United Nations Secretary-General Kofi Annan last week praised South Africa as a model for the developing world when he addressed a joint session of parliament in Cape Town. With a stable democracy, developed infrastructure, and first-world service industry, South Africa is now looking to play an increasingly robust role in what is perhaps the darkest corner of the world economy
South Africa's rise as a sub-Saharan economic superpower is almost inevitably leading the country to take a greater role in the political fortunes of the region. The bi-lateral commission held in mid-March between the Democratic Republic of Congo (DRC) and South Africa was part of an effort to bring stability to the DRC after years of turmoil and to aid the country's transition to multi-party democracy.
However, South Africa's delegation, led by nine cabinet members, was also in the DRC to hammer out a trade agreement and secure deals for South African state enterprises, including Eskom and Spoornet. The DRC is now South Africa's 34th-largest trading partner, with a flurry of free trade agreements coming over the last three years.
The importance that the government gave to the bilateral talks can be gauged by the line up of ministers who took part, with Jeff Radebe (transport), Charles Nqakula (security), Nosiviwe Mapisa-Nqakula (home affairs), Naledi Pandor (education), Lindiwe Hendrickse (minerals and energy) and deputy minister Rob Davies (trade and industry) forming the backbone of the delegation.
Strong economic growth in recent years has led some to dub the country Africa's first lion economy. South Africa has also caught the attention of multi-national corporations looking for returns in emerging markets, with 2005 proving the best year for foreign investment in the country's history.
A stable macro position, solid legal frame work and good infrastructure make South Africa the ideal stepping stone to the wider continent and it is not lost on the local political and business elites that most major investments are by companies looking to increase their African footprint.
South Africa therefore stands to gain a great deal from further regional free trade agreements. Some analysts believe that because the individual markets in the region are small trade liberalisation would increase the profile of South Africa as an attractive location for foreign direct investment (FDI).
It not just foreign multinationals however who are interested in regional trade agreements. South Africa has been the world's biggest investor in sub-Saharan Africa for some time now. South African state enterprises have earmarked investments of hundreds of billions of rand in regional projects over the next 10 years. One example of this is South African power company Eskom, which has a R26.2bn ($4.21bn) plan to tap hydroelectric power from the Grand Inga River in the DRC, which it is believed could provide power for the whole region.
Nearly all of sub-Saharan Africa is in dire need of infrastructure, and South Africa has the expertise to profit handsomely from greater ties with nearby countries.
The private sector will also be hoping to profit from closer ties with South Africa's neighbours. Anglo Gold Ashanti, for example, is currently looking to develop a greenfield site in the north-east of the DRC known as concession 14. The company also has interests in Ghana, Guinea and Tanzania.
A 2004 International Monetary Fund report, entitled "The Implications of South African Economic Growth for the Rest of Africa", found that that a one percentage point increase in South African economic growth could be correlated to a one-half to three-quarter percentage point increase in growth in the rest of Africa.
The report found that while many African countries still derive the majority of their trade from their former colonial rulers in Europe, South Africa was affecting growth through technology transfers and foreign direct and portfolio investments. In addition, because of South Africa's size and leadership role in multi-country political and economic initiatives, the report says the country could be having a positive influence on business and consumer confidence in other African countries.
The Southern Africa Development Community (SADC) is looking as if it could eventually become a regional trading bloc. The council of ministers' consultative conference is to meet in Windhoek in April to discuss possible trade agreements with China and India. The SADC group of nations includes Angola, Botswana, the DRC, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Tanzania, Swaziland, South Africa, Zambia and Zimbabwe.
While it is clear there is a long way to go before the region achieves anything resembling a common market, the mere existence of organisations such as the SADC and the South African Customs Union demonstrate both South Africa's growing influence in the region and the latent potential within these countries.
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