ECONOMY: Businesses in Southern Africa Run an Obstacle Course

By Moyiga Nduru Reprint | | Print |

Moyiga Nduru

JOHANNESBURG, Oct 2 2004 (IPS) - It was a case of ideals clashing with reality this week, as far as doing business in the Southern African Development Community was concerned.

While the free movement of goods and people within the region may be something the grouping aspires to, a survey released in Johannesburg has shown that the Southern African Development Community (SADC) has some way to go before achieving this goal.

According to the study, conducted by the Association of SADC Chambers of Commerce and Industry (ASCCI), entrepreneurs face unnecessary obstacles when conducting their day-to-day business in the 13-nation grouping. (While Madagascar was admitted as the 14th member of SADC during a summit held in Mauritius in August, this decision will only take effect from next year.)

"Fluctuations of exchange rates, crime, lack of market information, customs procedures and economic and regulatory policy uncertainty are the top five obstacles to intensified trade with other SADC countries," Cader Sayed-Hossein, ASCCI vice-president, told journalists in South Africa’s commercial hub, Thursday.

He said these problems would not be easy to tackle, but that the experience of countries elsewhere had shown small steps in right direction yielded rewards: "For example, the improvement of property rights and the measures passed to ensure the security of investment in China have launched a process that has lifted 400 million people out of poverty in recent years."

The survey covered nine of the 13 SADC member states, namely Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland and Zambia. The fact that key SADC countries such as Angola, the Democratic Republic of Congo, Tanzania and Zimbabwe were omitted from the study was a source of some concern, however.

"I think nine out of 13 is a reasonable number," Sayed-Hossein said. "Zimbabwe couldn’t participate because of logistical reasons. It has nothing to do with the situation there."

Martin Kanshichi, the president of ASCCI, agreed. "This is just a pilot project. We hope to improve on it next year by covering all the 13 SADC countries," he told IPS.

The comments of the two men come as Zimbabwe is grappling with a political and economic crisis that has seen its suspension and withdrawal from the Commonwealth, and the application of sanctions against high-ranking officials – including a travel ban. This comes in the wake of two elections marred by allegations of human rights abuse and vote-rigging.

Zimbabwe’s key agricultural sector has also been dealt a blow by farm occupations that got underway in 2000 – spearheaded by veterans of the 1970s war of liberation, and other militants. Prior to this, the majority of Zimbabwe’s prime agricultural land had been controlled by minority whites – a legacy of colonial injustices. The state is currently experiencing wide-spread unemployment and triple-digit inflation.

Despite its vast oil and diamond resources, Angola also poses challenges to would-be investors.

Human Rights Watch, a non-governmental organisation based in New York, has pointed to massive corruption within Angola’s oil industry. A report released in January 2004 by the group says over four billion dollars in oil revenue appears to have vanished from government coffers between 1997 and 2002.

Similarly, Angola’s diamonds – once used to finance the rebel National Union for the Total Independence of Angola – have yet to benefit ordinary citizens extensively.

A report issued in June this year under the auspices of the Pretoria-based Institute for Security Studies says, "Despite the notional return of peace to the Lundas (a diamond-producing region of Angola), the management of the diamond industry retains many of the characteristics that it acquired during the period when the diamond fields were both a prize and weapon in the civil war…"

The report notes, for example, that the sector is controlled by "secretive networks" that operate to the benefit of "political elites".

Nonetheless, "We hope Angola will be covered in the survey next year," Thomas Bedenbecker of German Technical Cooperation – a development agency of the German government – told journalists.

In August, South African Deputy President Jacob Zuma led a high-level delegation to Angola to explore investment prospects in the country. Angola’s three-decade-long civil war ended in 2002.

Sayed-Hossein urged Southern African governments to address the complaints raised by businesses about corruption – but emphasised that the region’s difficulties in this regard were not unique.

"We are not the only region of the world which suffers from these types of problems," he said. "We are confident that there are many opportunities for companies wanting to invest and expand their production facilities and markets into Southern Africa."

The survey focused on the manufacturing sector, which is central to reducing unemployment in SADC states. A total of 333 companies took part in the study, most of them private firms.

Just over 42 percent of respondents were from South Africa. Namibia contributed the second-largest number of respondents (16.2 percent), while 13.5 percent of participating companies came from Mauritius.

According to the Johannesburg-based South African Institute of International Affairs (SAIIA), South Africa’s dominance of regional markets may pose a further challenge to creating a common market in SADC.

Although South Africa has opened up its market to regional suppliers, its share of SADC trade rose to about 80 percent between 1995 and 2000, says SAIIA. This could result in reluctance on the part of certain governments to lower trade barriers, as some might fear their industries would not survive competition from South African firms.