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| World Marketplace |
Goal-Oriented
James Thompson and Ian MacMillan
10/01/2004
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Spectators at the 2010 World Cup in South Africa will witness more than a
good sporting contest. The host country itself will be on display. South Africa
is the first nation on that continent to host what many see as the world’s
greatest sporting event. Hosting the World Cup is a powerful endorsement of the
country, which expects the event to give its economy a welcome boost and as many
as 150,000 jobs.
 | | FORMER SOUTH African President Nelson Mandela, center, lifts the World Cup
trophy after it was nnounced that South Africa will host the 2010 World
Cup. (Photograph by Steffan Schmidt/AP Photo.) |
For some, winning the right to host the match is the result
of 10 years of conservative government policy and carefully nurtured economic
growth opportunities. It is also a rare chance to launch South Africa onto the
world stage and to showcase its ability to manage an event of such
magnitude.
If the exuberance in the air is to last, however, the government
of President Thabo Mbeki will have to accelerate market-oriented growth. Indeed,
investment is already flowing into the transportation infrastructure and the
property sector as the tourism industry booms. But post-apartheid South Africa,
now only a decade old, still divides into two economies, and making an economy
grow is a more complex problem than hosting a soccer tournament. The challenge
for the government is to create a winning marketplace, which is critical if the
country is to attract the foreign direct investment (FDI) it needs to grow.
FDI has been a sore spot; foreign investors have been slow to reward South
Africa for its sound fiscal policies. Public Enterprises Minister Alec Erwin has
said his goal is to raise FDI to 2 percent of GDP in the coming years, from only
about 0.5 percent of GDP last year. Given both a more stable currency outlook
and favorable economic indicators, the goal is not unrealistic.
The AIDS Crisis
Perhaps the country’s most serious long-term economic
challenge is how to deal with a labor force that is literally dying on the
workplace floor from AIDS. About 11 percent of the population is HIV positive,
and the figure in the hardest-hit regions reaches 25 percent. If left unchecked,
AIDS could hollow out the economically active portion of the population, as it
is doing in Zambia, Botswana and Zimbabwe. Early in his presidency, Mbeki
refused to acknowledge the scope of the problem. Recently, he has been more
forthcoming, and the government is now working to roll out antiretroviral drugs
across the country.
| Perhaps the country’s most serious long-term economic challenge
is how to deal with a labor force that is literally dying on the
workplace floor from AIDS. |
There are a number of South African initiatives to
address the crisis, many of which benefit from overseas supporters. These
measures are a step in the right direction, but the fight against AIDS will
continue to be handicapped until the government makes it a national priority.
One example to follow in the fight against the epidemic is that of Uganda, which
has seen a decline in HIV infection since 1995, when it launched, in combination
with various other efforts, a prevention initiative known as the ABC plan
(abstinence, being faithful to one partner and condom use).
The second most
precarious situation for foreign investors is the awkward manner in which the
country has begun its land redistribution plan. The Restitution of Land Rights
Act has allowed black South Africans whose families lost their property after
June 19, 1913, when the first race-based laws took effect, to lodge claims for
restitution. The practice is well and good as long as the government carefully
manages it. However, the government has not balanced the redistribution plan
with a similar commitment to the protection of private property rights, the
absence of which is bedeviling so many emerging and former communist economies.
Nor does Mbeki’s administration seem to have fully recognized the risk it is
running in neglecting to send clear signals about its position on this policy to
the foreign investment community.
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