African Arguments by Elliot Pence
South Africa has spent over a decade defining itself as different from the rest of Africa. Now, as its foreign policy pivots back to Africa and seeks to cash in on the continent’s growth, the country has sought to define itself as the leader of, and commercial gateway to, the continent. But the differences between South Africa and the rest of Africa are stark. If South Africa is nothing like the rest of Africa, what claim does it have to be its gateway, let alone its leader? Does South Africa even understand Africa?
There are a number of reasons why South Africa should be a leader in Africa. It’s the continent’s largest economy and home to its most sophisticated financial system. It has a constitution that is inclusive and progressive. But increasingly South Africa is misunderstanding the opportunities and challenges of the continent, even as it professes an interest in them.
As inbound investors steer away from Johannesburg, and the rest of the continent focuses its attention on capturing growth opportunities, South Africa’s lawmakers concentrate more and more on fundamentally different concerns: resuscitating anaemic growth, unlocking paralyzed labour markets, and balancing its obligations to country-club affiliations like BRICS and IBSA.
South Africa’s central claim as a ‘gateway’ to Africa rests on the assumption that it offers investors a secure and sophisticated landing pad filled with local partners able to take foreign investors into a rapidly expanding continental market. With the notable exception of telecommunications (MTN has outpaced nearly every corporate investor in Africa, earning over 75 percent of its profits outside of South Africa), the reality is that the country’s commercial access and influence is limited regionally and economically. Nearly 90 percent of South Africa’s trade is focused on SADC countries, only two of which (Zambia and Mozambique) are in Africa’s top 10 fastest growing economies. Only 1 percent of Nigeria’s total imports came from South Africa and the country is Ethiopia’s 22nd largest investor, despite a growth rate of over 10 percent. Two of the emerging strategic energy markets in the world, East and West Africa, receive just 10 percent of South Africa’s inbound trade and investment.
South African companies continue to benefit from the mistaken notion held by many multinationals in the US and Europe that because they are South African they have a better understanding of the markets in the rest of sub-Saharan Africa. But South African firms historically haven’t seen the rest of Africa as a particularly attractive export destination.
South African companies’ external expansion plans were initially focused on developed markets, such as Australia. In the 1990s, South African multinationals greeted the emergence from apartheid with trepidation and felt that risk diversification was better served by expansion outside the continent. There is only limited evidence to suggest that they are any better acquainted with the continent’s growth story now. One telling demonstration of this is the route the South African government’s own pension fund, the Public Investment Corporation, has taken into the continent. Despite a 100-year history, its board only started to take Africa’s growth seriously two years ago when it authorized the fund to allocate up to 10 percent of its $114 billion in assets in the rest of Africa. To its credit, it is doing so gradually because it “doesn’t understand the African market [or risks] very well,” according to its CEO, Elias Masilela.
Standard Bank — itself engaged in an ambitious pivot back to Africa, investing $100 million in building new African subsidiaries to do so — has labelled South Africa’s expansion “constrained” and “narrow” and called on its policy makers to articulate a more China-like “focused strategy” to the continent’s growth markets. A recent paper investigating the South African government’s “gateway strategy” by the South African Institute of International Affairs draws an even more frank conclusion: the gateway “rhetoric” belies the gateway reality.
Rhetoric or not, the effects of South Africa’s limited commercial exposure to Africa’s growth markets has seeped into its diplomacy, reflecting a deeper misreading of its place on the continent. In its “Vision 2030” document, South Africa’s National Planning Commission admitted as much: “South Africa is perceived as a bully [and] self-interested hegemon that acts in bad faith among neighbouring countries.” The report goes on to state that South Africa’s policy-makers “tend to have a weak grasp of African geopolitics” and often only “muddle through” negotiations concerning cooperation and integration with its African counterparts. As a result, diplomatic missteps pile up in places like Nigeria – the continent’s future economic powerhouse – over petty visa issues.
The palace coup South Africa orchestrated earlier this year to reserve the African Union presidency to Ms. Dlamini-Zuma — President Zuma’s ex wife — displeased the continent’s smaller countries, which are traditionally given the top job. Even after having lobbied to get the position, South Africa seemed not to want it, after realizing it had neither the budget nor the capacity to promote its interests (97 percent of the AU’s budget is western-backed and 40 percent of the positions are unfilled).
Having visited only two non-SADC countries on official state visits, President Zuma’s travel plans have not helped the situation. With such a limited travel agenda, it’s little wonder that South Africa lined up on the opposite end of most African countries on the two defining regional conflicts of the past two years (Libya and Cote d’Ivoire).
South Africa’s history is hardly Africa’s. But increasingly, neither is its future. If South Africa is to remain a leader – economically, diplomatically – it must look at Africa anew and not assume it is the best place to enter the continent, or even that it really understands it at all.
Eliot Pence is a director at the Whitaker Group, and Global Governance 2022 Fellow. He heads the firm’s oil and gas practice. In 2012, The Diplomatic Courier named him one of the 99 most influential foreign policy leaders under the age of 33. African Arguments