back to index »
|
South Africa
Breathtaking beauty, Invigorating spirit, Daunting challenges
In early February Toron launched its inaugural emerging market economy visit. These visits provide first hand insight into an emerging country's economic, political and social development, and offer a unique vacation experience.
South Africa was our destination, a country perfectly suited to our objective of soaking up the sights, sounds and culture of a unique country in grand style, while learning first hand how globalization is shrinking the world and how technology, combined with open access to information, is offering individuals - wherever they live - a newfound power to collaborate and compete globally.
After generations of apartheid and violent racial strife, spectacularly beautiful South Africa astounded the world with its peaceful transition to a stable, prosperous democracy that now embraces its racial and cultural diversity. Economically, South Africa is the unquestioned powerhouse of Africa. Its progressive constitution and sophisticated, yet transparent banking system allow it to capitalize on its natural resource wealth and technological talent. Yet the country also faces potentially destabilizing challenges as it struggles to improve living standards, health, education and equity ownership among the previously disadvantaged 80% of the population. These challenges must be met while simultaneously combating high rates of unemployment and HIV/Aids.
Cape Town
Within this context our small group of ten inquisitive and spirited guests, together with our experienced guide Greg Sacks, gathered in Cape Town to begin our adventure. We settled into the Bay Hotel in Camps Bay (the equivalent of Yorkville in Toronto, with the minor difference that Camps Bay is nestled at the base of Table Mountain and across the street from a stunning white sand beach), and strolled or dozed away our jet lag in preparation for the busy schedule ahead.
That evening Leigh Meinert from Tsiba - a university that offers business degrees to South Africans from remote or poor communities - introduced us to her twin-pronged holistic model for providing relevant education to South Africa's disadvantaged youth. This dynamic 30-year old has established an accredited "free" university relying on local and international donations for funding, and the University of Cape Town for faculty support. Her objective is to bridge the gap between traditional universities and those high schools that have had to lower standards to accommodate a larger historically disadvantaged student population, whilst singling out and streaming gifted kids who will likely be the country's future leaders. Leigh represented our first exhilarating exposure to the infectious enthusiasm and inspiration that emanates from so many grass roots organizations in South Africa.
The following morning Goolam Ballim, Chief Economist for The Standard Bank Group presented us with an erudite, yet candid economic overview and outlook for the country. By way of background, South Africa is abundant in natural resources, notably metals, minerals, diamonds and coal; the country generates over 50% of the entire continent's electrical power. The favorable climate is ideal for raising crops and livestock, and South Africa's orchards and vineyards are world-renowned.
Prior to the imposition of apartheid in 1948, South Africa was a first world industrial economy - a British colony with a similar ranking to Australia or the Dominion of Canada. Although the ravages of 40 years of apartheid (accompanied by trade sanctions and capital flight) drove the country into third world status, it continued to build on its technological expertise to maintain and expand a sophisticated infrastructure of power generation, communication and transportation networks. It now also boasts a growing manufacturing sector, strong growth potential in tourism and other service industries and a mature and transparent banking system that is rated among the top 10 globally. Indeed, the traditional image of South Africa as a resource driven economy isn't borne out by the modern reality. Retailing and manufacturing have both eclipsed agriculture and mining as economic components, and business services will eclipse those two traditional sectors in the coming years.
The statistical highlights are:
- GDP growth at 4.9% per annum. GDP has been rising consistently over the past 6 years, and now represents 25% of GDP for the entire continent;
- GDP is approximately US$250 billion - similar in size to Poland;
- South Africa's international credit rating is now BBB+, the same as Mexico, a notch below Chile, but above Brazil and Argentina;
- Consumer Price Inflation at 3.9% per annum, but still falls comfortably within the central bank's target range of 3% - 6% per annum;
- The country runs a small budget deficit of 1.5% of GDP, and the outstanding national debt is a conservative 35.1% of GDP (the corresponding Canadian figure, by contrast, is in excess of 70%);
- Rising consumer demand for imported goods and a strengthening currency have contributed to a current account deficit equivalent to 3.7% of GDP;
- Buoyant foreign direct investment has boosted South Africa's foreign exchange reserves, and interest rate levels are at their lowest in a generation;
- Although declining, unemployment remains stubbornly high at 25.3%;
- The population is now 47 million, and comprises 80% Africans, 9% whites, 8% coloureds (or mixed race) and 3% Indo/Asians.
On the qualitative front, the government deems it imperative to maintain an attractive international credit rating and a progressive tax environment, leaving little room for unbridled deficit spending. Consequently, while the middle class is burgeoning the relative wealth disparity is widening and the aspirations of many for immediate access to housing, electricity, sanitation, healthcare and free education are not being met. Fortunately, part of the gap is being filled by many local grass roots organizations whose enthusiasm and commitment is not only admirable, but serves to temporarily deflect dissatisfaction and resentment toward political promises being deferred.
The imposition and administration of Black Economic Empowerment (BEE), a government initiative that mandates minimum equity ownership levels, managerial status, and employment levels for black people in all public and private sector enterprises is regarded as a "tax" on business, analagous to the Sarbanes Oxley Act (which governs financial and accounting disclosure) in the USA. In a similar but very cynical vein, HIV/Aids, which affects 23% of the population, is also perceived as an ongoing tax on business that is unlikely to be alleviated anytime soon.
In Mr. Ballim's opinion, life in South Africa is like living next to a volcano - the fundamentals are deceptively encouraging, but the potential for eruption based on social unrest is real and ever-present. Enormous food for thought, but the sunshine beckoned and we left the economist to explore the Cape peninsula via the dramatic Chapman's Peak coastal drive, the fishing villages of Hout Bay and Kalk Bay, the penguin colony at Boulders and of course, the Cape of Good Hope - regarded by many as the convergence between the Atlantic and Indian Oceans.
On our return we stopped to visit the township of Masiphumelele - originally a small squatter camp for itinerant black workers, but now a bustling, 26,000 person community still living in the abject poverty of dirt-floored tin or wood shelters without sanitation or hot water, with one overcrowded school, no police station and an understaffed clinic. The incidence of HIV/Aids and TB is 35% to 40%. Greg had arranged for us to tour the township with a community youth leader on bicycles donated by Holland to the township's community centre. Keeping the bikes in working order is a community youth project. As our group of affluent white tourists pedaled their way around, hordes of kids joined us, gaily hopping onto the carriers or running alongside and proudly pointing out their homes, the school, the clinic, the crèche and other places of interest. We were treated to afternoon tea by a mother who runs the crèche. We listened to the challenges she encounters in promoting nutrition, basic healthcare and learning skills among her charges, while raising two teenage daughters of her own. Her daughters, however, are on scholarships at private high schools outside the township - another example of the unrelenting dedication and significant capabilities found in local grass roots or community groups. This mother's determination to attain the best possible education for her children should be viewed as the rule, and not the exception for South African parents. It goes without saying that such clear prioritization augers well for the country's long-term growth. Finally, we visited the home of the sangoma, or traditional healer, who treats all ailments with herbs, powders and tinctures. We joined her daily incantation to the ancestral spirits for advice and counsel. Interestingly, over 60% of the urban black population still actively relies on the services of a local sangoma. Exhausted, we finally returned to our hotel to prepare for dinner at Waterblommetjie - a superb restaurant specializing in tantalizing Cape Malay dishes and spices that date back to the 17th century.
Activities for the following day were chosen from a menu of options based upon traveler's individual preferences. Options included a visit to Robben Island where Nelson Mandela was imprisoned for 26 years, a hike across the top of Table Mountain with its spectacular 360-degree vistas of the Cape peninsula, a tour of the magnificent botanical gardens at Kirstenbosch, or simply wandering through stores and craft markets reveling in the beauty of a sophisticated, yet friendly city. On this note, security is a question of being sensible rather than paranoid - establishing and avoiding the places that will likely pose a risk and maintaining continuous awareness of your surroundings.
The Vineyards
We then left the hubub of Cape Town for Paarl and the vineyards, staying at Roggeland Country House, an old Cape Dutch farmhouse restored into simple, but very comfortable accommodations. There, we set out on a walking tour of Paarl - the first town settled outside Cape Town in the late 1600's- hosted by Cathy Raymond, who regaled us with a vivid history of South Africa's colonial past, reflected in the Dutch, French Huguenot, Victorian and Georgian architectural influences seen in the buildings and houses. Back to Roggeland for dinner and a presentation by Andre Morgenthal of Wines of South Africa, whose encyclopaedic knowledge of South African wine was as enchanting as the selections he brought along for us to sample.
Off to Franschhoek, a picturesque flower-filled village in the heart of wine country, populated by quaint boutiques, the Huguenot Museum and some of the best restaurants in the Western Cape. The drive meandered over high mountain passes, and presented dramatic views of hillside vineyards and manicured valleys bursting with orchards of seasonal fruit. We lazed through the day, strolled about, sent postcards back home and purchased the odd souvenir. It was Valentines Day and Greg had thoughtfully separated us into couples, each with a reservation for a romantic dinner at a different restaurant.
The South Coast
Leaving the mountains behind us, we set off along the Garden Route hugging the southern coast for 500 km. to Plettenberg Bay - a charming seaside village that anchors an ever-changing topography. Our home for the next three days was Tsala Treetops Lodge, an intimate group of luxurious tree houses built high in the bluegum forests and linked together by a common boardwalk. No further presentations were planned until we reached Johannesburg, so we indulged in a variety of activities that took full advantage of the breathtaking scenery - canopy slides in the dense Tsitsikamma forest, a sumptuous picnic on the wild beach at Nature's Valley, excursions to the Cango Caves, an ostrich farm, the desert town of Oudtshoorn, and a (best forgotten!) golf outing on the rugged Pezula course.
Our next stop had us overnighting at an airport hotel in Johannesburg where we could repack our luggage to the 20 kg. permitted limit for our upcoming safari in Botswana. Carol Dyantyi of the Ikageng Itireleng organization met with us that evening to discuss the plight of children orphaned as a consequence of HIV/Aids. In 2000 Carol left a budding career in the hospitality industry to look after the children of a friend who had succumbed to Aids, and the organization she started soon after now oversees some 800 orphans, ensuring they have food, clothing, school fees, supplies, healthcare and transport. These requirements are funded exclusively by private sector donations. She also provides mentoring, life skills and counseling for the children through a network of voluntary caregivers and occasional professional support. Her team is dedicated to providing love for these kids and accordingly makes every effort to maintain family units by keeping siblings together in their homes. Carol's work represents another shining example of a void being filled by a group of committed private citizens. It seems as if the government deliberately turns a blind eye to these desperate social ills, recognizing that the very admission of their existence would create a financial liability large enough to overwhelm the social services budget. In South Africa where the disparity of wealth is so apparent, private philanthropy performs a crucial role.
Botswana and Victoria Falls
The following morning we headed off on safari to the northern edge of the Okavango Delta in neighbouring Botswana. Our destination was Vumbura Plains, a luxurious camp accommodating up to 24 guests surrounded by 130,000 acres of pristine wilderness. We had the camp to ourselves and quickly settled into a routine of rising before dawn for an early morning game drive, returning to camp for brunch followed by a siesta, afternoon tea, an evening game drive and dinner. The game drives were both magnificent and humbling. Observing these majestic animals in their primal state under an enormous sky and on a terrain that stretched to the horizon induced feelings of admiration, intrusion and insignificance. Our guides, Morongo and Dukes were outstanding, picking out carefully camouflaged animals and birds with incredible precision, and then elaborating on their attributes and habits in extraordinary detail. Our cameras clicked incessantly and over three days we saw pretty well everything except cheetah, including the aftermath of a lion kill - not more than half a kilometer outside our camp! At night, the stars and the animal noises initially kept us awake in dumbstruck awe, but combined with the cool, fresh air, their splendor and rhythm eventually lulled us to sleep.
Our final destination was Zambia to visit the Victoria Falls. Rains had been plentiful, so the Zambezi River was cascading voluminously over every gorge and cataract along the 1.7 km. length of the lip. The falls are truly a natural wonder - and a wonder that they have been kept so natural and free from commercialization. Greg had arranged a surprise boat ride to Livingstone Island, which sits in the centre of the falls, right on the edge. Wearing waterproof ponchos to shield us from the spray, we kicked off our shoes and with two guides each as anchors, we shuffled over to the last protruding rock and peered into the misty depths below - an exhilarating experience that was topped off with a perfect lunch served no more than 40 feet from the gushing brink.
As expected, the trip produced many lasting images and insights into modern South Africa. Nelson Mandela's legacy is an ultra-progressive constitution that prescribes policy initiatives for stable economic growth, inclusion, and preservation that would be a model for many developed countries. He also articulated a vision for the country that continues to evince palpable enthusiasm among politicians and private citizens alike. True to its tag line, South Africa is "alive with opportunity" and has a head start on other emerging market economies by virtue of its sophisticated infrastructure and extensive technical talent. It is heavily invested in the rest of Africa, providing loans, technical support and even peacekeepers to Nigeria, Zambia, Mozambique, Rwanda, Sudan and others. Because of its institutional stability, relative safety and its sophisticated transportation and communications network, South Africa is also a hub for re-directing foreign direct investment flows earmarked for the rest of Africa. Accordingly I shall be surprised if South Africa's international credit rating isn't notched up to A- within the next 12 - 18 months.
The single most important challenge is to promote broad-based economic growth - that doesn't compromise fiscal stability - to deal with the ever-present issues of wealth disparity, high unemployment, poverty and HIV/Aids. Coincident with this task is a dearth of skills and experience among the previously disadvantaged, who are now key decision makers in many public and private sector enterprises. The resulting logjam in the execution and administration of worthwhile initiatives breeds frustration and resentment for the intended beneficiaries. Many of these challenges have no immediate resolution and the burning question is: Can the magic of Mandela survive the impatience of a people who have already forfeited their entitlement for two generations?
Peter Sacks
Managing Partner
|
|
 Toron Talks Newsletter
Toron publishes a newsletter Toron Talks on a quarterly basis. Please bookmark this page and visit it again soon.
Toron Talks Newsletters:
January, 2007 (PDF*)
July, 2006 (PDF*)
March, 2006 (PDF*)
November, 2005 (PDF*)
July, 2005 (PDF*)
April, 2005 (PDF*)
January, 2005 (PDF*)
July, 2004 (PDF*)
April, 2004 (PDF*)
January, 2004 (PDF*)
October, 2003 (PDF*)
March, 2003 (PDF*)
December, 2002 (PDF*)
October, 2002 (PDF*)
July, 2002 (PDF*)
April, 2002 (PDF*)
December, 2001 (PDF*)
October, 2001(PDF *)
July, 2001(PDF*)
March, 2001(PDF*)
Special Reports:
December, 2005 (PDF*)
March, 2005 (PDF*)
|
