It’s better than we think

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Foreign observers more optimistic than people at home, writes Rowan Philp for the Sunday Times, Business Times (South Africa).

Jane’s Information Group, the prestigious defence industry analyst, ranked SA alongside fast-growing economies like Ukraine and Vietnam in its inaugural “Country Risk Ratings”, which analysed 232 countries and territories.

The report echoes a series of recent international reports and credit ratings that have kept faith with the country’s prospects — in spite of the power crisis, declining local business confidence and political uncertainly.

It comes a month after the country was ranked 44th in the Global Competitiveness Index by the World Economic Forum, ahead of even Italy and India.

And the moderately bullish Jane’s assessment of SA’s future tallies with the Failed States Index, produced by US think tank Foreign Policy, which called South Africa “a success story” where “the economy and the state institutions are quite strong”.

Giving a ranking of 115, the Jane’s researchers found South Africa to be the second most stable country in sub-Saharan Africa, behind Mauritius. Botswana, which typically tops the region for investor confidence, ranked 142nd, with Zambia 179th, Mozambique 190th and Zimbabwe tied with Chad and the Democratic Republic of Congo for 224th spot.

The list was headed by Sweden and the UK.

By contrast, the SA Chamber of Commerce and Industry’s Business Confidence Index slumped to a seven-year low, earlier this month.

Experts, including the Institute for Security Studies’ Hennie van Vuuren, pointed out that the rankings introduced a unique period for South Africa, with foreigners more optimistic than those who lived there.

Sabine Machenheimer, head of the Jane’s report’s African section, said: “With all the current anxieties about crime, HIV/Aids, energy and leadership, a lot of people within South Africa might think the country might have ranked lower, but the figures show South Africa really has a lot of solidity in its systems, its economy and its institutions.” The comprehensive report — not released in full to the media — will be sold to governments and military agencies, and has been billed as being “to country stability what Standard & Poor’s is to credit rating”.

Christian Le Mière, managing editor of the report, told Business Times: “South Africa is in a band of moderate to relatively low-risk countries in terms of instability. I’d say a ranking alongside Vietnam will be seen as positive for South Africa’s outlook, since Vietnam is a relatively stable country with a growing economy.”

Le Mière revealed that SA’s ranking was tallied from:

# 62 out of 100 points for “economic stability”;

# 69 for military steadfastness;

# 42 for social stability — including indicators for crime, health and social cohesion;

# 78 for “external factors” — meaning the country’s relations with neighbours and the international community; and

# 78 for political stability — which focused on constitutional and institutional factors, rather than leadership or party politics.

Le Mière said the glaringly low figure for “social stability” — five points lower than Botswana — was partly the result of the worst rating for crime among all southern African countries.

Van Vuuren, head of the governance programme at the Institute for Security Studies, said: “For an emerging economy like South Africa, these studies do shape perception, especially for foreign investors, and I think to be grouped with developing industrial states like Ukraine and Vietnam reflects positively.”

Van Vuuren said the surveys suggested there was now greater anxiety about South Africa’s future locally than from abroad. “We have an elite in South Africa which is slightly manic in its response to changing circumstances — when things are good they’re seen as fantastic; when they’re bad, it couldn’t be worse, which is a perception trough we’re in right now,” he said. “Social cohesion is the big challenge. In addition to problems surrounding HIV/Aids and crime, we’re still likely to see protests around service delivery, for instance,” he said.

“But this report confirms that most of the other indicators are relatively strong. Externally, we do still box above our weight, and we face no contesting forces within the military, or from anyone else’s military. This underscores the point that, for all the domestic worry, the country remains a good bet in the long term.”

Meanwhile, African countries make up seven of the 10 most unstable countries named.

Le Mière said the persistent problems of artificial borders and poverty, as well as the lack of capable central government and of national identity, contributed to Central Africa, in particular, living on a knife-edge.

“Unfortunately, if you’ve had a war in the last 10 years or so, you’re less averse to going to war again,” said Le Mière. “That’s been especially true in sub-Saharan Africa.” The ranking list is to be updated monthly, using data from a network of sources and contributors, including “military and political officials”, as well as UN figures, “where we feel the information is accurate and relevant”.

How we pulled rank

Recently, South Africa also ranked:

# 44th out of 131 countries in the World Economic Forum’s Global Competitiveness Report 2007/8, but it missed out on a top 40 place by ranking 126th in the “business costs of crime and violence”;

# 19th on the Foreign Direct Investment Index 2007, ahead of the Czech Republic;

# 35th out of 178 in terms of “ease of doing business”, according to the Doing Business 2008 Report, in which Singapore was first and the Democratic Republic of Congo last;

# 121st out of 175 on the United Nation’s Human Development Index 2007, just ahead of Botswana and Namibia, but behind Gabon and Honduras; and

# 55th out of 185 nations in terms of “country risk”, according to the regular Euromoney survey, which put Luxembourg at the top.

Source: Rowan Philp, Sunday Times, Business Times, March 30, 2008.

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