South Africa on Thursday called for a tough stance on corruption, a key barrier to economic growth in Africa, proposing a name-and-shame campaign against big companies involved in the practice.
”Clearly, corruption is a very big issue,” South Africa’s Minister of Finance Trevor Manuel told delegates meeting for a second day at the World Economic Forum for Africa in the Mozambican capital.
”But we also need to look at those who corrupt. We need to get to the corruptors as hard as those who take it,” Manuel told the conference attended by more than 700 delegates.
Manuel cited the example of Lesotho, where several major international companies have been found guilty of paying bribes to officials at the Lesotho Highlands Water Project, which supplies water and electricity to neighbouring South Africa.
He said Lesotho and South Africa were frustrated in their attempts to have these companies blacklisted by the World Bank.
”The World Bank is giving us the runaround. These companies need to be clearly marked and space should be left open for companies who have not done this sort of thing,” Manuel said.
A report on African competitiveness released on Wednesday by the Swiss-based World Economic Forum painted a bleak picture of Africa’s economies, saying the ”long-awaited renaissance of the African economy has not taken place”, describing dismal performance as ”the worst 20th-century tragedy” after decolonisation.
Manuel criticised rich countries’ approach to Africa, saying trade relations are still driven by commodities.
He said ”a colonial relationship based on the extraction of wealth” in Africa still exists, especially in the oil industry.
”It’s still a question of ‘all that you need is a big hole with black stuff’ to attract foreign direct investment,” Manuel said.
Other factors holding back the continent’s economies include market protection legislation in Europe and the United States, crippling debt and the fact that many African countries are just too small to compete, Manuel said.
But Xavier Sala-i-Martin, one of the contributors to the World Economic Forum report, urged African countries not to make a tit-for-tat response to US and European trade barriers and protectionism.
”There have been lots of complaints about Europe not having open markets, but let me give you the news: Europe is not going to change,” said Sala-i-Martin, a professor of economics from New York’s Columbia University.
”The response to European protectionism by Africa is its own protectionism and this is not necessarily good,” he said.
”One of the reasons why Africa’s competitiveness is so low is because the price of investment is excessive. For instance, to buy a single computer here is far more expensive than buying one in Europe.”
Africa should open its markets and reduce business costs in order to attract foreign investment to the continent, Sala-i-Martin said.
Pursuit of short-term gains is ‘worrisome’
Manuel also said the short-term and ”quick return” attitudes of many investors are acting as a significant deterrent to investment in Africa, and could have long-term consequences for the continent’s development.
The minister said the approach of fund managers and other institutional investors, which require short-term returns, makes it very difficult for African countries and companies to attract investment required for long-term sustainable development, as they cannot deliver the requisite returns up front.
”This is probably not going to be a popular point, but there is definitely a gap,” he said.
”This makes it difficult for greenfield start-ups and even results in the weakening of a company, because it is not possible to invest in sustainable growth for companies when one is looking for quick returns. We have to wonder whether short-term investment is in the interest of global long-term development. I sense this is an issue that will have long-term consequences.”
Manuel added that it is ”worrisome” that in the post-Enron era, the pursuit of short-term gains to boost a company’s share price is also becoming so important. This is tied to issues of remuneration and stock options where share price performance matters.
”One can starve a company of its own long-term growth,” he observed. ”These issues are not identified enough and should be included as part of the broader development goals.” — I-Net Bridge, Sapa-AFP