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SOUTH AFRICA has made much of its induction last year into the vaunted BRICS club, consisting of Brazil, Russia, India and China, adding an S to the acronym. But it has been a struggle to justify the country’s inclusion. With an economy just a quarter the size of the smallest member (India) and a population little more than a third of its least-populous one (Russia), a main qualification claimed for it is that South Africa is “the gateway to Africa”. The continent’s economy is now the second fastest-growing in the world, its population is more than a billion strong (not much behind China’s or India’s), and its collective GDP of nearly $2 trillion is bigger than either Russia’s or India’s. All the same, is South Africa, still undoubtedly Africa’s most powerful and sophisticated country, doing quite as well as it claims?

It did indeed once serve as a landing slot for investors wary of venturing into shakier African countries to the north. But in the past couple of decades the continent as a whole has become a lot more peaceful, democratic and stable. As a result, investment has been pouring in—and often bypassing South Africa. Some African countries, with economies growing twice as fast, are challenging its claim to be the region’s obvious first stop for investors.

The economy of Nigeria, with some 158m people to South Africa’s 50m, has been roaring along at an annual rate of almost 7% for the past eight years—and may even become Africa’s biggest by 2016, with Egypt (82m people) hot on its heels. At the same time, Ghana and Kenya, among others, are competing with South Africa to host the African headquarters of foreign multinationals. General Electric, for example, recently chose Nairobi, Kenya’s capital, as its sub-Saharan hub, copying firms such as Nestlé, Coca-Cola and Heineken.

Used to being top dog in almost everything in Africa, South Africa has been slipping down the league tables. In 1995 it accounted for almost half of sub-Saharan Africa’s GDP; today it claims less than a third. Although its economy grew at a robust 5% a year in the four years up to 2009 it has managed barely 3% since then, making it one of the slowest-growing in Africa. Its taxes are high, education is poor, and its rapid growth in real wages is outstripping productivity in almost all sectors. Foreign investment has been declining.

Jim O’Neill, the originator ten years ago of the BRIC acronym, referring to a clutch of fast-growing emerging markets with the greatest potential, says South Africa does not even deserve to be a member of the N11, the next raft of most promising developing countries. When South Africa’s ruling African National Congress (ANC) first introduced inflation-targeting about 12 years ago, he had been bullish on South Africa, he admits. But not now. The country has lost its focus and can no longer be considered the continent’s superpower, says Mr O’Neill, who now heads Goldman Sachs Asset Management.

Business Unity South Africa, the country’s main employers’ organisation, worries that South Africa is falling behind Kenya and Nigeria, among others. If Egypt settles down politically, it could become yet another magnet. Over the past five years, South Africa, with the richest mineral deposits in the world, has fallen 17 places in the Canada-based Fraser Institute’s annual survey of mining-investment attractiveness—to 54th out of 93 countries and provinces. Uncertainty over the ANC’s nationalisation policy is partly to blame.

Yet South Africa’s decline is only relative. Despite having the continent’s fifth-biggest population, it still has easily its biggest economy, with GDP per head of over $11,000 at purchasing power parity, bigger than China’s or India’s and more than four times the African average. Its infrastructure is by far the best in Africa. It has 80% of the continent’s rail network and is home to the region’s biggest stock exchange. It also has the biggest middle class, proportional to its population, of any African country.

In the Swiss-based World Economic Forum’s Global Competitiveness survey, South Africa comes top in sub-Saharan Africa and 50th out of 142 in the world. In the World Bank’s “Ease of Doing Business” table it comes 35th out of 183 and second in Africa (after Mauritius). For the soundness of its auditing standards and regulation of its securities exchanges, it is second to none. In a survey of corporate governance in 44 emerging countries by UBS, a Swiss bank, it came second, just after South Korea. But it gets poor marks for the rigidity of its labour market, its shortage of skills and, above all, for the perception that corruption is sharply rising. South Africa has to some extent begun to create oligarchs in the Russian mould, says UBS. That could deter investors.

In its second “Africa Attractiveness Survey”, published in May, Ernst & Young, a London-based professional-services firm, ranked South Africa fourth in Africa in terms of foreign-direct investment inflows in 2003-11. Yet when measured in terms of the number of FDI projects, South Africa was still easily the leading investment destination. Ernst &Young expects FDI inflows into South Africa to average around $10 billion a year for the next five years, creating 125,000 jobs, whereas Nigeria is expected to get $23 billion a year, but with only 95,000 new jobs.

KPMG, another professional-services firm, thinks the whole idea of a gateway into Africa is dated. Entry into African markets now depends more on the nature of the development, it says in a recent report. As a result, there are now several gateways, “obviously” including South Africa, but with Egypt, Kenya, Mauritius and Nigeria, among others, “representing no less [of an] opportunity”. South Africa is still attracting some big investments, such as Walmart’s purchase last year of Massmart, a South African retailer, for $2 billion. But plainly it must look to its laurels.
http://www.economist.com/node/21556300
Discuss....
 

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P.E. Aubameyang
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Gdp PPP is not a good indicator of economic performance. Nominal gdp is.

SA: $11.000 in Gdp ppp per capita

Gabon: $15.000 in gdp ppp per capita.:)
 

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Discussion Starter · #4 ·
Gdp PPP is not a good indicator of economic performance. Nominal gdp is.

SA: $11.000 in Gdp ppp per capita

Gabon: $15.000 in gdp ppp per capita.:)
Nope, nominal GDP is a better measure of the overall production and output o capacity of an economy, while PPP per capita measure is a better measure of wellbeing, cos it takes into account the cost of living in that particular country. Anyways please discuss the article, do you think SA's in decline as an African powerhouse or not?
 

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Discussion Starter · #5 ·
Be wary of mineral rich Angola
Fair enough, but is there growth(significant) in the industrial, mining and agricultural and service sectors of the Angolan economy? Or is the growth a reflection of robust petrolium production? Take a brother to school, wats good.....
 

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P.E. Aubameyang
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Nope, nominal GDP is a better measure of the overall production and output o capacity of an economy, while PPP per capita measure is a better measure of wellbeing, cos it takes into account the cost of living in that particular country. Anyways please discuss the article, do you think SA's in decline as an African powerhouse or not?
When the international monetary bottom classifies the world economic powers. He takes into account the NOMINAL GDP. Because if the International Monetary Fund takes into account the GDP in parity of power d purchase, India would be the third world economy in front of Germany, France or UK.:)

Concerning South Africa, I think that She is not in decline, it would always the first economy in Africa during 20 years still, but only that Nigeria, Egypt, Morocco or Angola, Kenya or Algeria progress.:)
 

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Discussion Starter · #7 ·
When the international monetary bottom classifies the world economic powers. He takes into account the NOMINAL GDP. Because if the International Monetary Fund takes into account the GDP in parity of power d purchase, India would be the third world economy in front of Germany, France or UK.:)
Concerning South Africa, I think that She is not in decline, it would always the first economy in Africa during 20 years still, but only that Nigeria, Egypt, Morocco or Angola, Kenya or Algeria progress.:)
We're actually in total agreement. Nominal GDP is the most accurate way to measure the total size of the economy, while GDP per capita(PPP) is the best way to measure the living standards of the population or am I missing something

I don't think SA will continue being the largest economy over the next 20 years, however I believe it will remain the wealthiest of the large countries when measured by GDP per capita (PPP)
 

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P.E. Aubameyang
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We're actually in total agreement. Nominal GDP is the most accurate way to measure the total size of the economy, while GDP per capita(PPP) is the best way to measure the living standards of the population or am I missing something

I don't think SA will continue being the largest economy over the next 20 years, however I believe it will remain the wealthiest of the large countries when measured by GDP per capita (PPP)
If you take into account as better indicator to measure the standard of living is the ppp Gdp per capita, then my country the Gabon is three first ones.
Equatorial Guinea: $25.000
Seychelles: $17.000
Gabon (my country): $15.000 .

But we know all that the fair distribution of the wealth (called still social justice) between all the populations of the country is the only one for me indicator of the standard of living.

Equatorial Guinea is widely poorer than us in the Gabon.

SA has a problem of social justice.:)
 

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Discussion Starter · #9 ·
^^ok mate we getting sidetracked. Do you have any thoughts on SA's decline as the gateway of Africa?
 

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P.E. Aubameyang
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^^ok mate we getting sidetracked. Do you have any thoughts on SA's decline as the gateway of Africa?
Nope, Your sector of industry and your constitution are among the most advanced of the world, I can say among the first 15 countries.:)

Only, a real leadership is missing in your country. Jacob Zuma is for me very incompetent.:yes:
 

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^^ok mate we getting sidetracked. Do you have any thoughts on SA's decline as the gateway of Africa?
When you get to the very top the only other way is down, South Africa is not really on decline; its only that several other African countries are catching up fast.
Remember that the South African economy has largely been mineral based while most of the other African countries have been under-explored , when the exploration bug hits Africa in a big way the other African countries may just catch up. It is likely that there will be several African countries who will be peers with South Africa in terms of economy size in the next 20years but to eclipse it we will wait and see.
 

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Still Comin' Out Strong
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Its infrastructure is by far the best in Africa. It has 80% of the continent’s rail network and is home to the region’s biggest stock exchange. It also has the biggest middle class, proportional to its population, of any African country.
This is why SA will remain a 'gateway' for a while to come. Companies looking to enter Africa obviously may want to tap the most developed/secure market before venturing into the rest of the continent. Amirite?

However, at the same time if a company is trying to enter the Nigeria and/or East Africa market, for example, then I assume it isn't like today they couldn't just venture into these markets, Kenya for EA example, instead of going to SA first. In the future (10-20 years) I'm sure it'll make little sense to start in SA before venturing into the rest of the continent.

But that's just my :2cents:

When you get to the very top the only other way is down, South Africa is not really on decline; its only that several other African countries are catching up fast.
Remember that the South African economy has largely been mineral based while most of the other African countries have been under-explored , when the exploration bug hits Africa in a big way the other African countries may just catch up. It is likely that there will be several African countries who will be peers with South Africa in terms of economy size in the next 20years but to eclipse it we will wait and see.
Nigeria and Egypt, though they'll surely be ahead long before then. Everyone else is too small at the moment. For example if Ghana/Kenya/Ethiopia/TZ/UG grow at 12% yearly for the next twenty years, the highest GDP of the group will be around $350 billion nominal (and that's Ghana going off of $37b nominal today). That's lower than SA's gdp now.

I think it'll take around 30 years before we see other African nations besides #2 (Nigeria) and #3 (Egypt) surpass SA.
 

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i think the last paragraph of the article hits the nail on the head. its gone past the stage where south africa is looked at the first country invest in b4 other countries. the profit that can b made by investing in other countries is 2 great, and many investers r willing 2 turn a blind eye 2 the shortcomings where the infrastructure of these countries r concerned (chinese investers r a good example of this).
 

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Concerning South Africa, I think that She is not in decline, it would always the first economy in Africa during 20 years still, but only that Nigeria, Egypt, Morocco or Angola, Kenya or Algeria progress.:)
uh???? :? :?

rephrase??
 

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Discussion Starter · #16 ·
^^I agree. Funny thing is that in SA the situation is sometimes looked at as a zero-sum game, as soon as an investor goes directly to another African mkt, its taken as a loss to SA, but it's inevitable in my opinion. I think its good that Africa has several "gateways" as this will facilitate more investments, its like doors to a house, if a house has one entrance there's only a limited number of people who can enter at any one time, (crappy analogy but you get the point).
 

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Ernst &Young expects FDI inflows into South Africa to average around $10 billion a year for the next five years, creating 125,000 jobs, whereas Nigeria is expected to get $23 billion a year, but with only 95,000 new jobs.

KPMG, another professional-services firm, thinks the whole idea of a gateway into Africa is dated. Entry into African markets now depends more on the nature of the development, it says in a recent report. As a result, there are now several gateways, “obviously” including South Africa, but with Egypt, Kenya, Mauritius and Nigeria, among others, “representing no less [of an] opportunity”. South Africa is still attracting some big investments, such as Walmart’s purchase last year of Massmart, a South African retailer, for $2 billion. But plainly it must look to its laurels.
This struck me as the most Interesting part of the lot.

The highlighted part shows that even though Nigeria will be getting wayy more FDI than SA, in the next 10 Years, it will be creating less Jobs, than SA's.
this can only mean one thing, -and that thing, is the fact that a good part of Nigeria's FDI Are being SUNK into Capital Intensive sectors, and not very labor intensive sectors ---{At least compared to SA}....Which in my Opinion, is not a good thing... I mean, what is the use of a HUGE FDI, that fails to create Massive Job gains, for the country at the receiving end of the Inflow??

My solution: The Nigerian government , should try to open Up, other sectors of the economy, like Hospitality and Tourism, Light manufacturing, Agriculture., Etc, so, that foreign investors can have other choices to Invest In the economy, other than the usual.
 

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Discussion Starter · #18 ·
This struck me as the most Interesting part of the lot.

The highlighted part shows that even though Nigeria will be getting wayy more FDI than SA, in the next 10 Years, it will be creating less Jobs, than SA's.
this can only mean one thing, -and that thing, is the fact that a good part of Nigeria's FDI Are being SUNK into Capital Intensive sectors, and not very labor intensive sectors ---{At least compared to SA}....Which in my Opinion, is not a good thing... I mean, what is the use of a HUGE FDI, that fails to create Massive Job gains, for the country at the receiving end of the Inflow??

My solution: The Nigerian government , should try to open Up, other sectors of the economy, like Hospitality and Tourism, Light manufacturing, Agriculture., Etc, so, that foreign investors can have other choices to Invest In the economy, other than the usual.
Yep, most of FDI in Naija's will obviously be going into oil sector.
 

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P.E. Aubameyang
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Naijaborn,
Interesting the article. Many thing remains to make for the rest of the continent to compete SA. ;)
 

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Mutu ya Chuma.
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Re: Wassup

Angola economy might be dependent on Oil, but its developing other sectors as well. Angola is just building from scratch in last 9 years. ...... South Africa will continue to be the Leader in Infrastructures, Manufacturing industry, and Technology for a good while the rest just catching up slowly.
 
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