South Africa’s successful hosting of the Soccer World Cup is likely to change global perceptions of the country, Minister of Trade and Industry Rob Davies said on Thursday.
He was speaking at a development dialogue between his department and the World Bank in Benoni on Johannesburg’s East Rand.
The dialogue followed the publication of the World Bank’s second Investment Climate Assessment of South Africa.
“Africa itself has been seen as particularly risky, but these perceptions have undergone a change,” Davies said. “We must realise this and build on it.”
He emphasised that after China, India and Brazil, Africa was now seen as “the next growth story” in the world economy.
Davies said the World Bank’s report said competition in South Africa was limited.
“We do see a need to strengthen the role of the Competition Commission as we have uncovered so much collusion. We want the commission to become more active and not only reactive,” he said.
This, however, was not the only challenge facing the economy.
Before the recession, the consumption sector had grown twice as fast as the production sector and credit extension had confirmed this.
“An increasing part of credit was extended for consumption and a declining part for production.”
South Africa’s deficit of the current account of the balance of payments had been financed by “hot money” or the carry-trade.
“This has been sustained by high interest rates and this has led to us having an uncompetitive exchange rate.”
According to the minister, infrastructural progress was important for South Africa.
“We must improve infrastructure by keeping the process going and see that it leads to more industrial activity.”
Difficulty in accessing finance
Davies said the World Bank’s report noted that businesses in South Africa — particularly small businesses — had difficulty in accessing finance.
“But we are learning from Brazil, where interest rates are much higher and yet that country manages to provide finance to businesses at lower rates.
“We know we must make profound changes to the way in which our Industrial Development Corporation works.”
His department had identified particular problems facing small business.
“We are currently undertaking a major review of small business programmes, and from this we will see what’s working and how we can improve it.”
Davies said he welcomed the World Bank’s report.
“It is a contribution to our debate and hopefully our development dialogue will provide recommendations that we can take forward.” — Sapa