Africa wants your money - South Africa seeks loans for modernization, development, and exports - Newspoints

Black Enterprise, Oct, 1994 by Andrew Brimmer

South Africa needs wealthy friends. Africa's newest democracy wants to expand exports and foreign capital inflows to finance post-apartheid modernization and development. It's looking to the United States for help, and particularly to African-Americans. The verbal response to the new appeal is positive, but the level of trade and foreign investment in South Africa remains quite low.

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Since 1988, partly reflecting the effects of sanctions, South Africa exports have not kept pace with imports. Between 1987 and 1993, its total merchandise exports rose from $21.1 billion to $23.9 billion. The latter figure represents an average annual increase of 2.2%, but over the same period imports rose 4.3% annually.

In world trade, South Africa also lagged behind the average trading nation. Between 1986 and 1992, total world exports expanded at an average annual rate of 10.8%. The parallel gain for South Africa was 8.4% and trade with the United States was mixed. In 1987, South Africa exported $1.97 billion in goods to the United States. Five years later, exports were $1.63 billion and the proportion of total exports to the United States had declined from 8.4% to 5.4%. South Africa's total imports also wavered but remained near 13.1%. Italy and Germany are South Africa's leading export markets, while the United States and Germany lead in imports.

Over the last year or so, South Africa's foreign trade situation improved. Export growth quickened and imports fell only marginally. On balance, however, the net result was a decrease in South Africa's earnings from foreign trade.

For nearly 20 years, South Africa suffered from serious capital flight precipitated by internal unrest and attempts by foreign governments to isolate apartheid. Foreign direct investment in South Africa declined over the past seven years, and foreign purchases of South African stock was negative in six out of seven years ending in 1993.

But during the next few years, South Africa will need enormous direct foreign investment, particularly in computers, electronics and communications. In 1992, the United States invested $871 million in South Africa--57.5% in manufacturing, 17% in chemicals, 10.6% in non-electrical machinery, 5.2% in primary and fabricated metal and 7.7% in wholesale trade.

To boost its economy, South Africa seeks to attract foreign capital by offering tax incentives and looser profit repatriation restrictions. This October, it will also endorse the second annual Made in USA 1994 trade fair in Johannesburg, which attracts hundreds of U.S. firms, including Fortune 500 and BE INDUSTRIAL/SERVICE 100 companies. The South African government hopes these firms want to both acquire existing production facilities and build entirely new enterprises.