of 2004, Singapore announced that it would be increasing its technical assistance to Cambodia, Myanmar, Laos and Vietnam by approximately US$30 million. Viewed by its government as part of the Initiative for ASEAN Integration, an initiative launched in 2000, Singapore will be providing assistance of a technical nature, in which it has the expertise. Why should Singapore take su_ch step, and what are the implications for global competitiven_ess.

Firstly, Singapore has an interest in the stability and welfar_{e o}f its neighbours, since these poorer countries, along with Singapore help to comprise the region. Secondly, by providing assistan_{ce o}f this nature, Singapore is making a contribution towards lessening the economic gap between the richer and poorer members of the region, thus making way for better political cohesion and ensuring better economic integration, both regionally and globally. This is vital, because in the context of globalisation, it means that poorer countries in the region will not get left behind in terms of competitive advancement. Obviously, a policy of openness, as far as trade and investment is concerned, is going to play a more important role than aid. Nonetheless, the provision of aid indicates how seriously the country views regional development. Thirdly, although the amount Singapore is donating is modest, it does mean that specific projects can be targeted. As a result, these countries are helped to integrate more into ASEAN. Given that an ASEAN economic community is being planned for 2020 in order to give the alliance more economic clout in the face of global competition, anything that countries can do to help will facilitate the process.

Scenario No. 6

The Heritage Foundation’s 2005 Index of Economic Freedom ranked South Africa 56th out of a total of 161 countries assessed.’ This assessment, whilst praising the country’s steps to become more economically free, expressed its concern that foreign investors view black economic empowerment in a negative light, and may well see this as a hurdle to investing in the country. In addition, two points in this assessment are of major concern:

During the last few years, violent crime has been a _most serious problem and an impediment to and a cost of doingbusiness in South Africa. Although there have been some positive developments in law enforcement, the South African police forces generally have not been effective because of the high number of low-skilled and low-paid members of the forces and internal crime and corruption within the forces.’

And:

The economy faces major obstacles to long-term growth and stability including unemployment that is estimated to be as high as 40%, violent crime, and HIV/AIDS infection rate of over 11%. Liberalisation of rigid labour markets and privatisation of South Africa’s many state-owned enterprises has (sic) been slowed by opposition from powerful unions and lukewarm political support. Regional instability, over-regulation and relatively high taxation hinder foreign investment.’

However, the report did concede that the improvements outweighed the negatives. These improvements, it concluded, could be ascribed to freer trade policies as a result of lower tariffs agreed to by the Southern African Customs Union, a tighter belt on government spending and improved transparency in the country’s regulatory framework.

As far as the competitiveness of South African companies is concerned, to be globally competitive and, thereby, truly embrace globalisation, more of them will need to further penetrate the international arena and establish a wider presence in selected geographies. With the exception of a few major players, they cannot continue to focus their attentions on Africa and sub-Saharan Africa. To acquire sharper skills and gain greater experience, they will have to mix it with the best, and eventually do so in those territories in which the best function. With the Minister of Finance removing restrictions regarding offshore investment and with deft management of the rand, international activities should become a greater possibility.

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