Politics Starts to Unsettle Investors
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School test Poor education is seen as a main reason for unemployment, says SOUTH AFRICA Simon Mundy Page 3 FINANCIAL TIMES SPECIAL REPORT | Friday November 4 2011 www.ft.com/southafrica2011 | twitter.com/ftreports Inside Banking the poor Thousands of retailers have taken on the Politics starts to unsettle investors additional role of banker Page 2 Andrew England Banking The big four are convinced they will escape considers the the worst of the global fallout but some see country’s reputation trouble ahead Page 2 as the continent’s The economy Poor powerhouse performance has been blamed on events hen the lead- elsewhere but internal ers of China, dynamics have also been India, Russia at play Page 2 and Brazil Wgathered this year for the Guest column The third Brics’ summit, South most pernicious aspects Africa was welcomed as the of the Protection of newest member of the elite Information Bill have been group of fast growing chipped away Page 3 emerging markets. The country lags behind Unemployment Jacob its peers in terms of the size Zuma has identified job of its population and econ- creation as a priority but omy, as well as its growth the country’s jobless rate rate, which has been slug- is among the highest in gish. the world Page 3 But the decision pointed Mining A debate over to the shifting world order, nationalisation has added with increased south-south to frustrations for an trade and reaffirmed South industry that should have Africa’s position as a politi- been enjoying happier cal and economic power- times Page 4 house on its home conti- nent. Investment hub Jacob Zuma, the presi- Walmart deal is seen as a dent, used the occasion to Elite club: India’s Manmohan Singh, Russia’s Dmitry Medvedev, China’s Hu Jintao and Brazil’s Dilma Rousseff, invite Jacob Zuma (far right) to their emerging markets party AFP vote of confidence in the laud his country – also a country’s potential as a G20 member – as one that year, down from 3.4 per (Cosatu), part of the govern- deficiencies, its infrastruc- government departments, continue to build up “If South Africa uses this springboard to the rest of leads Africa in “terms of cent, while predicting 3.4 ing alliance, said: “There is ture is still by far Africa’s was seen by the business and the party’s support [global] recession to build the continent Page 4 mineral and industrial out- per cent for 2012, revised a poisoned atmosphere of most developed. community to tarnish declines. infrastructure capacity, it put, electricity generation, down from 4.1 per cent. divisions and fast forming South Africa is also cred- South Africa’s image as an Nazmeera Moola, director means you come out of it in The JSE Jeremy Grant infrastructure, sophisti- That is healthier than cliques and cabals, pigeon- ited with high standards of investor-friendly destina- at Macquarie First South, an environment where they talks to cated financial markets and many developed economies, holing of unsuspecting indi- corporate governance and tion. says: “What you are start- could actually get to 5 per Russell service industries”. but falls well short of the viduals, innuendo, gossip, high-quality regulation of There is also a sense that ing to see, especially from cent growth. “But it’s a Loubser, He said it was natural rate the country needs to back-stabbing, character its financial services. politics is playing a greater a foreign investor’s perspec- question of using the oppor- (right) the JSE’s chief that the country’s partners tackle high unemployment, assassination, political and While the $2.4bn Walmart role in investors’ decisions tive, is that politics in tunity.” The problem, she executive would look at South Africa an important theme of Mr even physical assassina- deal highlighted positives than previously, amid South Africa matters. says, is “the political envi- Page 4 as a springboard into the Zuma’s administration as tions.” for the country, loud resist- concerns that the ANC Whereas for years it didn’t, ronment is so messed up region and a source of guid- social pressures mount. Mr Vavi has been equally ance to the transaction could slide down a populist in the past year it has that no one is making deci- ance on economic develop- The country lost about forthright in his condemna- from unions and three route, as social problems become an issue.” sions on critical variables”. ment opportunities. 1m jobs as a result of the tion of corruption, amid the Even if analysts ques- 2008/2009 economic crisis, perception that cronyism, tioned South Africa’s right and the 25 per cent unem- patronage and graft are on to be in the Brics grouping ployment almost doubles the increase. on economic and demo- for the young. Mr Zuma dismissed two graphic grounds, its admis- Mr Zuma has pledged to cabinet ministers and sus- sion to the club was consid- create 5m jobs by 2020, but pended the police chief last ered a diplomatic success the target looks increas- month, after they were for the president. ingly unrealistic. The finan- alleged to have been But if Mr Zuma reflects cial sector, by far Africa’s involved in scandals relat- on the year, he could strug- largest, most developed and ing to misconduct and the gle to find similar positives. best regulated, emerged misuse of public funds. His African National Con- from the 2008 crisis rela- But the worry is that the gress party dominated local tively unscathed, but banks messy political environ- elections in May, but its and the private sector ment is unlikely to improve support fell in all but one of remain cautious. until at least the end of the nation’s nine provinces. Furthermore, domestic next year, or even beyond Mr Zuma’s own position constraints are impinging until the next national elec- has also become the subject on growth prospects, with tions in 2014. of increasing scrutiny, amid electricity capacity limita- Prince Mashele, executive speculation that he could tions and rail bottlenecks director of the Centre for face a leadership challenge blamed by businessmen for Politics and Research, says: when the ANC holds its “The old ANC, the digni- five-yearly elective confer- fied, cohesive ANC – if you ence in December 2012. Nearly half the were to ask ‘Does it exist Julius Malema, mean- population lives today?’, I would certainly while, the leader of the say it doesn’t and that has ANC’s Youth League and below the poverty serious implications for the one of the country’s highest line and inequalities state. profile politicians, has “When there’s internal courted controversy, reiter- still blight post instability in the ANC as a ating his calls for the expro- ruling party, the effect is priation of white-owned apartheid gains instability in the state.” land and the nationalisation The result, he says, is of mines – exacerbating a holding back industry’s something akin to a confed- mood of investor uncer- potential, particularly in eration of ministries, with tainty in the mining indus- the mining sector. “each minister doing what try, one of the country’s Analysts say poor quality they like”. most important sectors, education, low skills and It is a situation the coun- which has underperformed inflexible labour laws are try can ill-afford, with its global peers through the hurting job-creation efforts, nearly half the population commodity boom. with unions, which are part living below the poverty The subject of a party dis- of the governing alliance, line and gaping inequalities ciplinary hearing that could enjoying a powerful role. continuing to blight gains see him suspended or An agreement between the country has made since expelled, Mr Malema is seen clothing factory owners and the end of apartheid in 1994. as the public face of those that industry’s union to The past three years have plotting against the presi- allow employers to reduce seen an increase in protests dent. minimum wages by 30 per by township residents His case has illustrated cent for new entrants angered at the poor delivery the factionalism plaguing showed compromise is pos- of services. the ANC, with people sible and might set a prece- Still, when Mr Zuma within and outside the dent for other sectors. spoke of South Africa’s party describing it as being The broader concern is potential as the springboard in crisis. that the country is bur- for investors to enter The pace of economic dened with weak leadership Africa, he was pointing to growth has disappointed and is drifting, as social and advantages economists and after a bright start in the economic pressures mount. business leaders agree the first quarter. Global eco- Critics say Mr Zuma is inde- country can capitalise on. nomic concerns and a wave cisive, seeking to appease As an example, Walmart of strikes, have caused factions in his party and used the acquisition of a downward revisions of stave off any challenge to South African company, growth in gross domestic his position. The conse- Massmart, to become the product for this year and quence is a sense of politi- first mass retailer to enter next. cal malaise. Africa. In his midterm budget In a speech last month, The country’s corporate statement, Pravin Gordhan, Zwelinzima Vavi, general sector is the largest and the finance minister, fore- secretary of Congress of most sophisticated on the cast 3.1 per cent growth this South African Trade Unions continent, and in spite of Power struggles blight the ANC nary. It should be a jubilant Politics milestone that reflects the history of a movement that Andrew England has spawned leaders such on a sense of crisis as Nelson Mandela, Oliver Tambo and Walter Sisulu.