It’s been a bad year for South Africa. The series of mine strikes that plagued the country for months has ravaged the economy and tarnished the country’s image with investors. Foreign direct investment in the country dropped 46 percent in the first half of the year alone, a horrible showing compared to other developing countries, where FDI dropped an average of only 4.8 percent over the same period. The country is well on its way to losing its reputation as the safest investment in Sub-Saharan Africa.
In a guest post for John Campbell’s Africa in Transition blog at CFR, South African John Causey, an independent private equity consultant, compares the optimistic and pessimistic forecasts for his country in light of the FDI drop.
The pessimists, like Morgan Stanley and the Economist, paint an extremely dreary future for the country. Morgan Stanley predicts that Nigeria’s growth will soon outpace South Africa’s. The Economist contends that other issues plaguing the country (lack of basic services, debt downgrade, status quo politics, and so on) will keep investors away from the country for a while to come.
For the good news, Causey points us to FirstRand CEO Paul Harris, who argues that South Africa is just fine. His evidence? South Africa was admitted to the BRIC group two years ago, and local sports teams have made the country proud in recent rugby matches and in the Olympics.
If this is the best case for South Africa’s success, color us unimpressed. South African rugby may have helped bring the nation together at one time, but the country’s political and economic problems are far too serious and messy to be fixed by an inspirational sports video. The BRICs argument is at least more serious, but it would be more convincing if the organization was more than a useless talking shop for countries with little in common.
Unfortunately for South Africa, it looks like the pessimists have won the day here.