The latest Africa Economic Outlook has recently been released and shows growth trends in Africa to be encouraging. South Africa is certainly running with the pack in this regard. That South Africa is both a destination for investment, as well as a source of investment, formed part of the discussion about international investment trends during the Launch of the Investment Policy Framework for Sustainable Development, which took place at the Chalsty Centre, at the University of the Witwatersrand, on the 26 July 2012. Speakers were James Zhan from the United Nations Conference on Trade and Development (UNCTAD), Stephen Gelb, Professor of Economics at the University of Johannesburg and the South African Minister of Trade and Industry, Dr Rob Davies.
The fact that developing countries are now entering the investment sphere as potential investors, and the fact that sub-Saharan Africa is now a significant investment destination, shows that the South and East are becoming noteworthy economic players. What was most interesting about the discussion was the “new” role of government (which favours regulation and protectionism) and that fact that not all investment is good for a country. The example of Wallmart entering South Africa was briefly mentioned here. This suggests that if a government is given more of a role in regulating investment, then government has some responsibility in insuring that growth in a country is not contrary to the laws and principles, as well as other policies, which already exist in the respective country. In South Africa, the Constitution should play a central role in guiding the principles of investment, whilst economic targets like skills development, technological transfer and enterprise development, as suggested by Stephen Gelb, can be factored into any investment treaties.
But what is the role of the Investment Policy Framework for Sustainable Development? As Stephen Gelb noted, investment inputs and outputs in South Africa have always been measured within a short-term framework and have focussed too heavily on quantitative values, leading to unwarranted worries; some of which recently sparked debates about nationalisation. He was talking of the 2010 slump which saw our Foreign Direct Investment (FDI) drop by 70%. As he points out, we have recovered sufficiently now to understand that South Africa was not in the sort of danger which was predicted. For this reason, he feels that the Framework is necessary to guide our thinking, ensure that we understand long-term trends and locate our debates within the international sphere.
I was impressed by a number of aspects of the Framework. Firstly, the Framework contains a number of values and principles for investors and host countries; suggesting regulation, cooperation, fairness and inclusive growth and so on. Furthermore, the Framework introduces sustainable development thinking into policy. While a definition of sustainable development is not given, it does suggest that social and environmental concerns are flagged. The Framework is considered a guide, to be used voluntarily by governments when framing their investment policies, using the expertise and experience from a number of well-respected specialists; including Dr Rob Davies. Most importantly, the Framework is a living document for those who use it, inviting commentary and suggestions.
Going back to the Africa Economic Outlook, it is suggested that youth unemployment will lead to more instability in Africa; with poor quality education to blame for excluding the youth from economic opportunities. While education has the greatest share of our national budget, South African’s are well aware of its continued failings. Should it be then that Government looks at new ways to invest in education, youth development and employment – all of which is crucial for future generations.
What are your thoughts on the Investment Policy Framework for Sustainable Development? Do you agree that the state should play a more active role in the investment flows? What do you think should be the focus areas for investment?