South Africa wakes from its long sleep - Business - News - The Independent

South Africa wakes from its long sleep

Hugh Pope reports from Johannesburg on the new mood of optimism prevailing on what will be a long and arduous road

It's official: South Africa's economy has turned the corner. A long uphill slog is in prospect, but some businesses are already racing ahead.

Hotels and airline seats are booking up fast as tourist interest grows in the new South Africa. Crowds are flocking to cinemas and cafs. Consumers are girding up their credit cards for what one national newspaper dubbed "the big spend".

"It's party time," said Eric, proprietor of a Thai restaurant in a crowded, up-market Johannesburg mall. "Anybody who knows how to run a restaurant is making a pile."

When growth in the last three months of 1993 reached an annualised 6.5 per cent, the Chamber of Commerce in Johannesburg, telephoned its members to see if the figure could be true.

Marius de Jager, the chamber's chief executive, says: "Without exception there is a strong optimism about 1995 and 1996. Manufacturers say business is booming, especially construction. There is growing confidence. I'm convinced it is real."

Service industries have led the way as businesses see new markets at home and in neighbouring African states. Foreign investors have also started arriving in force. Barely a week goes by without another multi- national announcing its return following the first fully democratic elections 10 months ago.

"We've gone bananas. We're reaching capacity breakdown points," said Peter Scott-Wilson, a director of Markinor, a market research company.

Daunting problems remain. Unemployment in the population of 40 million remains at a stubborn 50 per cent, especially among rural blacks. South African Chamber of Business economist Keith Lockwood said growth for the whole of 1995 would probably settle down to about 3.5 per cent, well short of the 6-7 per cent needed to really start creating jobs.

"I wouldn't like to underplay the problems," said Mr Lockwood. "But it's better than 2.4 per cent growth in 1994, 1 per cent in 1993 and contraction for years before that. We are on the way to getting a sustainable growth rate above the rate of population growth."

Many countries are trying to jump aboard the bandwagon. Britain, already the biggest investor, plans to spend half of its export promotion budget for the entire world on helping trade with South Africa.

A 27 per cent rise in imports in 1994 was mainly for plant and machinery. Other products are bound to follow after last week's budget scrapped, from October, a 40 per cent surcharge on luxury imports and 15 per cent surcharge on white goods such as kettles and fridges.

Banks have joined in by opening up the money taps. Dr Chris Stals, governor of the Reserve Bank, raised interest rates and asked the banks to keep credit expansion in line with inflation, still well under control at 9.9 per cent last year. But it did little to spoil the party.

"The rate change had virtually no impact on us," said a busy bank manager in an up-market Johannesburg mall. "We're still lending hand over fist."

President Nelson Mandela's first full budget has also been well received, with businessmen applauding the importance it placed on fiscal stability. Even the implacable Confederation of South African Trade Unions granted that the budget was "vastly improved". Only faint complaints came from the white rich, who will pay slightly more.

Chris Liebenberg, Finance Minister, said: "This is but the beginning of a long and arduous road and we cannot afford the luxury of complacency. People out there are rooting for us to succeed. Internationally, they look to us as an example - we owe it to Africa and specifically our region. We cannot afford to fail them."

Mr Liebenberg was able to announce that the 1994-95 deficit was slightly less in relation to South Africa's total gross domestic product than expected at about 6.4 per cent. In 1995/96 he planned to reduce that to 5.8 per cent, helped by the sale of strategic oil reserves.

Once-prohibitive taxes on imported cars are being slowly reduced in line with international trade agreements. But local assemblers of cars under licence have had one of their best first quarters, spurred on by car rental agencies snapping up fleets for a boom in visitors that is catching the long-isolated tourism industry on the hop.

The 30,000 extra visitors expected for the Rugby World Cup in May to June has blocked hotel bookings and most domestic airline seats months ahead. Even first-class business travellers are having to make flight reservations well in advance.

Immigration officials can barely cope, forcing arrivals to wait up to 90 minutes after their flights just to enter the country. Airport arrivals were up 49 per cent on the year before by November last year, and hotel occupancy rates were 80 per cent ahead by December.

Foreign investors are moving in faster than expected, as proven by the steady performance of the rand during its first week floating free in world markets. The strength of the rand and the dismantling of customs barriers are already posing many long-term challenges to manufacturing industry as it emerges into the international market. Relatively unproductive labour is another, as one manufacturer of pots and pans lamented.

"We sell one pot for about $20 wholesale," he said. "Now we find the same pot, made in South-east Asia, selling locally for $7. There is no way we can compete. So we are having to rethink our strategy."

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