Are southern Africa's efforts to combat corruption, increase exports and encourage inward investment finally paying off?

By PETER HAWTHORNE /CAPE TOWN

ith the economic tigers of Asia licking their wounds, is this the moment for sub-Saharan Africa to breed a pride of lions to take their place - or even mount a credible challenge? Up to now, "No way" would have been the response from international investors who have confined their activities to speculative raids on South Africa's volatile stock market in pursuit of short-term portfolio profits. Currency risk, heavy-handed governments, trade barriers and abysmal investment returns have combined to keep much of Africa off-limits to all but the most intrepid investors. Corruption, violence and political instability have also scared off international capital.

But to hear people like Kaire Mbuende talk, southern Africa at least is poised for a breakthrough that could usher in an era of investment and growth to take this sidelined region into the global marketplace. To be sure, the executive secretary of the Southern African Development Community (S.A.D.C.) is paid to be bullish about the region's prospects. But at last month's southern African economic summit in the Namibian capital of Windhoek, Mbuende was one of several speakers to serve notice that the S.A.D.C.--an economic and political grouping of 14 countries with a combined population of 185 million--is determined to become a good-news, investment-friendly, export-driven region that can kick-start the area's moribund economies.

The scenario Mbuende and other summit participants predicted is one of sure-but-steady change led by the region's economic locomotive, South Africa. Together, the 14 account for more than half of the economic output of sub-Saharan Africa; the World Bank estimates the size of the S.A.D.C. combined economy at $172 billion. And after decades of falling output the tide appears to have turned. The region is now achieving a growth rate of over 6% compared to Africa's average growth of 5% and the 4% recorded by the world's industrialised countries.

The notion of African competitiveness may still constitute an oxymoron, but the World Economic Forum's Africa Competitiveness Report for 1998, a joint endeavor by the WEF and the Harvard Institute for International Development presented for discussion at the Windhoek conference, detected sure signs of a turnaround. "The world is finally listening to Africa," says Harvard Institute's Jeffrey Sachs, co-author of the report. "Now we are waiting to hear what Africa will tell the world." The report, which analyses the comparative economic strengths and weaknesses of 24 African countries, listed four of the S.A.D.C.'s member states--Mauritius, Botswana, Namibia and South Africa--in the top seven.

None of these four better illustrates southern Africa's spirit of renewal than Namibia itself. Tucked away in a desolate corner of southwest Africa, Namibia was for years a pawn in the game of global power politics as international anti-apartheid forces sought to wrest it from South African control. In 1990 when it became independent under a Marxist-inclined black leadership it had all the makings of another African socialist disaster. Now, thanks to a government shift toward business-first, investment-friendly policies, it boasts a free-market economy that has grown by 15% since 1992. Namibia's per capita income of $2,000 a year is more than double the S.A.D.C. average, it has a GDP of $2.6 billion and hardly any external debt.

Another piece of good news is Mauritius, described in the report as "perhaps Africa's most impressive economic success story." The former Indian Ocean British colony--poor, undeveloped, distant from major markets at independence 30 years ago--today sits atop the WEF competitiveness index, boasting a per capita annual income of $3,690, annual growth of 5.5% and a continent-leading 2% unemployment rate. Mauritius' secret was to follow the east Asian tigers' approach of low-wage, export-oriented development. It established an Export Processing Zone which attracted foreign ventures through tax concessions and other incentives and now produces some two-thirds of the country's exports, most of which are textiles and clothing.

Impetus for the optimistic goals has come from South Africa, which accounts for 74% of S.A.D.C. output, almost two-thirds of exports and 57% of value-added manufacturing. Now freed of its apartheid chains, South Africa is not only beginning to pull in more direct investment ($8 billion since 1994) but is also becoming the main engine of growth for the economies of southern Africa and beyond, its know-how being employed in deals from electrical power projects and breweries to mining ventures and tourism. With a sophisticated infrastructure and close involvement in rehabilitation and development projects in neighboring countries such as Mauritius, South Africa is the only country with the driving force to lead the sub-continent into the world market-place.

It will be no easy task. Despite its relative wealth South Africa faces serious problems of its own. They include rising unemployment, crime and corruption at regional and local government levels. And, ominously, Deputy President Thabo Mbeki has warned South Africans of a "mounting rage" among blacks at the lack of white commitment to racial reconciliation. Although South Africa has had solid economic growth in recent years and won plaudits from the international financial community for its no-nonsense budgetary policies, the country is still struggling to establish its economic credentials. Two weeks ago the South African Reserve Bank was forced to intervene to shore up the falling rand. The price of gold--a mainstay of the economy--is trading dangerously close to $290 an ounce, and labor unrest has become a disturbing factor. Problems of transition and concern at South Africa's alarmingly high crime rate clearly contributed to its rock-bottom ranking in the WEF's African "optimism index" of business attitudes toward reforms and growth on the continent.

And while the S.A.D.C. can boast relative successes in Mauritius and Namibia, it also has its share of horror stories such as Angola and the most recent recruit to its membership, the Democratic Republic of the Congo (formerly Zaire). At the Windhoek conference, Laurent Kabila, President of Congo, appealed to international business to help rebuild his shattered country by investing in the development of hydroelectric power and mining ventures in the Congo River basin--a plea not likely to receive an enthusiastic reception until and unless he gets his political house in order. South Africa is helping him do so by training officials for the Congolese Central Bank and the civil service. "We believe that not just we in Africa but the rest of the world have an obligation to assist in redressing more than three and a half decades of destabilization," says Mbeki.

That's easier said than done. Most of the S.A.D.C.'s poorer countries are so heavily in the red that what little they earn goes to pay off their international debt. For sub-Saharan Africa to compete in world markets it will have to start with a clean slate. "African countries have to say they are ready for bold economic reforms and credit countries have to write off the debt," says Jeffrey Sachs. But thus far, he warns, African governments have been too slow: "They are too grudging on the one hand and they are receiving insufficient support when [reforms] do occur on the other."

Much is at stake. The S.A.D.C.'s Mbuende maintains that "going global has ceased to be a matter of choice. It is a matter of survival." Modest though the S.A.D.C.'s marketplace may be, it may also be the only chance for sub-Saharan Africa to gain a real foothold in the world economy. The Asian tigers may be licking their wounds at present, but will very soon be back on the prowl.