Address by the Minister of Foreign Affairs,
Dr NC Dlamini Zuma at the Gordon Institute of Business
Science, University of Pretoria, Illovo Campus, Sandton,
26 July 2004
Professor Nick Binedell, Director of the Gordon Institute
Ladies and Gentlemen,
Firstly, I would like to thank Professor Binedell,
Director of the Gordon Institute of Business Science,
for inviting me to address this esteemed audience on
a topic of "The Politics of Investment in Africa:
Risks and Returns"
Investment in Africa is critical to the realisation
of the African Renaissance - a peaceful, stable and
prosperous Africa. This can only be realised through
the collective efforts of Governments, business and
When talking about the politics of investment, one
cannot escape looking at Africa's history, the present
and the dream and vision of the future. Slavery, colonial
and apartheid rule on the Continent can only be described
as the most brutal and systematic period of asset stripping
in modern history. The best of Africa's human capital
and natural wealth has been ruthlessly exploited for
the benefit of a small elite and foreign countries.
That is the past, of course, one cannot sit and lament
the past forever. The African leadership in the 60's
took the decision to unite and struggle until all the
African countries are liberated. That, by and large,
has been achieved with the exception of Western Sahara.
Our history poses great challenges for all of us in
the 21st, which we have called the African century.
At this point in time, Africa has a critical mass of
leadership that has understood what needs to be done
to create a sustainable investor-friendly environment
and to meet the general requirements of the African
Renaissance. Africa also needs business leadership who
has dreams, creativity and a vision that will enable
the Continent to confront these challenges.
What is being done to ensure that such an environment
is created and sustained?
On the Continent we have witnessed very fast and positive
developments that have seen the transformation of our
Continental organisation, the OAU to the AU. In line
with the notion that it is all in the genes, organisations
like the OAU had to make sure that its genetic make-up
is able to evolve with the challenging environment and
demands of the 21st century.
Borrowing from the Financial Mail article, "It's
all in the genes", the OAU "like Professor
Bindell and others was of the belief that its DNA is
changeable, it learned how to debrief itself and abandoned
old attitudes, behaviours and practices and was not
only able to absorb new information, new behaviours
and habits but was able to abandon these that no longer
served it and hence the movement from the OAU to the
Amongst these major changes, it has realised that the
Continent will never reach its full potential of development
if it continues to marginalise women and leave them
out of the decision-making echelons, both at the AU
level but also at the national level and hence the bold
decision to have gender parity at the Commission level
and in all AU institutions and at the national decision-making
structures, e.g., Parliament, the executives, civil
servants, courts, public universities, diplomatic corps,
etc and that all Heads of State have to report every
year at the Summit on progress in this regard.
The AU has not only the new structure but has a new
vision, new strategy and new policies that will guide
it through the coming decades. All these efforts are
important in producing an environment, which promotes
The sceptics said that this does not mean anything:
we have only removed an O from the OAU and everything
will remain the same. But now there is consensus that
the AU is definitely different from the OAU. That beyond
just the change of name, the genetic make-up has been
Two broad priorities which are the two sides of the
same coin have been identified, peace, stability, security
on our side; development and economic prosperity on
the other, both underpinned by democracy, respect for
the rule of law and human race and good governance.
Let us have a look at what has been achieved.
The Assembly, the Executive Council, the Commission
and the Committee of Permanent Representatives are now
fully operational. The creation of a Peace and Security
Council gives both a political and legal framework for
dealing with the full spectrum of conflict resolution
from the early warning stage to conflict resolution
to post conflict and peace management and post conflict
Darfur is one of the first conflicts that we have to
deal with. It has also taken on all the other conflicts
and is giving leadership and action where necessary.
The inauguration of the Pan African Parliament as one
of the fundamental institutions for nurturing values
of democracy, respect for human rights and good governance
has taken place.
South Africa has been provided with an historic opportunity
by the African Union to be the Permanent Seat of the
Pan African Parliament, which will have its Second Session
in this country in September 2004. The AU's offer for
us to host this Continental Parliament is, indeed, an
indication of confidence in our abilities to host, but
more importantly in the sustainability of our democracy
You are equally aware that the Peace and Security Council
(PSC) was inaugurated on 25 May 2004 in Ethiopia. The
launch of the PSC was a historic moment giving us a
framework for conflict prevention, management and resolution
and for peacekeeping and peacebuilding. This new organ
signifies our determination and unwavering commitment
to rid the Continent of any form of instability and
to ensure that enduring peace reigns on all corners
of our Continent. A well functioning PSC bodes well
for a continent in the midst of an unprecedented renewal.
An Africa renewing itself.
As a member of the PSC, South Africa will do all that
it can to ensure effective functioning of this important
instrument of African Peace. As such, we shall continue
to contribute to the various conflict resolution and
post-conflict reconstruction efforts that we are engaged
with on the Continent. We shall do so, because we remain
steadfast in our assertion that peace and sustainable
development are the necessary conditions that will give
meaning and content to our desire to ensure a better
life for all Africans. Through these efforts we are
certainly investing in Africa's present and future,
bringing forward the dawn of a better tomorrow.
The PSC held its first session at the level of Heads
of State and Government, where it took a decision to
deploy AU military observers and members in Darfur,
in Western Sudan. The AU through its Peace and Security
Council also intends to deploy about 300 troops to protect
its observers and civilians in Darfur soon.
Significant work is in progress in respect of establishing
an African Standby Force which can be rapidly deployed
and an Early Warning System to bolster the effectiveness
of the Peace and Security Council.
Africa is, indeed, currently engaged in profound and
fundamental processes of renewal. This is part of the
second wave of democracy to sweep the continent in recent
years beginning with the liberation of South Africa
in 1994. The over-arching objective is to break the
vicious cycle of political instability, poverty, and
underdevelopment, as well as to strengthen Africa's
capacity to defend and advance her interests in the
global arena. The key building blocks of this strategy
are increased political unity and concerted action through
the new African Union, and accelerated socio-economic
transformation through the New Partnership for Africa's
Development (NEPAD), which is the AU's programme.
To this end, in May this year, African leaders met
in Maputo, Mozambique, as Heads of State Implementation
Committee to review the progress made in respect of
NEPAD. Among others, they agreed on accelerating the
priorities of NEPAD in general and the building of infrastructure
and the provision of food security in particular. We
assert that NEPAD is an integral part of the African
Agenda designed for Africa's regeneration and renewal,
whose success is dependent upon the collective ownership
by all Africans on the continent and in the Diaspora.
It is on the basis of NEPAD that Africa continues to
interact and partner with both the developed and developing
world with a view to pushing back the frontiers of poverty
and under-development. In keeping with the recent practice
of the G8 leaders to engage with African leaders on
NEPAD, we have just returned from the USA, where we
explored with the leaders of the G8 Africa's increased
access to support, financial and institutional, for
the implementation of NEPAD.
NEPAD is also endorsed as the framework for South-South
cooperation. In this regard, our President, President
Thabo Mbeki has been invited to address fora such as
the Asia-Africa Sub-regional Organisations Conference
(AASROC) - explain - the China-Africa Cooperation Conference
Forum, and the Non-Aligned Movement on the NEPAD. NEPAD
also provides us a framework of operation in our interaction
with our partners in the recently formed India-Brazil-South
Africa Dialogue Forum (IBSA). These initiatives are
important because they also signify a South Africa and
an Africa that is looking East and also looking South
for investment opportunities and economic potential
as well as seeking investment from these largely untapped
markets in its own economies.
NEPAD has also been endorsed by the United Nations
(UN) and is now the framework for all UN involvement
Ladies and Gentlemen
In the pursuance of good governance, accountability
and transparency, an African Peer Review Mechanism (APRM)
has been established to promote the sharing of best
practice and peer learning.
The primary purpose of the APRM is to foster the adoption
of policies, standards and practices that lead to political
stability, high economic growth, sustainable development
and accelerated sub-regional and continental economic
integration through the sharing of experiences and the
reinforcement of successful and best practice, including
the identification of deficiencies and an assessment
of needs for capacity building. In other words, APRM
is our unique way of peer reviewing ourselves, learning
from ourselves, correcting ourselves and doing what
we believe is right.
Participation in the APRM is voluntary and open to
all member-states of the AU. It is envisaged that participation
in the APRM will expedite social, economic and political
reforms, consolidate democracy and sound economic management,
enhance transparency and the accountability of leaders
and deepen trust and cooperation among governments and
The determination of criteria, standards and indicators
and the modalities for operationalising the process
have been finalised and the first set of reviews have
begun, starting in Ghana.
Twenty-three (23) AU member-states, including us, have
signed up for review, and still others will be inspired
to join as it success becomes evident. We are anticipating
that the results will have a very positive effect on
The APRM process will also focus on accelerating the
transformation of public service institutions and increasing
their effectiveness and efficiency in service delivery.
Thus, the review process will examine aspects of socio-economic
delivery and performance.
What is the progress on other institutions?
The Protocol of the African Criminal Court and Court
of Human Rights has been completed. The African Court
for Human Rights is in the process of being established
- judges are being recruited. For the criminal court,
the Protocol is in the process of being ratified by
the national parliaments. The statutes for the economic
and social and cultural commission has been completed,
and is now being set up. All this has happened in only
two years. This is unprecedented to reach consensus
on so many major issues in such a short space of time.
Even in smaller organisations, they took years to accomplish
what we have in exactly 2 years.
Next we shall be embarking on the development of
the protocols of the financial institutions:
African Central Bank
African Development Bank
African Monetary Fund
This will then complete the major institutions of the
Ladies and Gentlemen,
Africa today is beginning to have the sort of profile
that we would all like to see. It has moved to the centre
stage of the international agenda and features prominently
at all major conferences.
The international community, led by the UN and the
G8, the latter through its Africa Action Plan, has welcomed
current positive developments in Africa. Countries on
our Continent continue to enjoy preferential access
to Europe (under the Anything but Arms Initiative).
Economic relations with the US are guided by the African
Growth and Opportunity Act (AGOA). The latter has recently
been extended to 2015.
The issue of market access is crucial at this time,
as the parties in Geneva at the World Trade Organisation
(WTO) attempt to reach a framework agreement for the
resumption of the Doha Development Agenda. Central to
these attempts is the issue of how to improve agricultural
market access for developing countries. As we all know,
this is affected not only by tariffs and other trade
barriers, but also by subsidies, both through domestic
support measures and through export subsidies. These
latter measures have rightly received widespread condemnation
for the pernicious effect they have on African producers.
They make it unproductive for farmers to continue working
in their own countries by undercutting the prices at
which it is economical to farm. It would seem that there
is acceptance in Geneva now that export subsidies must
go, and this is certainly encouraging.
However, market access, with trade-distorting subsidies
removed, will not by itself solve Africa's problems.
We have seen how little difference tariff-free access
for practically all products has made to the Least Developed
Countries in Africa. What they have lacked is investment:
investment in productive capacity to help them improve
and develop their products so that much greater value
can be realised. Without this investment, they will
be condemned to forever sell their unprocessed products,
at sometimes wildly fluctuating prices, to others with
capital, who can process them and realise their full
Capital flows are crucial to the industralisation of
the continent. At this point in time the majority of
countries that need capital are still nett exporters
of capital. This clearly needs changing. Let me share
with you something I find very interesting. According
to the World Bank remittances which ordinary African
workers while working abroad send home to their families
constitute the 3rd most important sources of external
finances for the continent. The other 2 of course are
Bilateral Aid and foreign direct investment.
According to the World Bank's annual report of 2003
workers remittances reached 4 Billion Dollars in 2002.
This means that the many thousands of ordinary African
men and women who often work under very difficult circumstances
what they are investing in their home continent exceeds
the entire amount of loan capital that the private sector
made available to Africa in the same year.
The total amount of remittances has doubled every 2
years, if this trend continues the amount may reach
6 Billion Dollars in 2004/2005. This is a contribution
to poverty alleviation.
The ordinary people of Africa lead the business world
by example. Now the environment should be conducive
enough for the private sector to invest a lot more.
What are some of the Risks to Investment
- Conflict or war, but this is being vigorously addressed
where it exists
- Unpredictable legal and policy environment and high
dependency on personalities rather than entrenched
systems and institutions
- In some places there is entrenched corruption
- Weak or bad Government and bureaucracies
- Unpredictable tax system
- Currency volatility
- Poor transport infrastructure (rail and air)
- Weak private sector
- Low skills base in some countries
- General underdevelopment
There are also misconceptions:
Generalisation: Inability to differentiate the
strengths and weaknesses of each country. Treating the
continent not only as a solid geographical place but
also as though it was one country.
International NGO's: These sometime exaggerate
situations so as to raise money in their parent countries
for an example in 2003 several well known NGO's based
in the United Kingdom had to withdraw their claims that
Southern Africa was in the grips of a famine of biblical
proportions. After an independent review showed that
these claims were made public because of internal funding
pressures on the NGO's themselves.
Misconceptions about crime, diseases and conflict.
We have to battle with these misconceptions all the
time. The truth of the matter is that opportunities
and returns outweigh the risks.
The good thing is that most of the risks can be turned
- Africa is very rich in raw materials, which it gets
very little for. The major issue is how do we make
sure that it adds value and is beneficial the raw
material. How do we change it into an industrial continent?
- How do we change Africa into a place of scientific
and technological innovation?
- Africa is very rich in oil but it does not even
have a big oil company to speak of.
- It is a big producer of gold, the majority of which
is refined outside the continent. Other precious metals
include diamonds, platinum, cobalt, to mention a few.
- Africa also has a significant number of cocoa plantations
but hardly has any chocolate factories. Most of its
cotton is exported raw and so is its coffee and so
on. Many countries still sell cattle on the hoof to
other countries - there is no meat industry. There
no facilities for food storage. There is no agro industry
and the fruit cannot be turned into juice or dried
fruits, to mention a few problems.
- Dairy products are imported even though they have
- Timber logging companies from outside the continent
even exploit the lack of capacity to monitor quotas.
- Has a very long coastline but fisheries are rudimentary;
Marine transport is also an area of importance, but
- Rail development for movement of goods and people;
- Tourism - Africa is a world in one Continent, every
type of tourist can find what they are looking for;
- Pharmaceutical industry and medical equipment. Different
variety of animal and plant species and megadiversity;
- Leather industry;
- ICT is a growing industry but needs to even catch
up with other Continents. These are just a few examples
of what is available on this wonderful Continent of
- Because there is nothing, everything is an opportunity.
Opportunities for domestic and international investors
abound as the NEPAD infrastructure and agriculture projects
come on line. The infrastructure projects are in the
energy, transport, ICT and water and sanitation sectors,
among others. It is important to note that the World
Bank Board approved funding for two major projects in
November 2003, namely the Southern Africa Power Market
Project and the Southern African Regional Gas Project.
In this way, the foundation is being laid for harnessing
Africa's resources for Africa's own benefits.
These are just examples of a few of the opportunities.
- Labour is abundant and reasonable
- If we develop industries - very skilled African
human resources in the developed countries will have
incentives to come back
- Africa is a large market
- Regional integration will also consolidate the regional
markets and simplify trade
High demand for manufactured goods
- Demand for the banking sector
It is clear that the opportunities far outweigh the
Business leadership and investment is very important
for turning this situation around. A hard-nosed businessman
confronted Marcel Proust, the French philosopher and
author. The businessman who had no time for ideas told
Proust that a little dreaming is dangerous. Proust responded
as follows "if a little dreaming is dangerous the
cure is not to dream less, but dream more and dream
all the time".
Today we all accept that great new business ventures
are built on dreams. Business history demonstrates clearly
that to invest successfully in new ventures requires
boldness, the ability to dream and a vision of doing
things in a new way. The ability to be able to adopt
and endure the genetic make-up of the company.
Africans are pursuing their dreams. They are taking
the initiative to invest in Africa and are helping each
other. They are shaping their economic security and
prosperity for the future.
The Captains of industry have to play a critical role
in assisting in pursuing these dreams. I am glad that
a lot of South African companies are already doing exactly
What are the Risks?
Of course we have to work in partnerships so that we
can assist in bilateral agreements that are needed to
protect investments, deal with taxation and a whole
range of other enabling agreements. We believe that
our continent is now a place of hope. We are expanding
our presence in our continent, with the hope that in
about 5 years we shall be in almost every country. To
date we are in 32 countries.
Partnership with government is important. One of the
biggest opportunities in our own country came about
there's a small collective investment between Industry,
Government and Sports. The return on that modest was
the spectacular wining of the 2010 World Cup. Africa
will host the biggest sporting festival, the World Cup.
The real return will be large.
The good news is that the World Bank forecasts 7% real
GDP growth for the whole of Sub Saharan Africa for 2005.
A third of Africa's states have sustained economic growth
rates above 4% for more than a decade. Africa is not,
as often stated, only dependent on the extractive industries.
Many countries have developed sophisticated and diversified
economies. According to Standard Bank's research financial
and business services are now largest contributors to
South Africa's GDP (21%) followed by manufacturing (19%)
and general government services (16%). The mining sector
contributes 6% of GDP. The same holds true for Nigeria,
sub Saharan Africa's second largest economy where a
recent study shows that the manufacturing sector attracts
more than half of the country's FDI projects.
It is therefore not surprising that the World Bank
in its most recent annual report finds that Africa offers
the highest return of foreign direct investment anywhere
in the world. Similarly, a recent study of investment
by American transitional corporations in Africa over
the last 12 years shows that their FDI returns have
averaged 29% annually with higher returns than any other
of the regions world-wide.
In conclusion, I believe that you, the captains of
industry, have a central role to play in unlocking the
potential of our African Continent and participating
in its growth and development. The imaging and dream
of a new Africa cannot be that of Government alone,
but ought to be as a result of the collective thinking
of a range of sectors and players on the continent.
Indeed, as Callisto Madovo and Jean-Louis Sarib, Vice
Presidents of the World Bank has observed in 1997 in
their paper entitled A New Africa is Generating Success
and Hope, Africa is on the move. "From Mali to
Uganda to South Africa, hope and real success are transforming
the continent. A new spirit of social and economic progress
has energised much of the region".
Let this spirit be part of who we are and why we do
what we do. For the sake of our children who are Africa's
children, and for the sake of our future which is Africa's
future, let us work together and invest in the present
so as to build a better tomorrow, an Africa not in the
throes of poverty but indeed in the midst of an enduring
Thank you very much for your attention.