posted 13 Nov 2007 in Volume 10 Issue 6

Exciting investment opportunities lie ahead in South Africa

By the Rt Hon Paul Boateng, British High Commissioner to South Africa

MY FIRST day as an articled clerk at London Bridge in 1973 saw my principal, the distinguished civil liberties lawyer, Ben Benberg, hand me a civil litigation file with the soon to be familiar words “I want you to look at that, see what we can do to help”. The client, then an exile miles away from her African home, went on to become the first Speaker of the first Democratic South African Parliament. Frene Ginwala was one of many South Africans from this ‘rainbow nation’ with whom I have been lucky enough to work over the years. The road to freedom for this wonderful country with a complex and, at times, deeply divided history, was a long one, but at that time to many of us in the anti-apartheid movement it was a road embarked upon without an end in sight. I am now privileged at this stage in my own personal journey, as a lawyer and a politician, to serve as High Commissioner in what is now a free, non-racial South Africa, where democracy and the rule of law are firmly entrenched. South Africa is a friend and partner of Britain in peace support and development work throughout the continent, and plays an important role on the Security Council and as a member of the G8+5. There remain real issues around disadvantage and inequality, which the South African Government is addressing, but it does so in the context of record levels of growth and a hitherto undreamt of financial stability in what has become one of the most sophisticated and high-growth markets in the world.
South Africa’s first-world economic infrastructure, coupled with an emerging economy, makes it an attractive market for foreign investment.
The UK is one of South Africa’s major trading and investment partners, with over £6bn in two-way trade in 2006. Many household names in the UK have invested or are doing business in South Africa, including Barclays, Vodafone, Rolls Royce, Bombadier UK, Cadbury’s, HSBC, Lloyds TSB International, Associated British Foods and Virgin. Barclays bought a majority share of ABSA Bank in 2005. The investment of R30bn was one of the largest foreign direct investments to South Africa in recent years and Barclays’ largest ever overseas investment. Vodafone is now a 50 per cent shareholder in Vodacom; Rolls Royce has a $100m contract with South African Airways, and Bombardier UK is providing rolling stock for Africa’s first rapid rail network, the Gautrain. These examples endorse the view that South Africa is a very attractive market across a range of sectors.
We want more British companies to look to South Africa as a destination for investment. Why? Because South Africa has sound economic policies coupled with an excellent legal and business environment, all of which present favourable conditions for investment. In the World Bank’s Doing Business 2008 Report, South Africa ranked 35th out of 178 countries for ease of doing business. This rating speaks for itself. In 2005 the government began to formulate a strategy to boost the country’s economic growth rate to 6 per cent of Gross Domestic Product (GDP) by 2014. Reducing the country’s unemployment rate was also high on their agenda. Economic growth had been hindered by the legacy of apartheid in the past, which had resulted in two divergent economies. The South African Government introduced Broad-Based Black Economic Empowerment legislation to help redress the social imbalance and bring the majority black population properly into the workplace. Education and training initiatives have also been introduced to upskill the workforce. South Africa is also an obvious gateway to other markets in Africa. It possesses the necessary business characteristics to help companies grow and is a springboard into the rest of the continent.
South Africa’s economy has been steadily improving over the past 10 years, averaging three per cent growth in the period from 1994-2004 and latterly rising to five per cent. As a result of stronger economic growth, corporate profits and consumer spending, the finance minister recently announced South Africa’s first ever budget surplus. Foreign exchange controls are gradually being eased, and an extra £7bn has been allocated to health, education, housing, science, technology and infrastructure ahead of the 2010 World Cup. There will also be major investment in sectors like tourism, ICT and business process outsourcing. The government’s programme is striking in its ambition, scale, confidence and the potential to further strengthen South Africa’s economy.
With South Africa hosting the 2010 FIFA World Cup, opportunities exist in just about every sector, from construction to power, education, hospitality and sports and leisure. The recent completion of an expansion of OR Tambo International Airport in Johannesburg is a major milestone in preparation for the landmark event. South Africa is preparing for this major tournament with great anticipation and UK companies are already active in the build up to the event, committed to South Africa’s legacy programme.
The UK Government has identified South Africa as a high-growth market, and as a result, is committing extra resources to assisting UK businesses to achieve commercial success. We are engaged in a robust dialogue with our hosts about the opening up of the market in legal services in South Africa, but this is nevertheless a country of real opportunity, which is looking to attract still more foreign direct investment. We look forward to welcoming more UK investment in South Africa. Brian Gallagher, the UK Trade Commissioner and his UK Trade and Investment team in Johannesburg, Cape Town and Durban, are here to support UK businesses wishing to trade and invest in South Africa, working alongside them to achieve their goals and share in their success. I hope that we will see many of you, your colleagues and clients in the coming period. There is good business to be done and a real opportunity to assist in unlocking the potential that exists, not only in South Africa, but throughout the great continent of which it is a part.