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UNCLAS SECTION 01 OF 03 PRETORIA 002194 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EFIN EINV ETRD ECON PREL PINR XA SF
SUBJECT: SOUTH AFRICA: CONFERENCE PROMOTES INVESTING IN 
AFRICA 
 
REF: A. PRETORIA 1959 
 
     ¶B. 2004 PRETORIA 5105 
     ¶C. PRETORIA 2161 
 
(U) This cable is Sensitive But Unclassified.  Not for 
Internet distribution. 
 
¶1. (U) Summary.  South African-based Investec Asset 
Management hosted a May 4th conference in Johannesburg 
focused on improving the investment climate in South Africa 
and Africa.  About 250 people attended the posh conference 
which touted such high profile speakers as Cyril Ramaphosa 
(former ANC head), Hernando de Soto (Peruvian economist), and 
Maria Ramos (Transnet CEO).  Many speakers reinforced the 
theme that Africa was poised to enter a new era of 
prosperity.  The audience was encouraged to invest in Africa 
and spread the good word.  Panel discussions addressed the 
problems of attracting foreign direct investment and South 
Africa's policy on Zimbabwe.  Other speakers presented 
suggestions on ways to attain sustainable economic growth and 
push this new era forward.  De Soto made a strong pitch for 
creating a legal framework to provide property rights to 
those outside the formal economy.  Ramaphosa and others 
emphasized the need to invest in infrastructure, trade 
issues, and the African people.  End Summary. 
 
Investment Conference Makes a Hard Sell for Africa 
--------------------------------------------- ----- 
 
¶2. (U) The largest asset manager on the African continent, 
Investec Asset Management, hosted a conference on "Investing 
in Africa" on May 4 in Johannesburg.  The South African-based 
firm manages R270 billion ($45 billion) in assets and hosted 
about 250 fund managers, brokers, and journalists for the 
one-day affair focused on improving the investment climate in 
South Africa and Africa as a whole.  Beyond the high-tech 
presentations and pomp and circumstance of waterfalls, 
massage chairs, and shoe shine stations laid the message of 
improving Africa's image abroad.  According to Investec Asset 
Management CEO Hendrik du Toit, investors need to seize this 
opportune moment across the continent as we are on the verge 
of an "African Renaissance." 
 
¶3. (U) After an emotionally moving film detailing South 
Africa's sordid political history, Du Toit opened the 
conference arguing Investec's role in South Africa's 
transformation.  Founded in 1991, Investec has been part of 
the momentum carrying the country and continent forward, Du 
Toit claimed.  He added that while Africa was not perfect, 
90% of African countries were open for investment.  He went 
on to point out the urgency of capitalizing on the current 
world focus on Africa.  All eyes were on Africa as a result 
of the Commission for Africa, the G-8 Summit agenda, and the 
New Partnership for African Development (NEPAD). 
 
Ramaphosa Touts Africa's New Era 
-------------------------------- 
 
¶4. (U) Cyril Ramaphosa, former Secretary General of the ANC, 
former Member of Parliament, and current businessman, 
delivered the conference's keynote address.  Ramaphosa opened 
with great optimism, stating that Africa is "on the cusp of a 
new era," as it was positioned better than ever towards 
growth and "great promise."  He went on further to say that 
this was the "most decisive moment since the end of 
colonialism."  He emphasized that this realization all 
depends on the stakeholders' attitudes that lie in the public 
and private sector. 
 
¶5. (SBU) Since the end of the Cold War, Ramaphosa stated that 
mostly positive changes have been spreading across Africa. 
He stated that Namibia, Mozambique, South Africa, and Angola 
all gained freedom, two-thirds of African countries have had 
multi-party elections in recent years, and civil wars have 
been reduced from 15 to nine.  However, many challenges 
remained, most notably in Cote d'Ivoire, Sudan, the 
Democratic Republic of Congo, and Burundi. (Comment: Only 
later in the discussion did Ramaphosa admit that the Zimbabwe 
situation needed attention.  End comment.)  Ramaphosa added 
that South Africa was stepping up to the plate to face 
Africa's remaining challenges along with its central role in 
the African Union (AU) and NEPAD.  He stressed the importance 
of the AU's peer review mechanism and the positive influence 
that African countries could have on their neighbors. 
 
¶6. (U) Ramaphosa summed up his address on a positive note, 
stating that a "new era is dawning" in Africa.  He cited 
USAID-funded Afrobarometer's survey that one-half of Africans 
thought life would improve in the year ahead and a BBC survey 
that nine out of 10 Africans were proud to be African. 
Ramaphosa also thanked British Prime Minister Tony Blair and 
other G-8 leaders for their focus on Africa. 
 
Nagging Problems: Lack of FDI and Zimbabwe 
------------------------------------------ 
 
¶7. (U) South Africa historically has attracted high levels of 
capital inflows compared to other emerging markets.  However, 
portfolio investment has dominated South African capital 
inflows, leaving the country with relatively low levels of 
foreign direct investment (FDI).  During a panel discussion, 
discussants questioned whether crime, inflation, currency 
volatility, and Zimbabwe prevented South Africa from 
attracting more FDI.  Brian Molefe, former political activist 
and CEO of the Public Investment Corporation (which manages 
public sector pension funds), disagreed.  Crime, inflation, 
and currency volatility were largely under control, he 
thought.  As for Zimbabwe, Molefe asked rhetorically, "What 
else can we do?  Should we invade the country?"  He went on 
to say that according South Africa's Department of Foreign 
Affairs (DFA), Zimbabwe held free and fair elections.  "We 
have to respect the opinion of our DFA officials," he said, 
and should rather focus on communicating South Africa's 
successes to the world. 
 
¶8. (U) Other panel members were hopeful that the 
Barclays/ABSA deal would be the start of a new trend in FDI 
(ref A).  Given recently relaxed foreign exchange controls 
(ref B) and assuming the South African Government could 
minimize rand volatility after the Barclays/ABSA deal, most 
agreed that the outlook for attracting FDI to South Africa 
was improving.  However, the investment environment still has 
room for improvement.  A recent International Monetary Fund 
(IMF) Survey noted that further trade liberalization, 
privatization, and removal of remaining capital controls 
(such as repatriating export proceeds with a specified time 
period) would improve South Africa's attractiveness to 
foreign investors. 
 
De Soto's Pitch For Property Rights 
----------------------------------- 
 
¶9. (U) Renowned Peruvian Economist, Hernando de Soto, 
addressed the conference on the fundamental importance of 
secure property rights as a precondition to economic growth. 
His widely acclaimed book, "The Mystery of Capital," served 
as the basis of his presentation.  De Soto asserted that a 
legal framework was necessary to unlock economic value, and 
without this, the creation of further economic growth would 
likely not occur.  This notion of property extended beyond 
the actual value of real estate to credit and capital, which 
were ultimately predicated on the value of property.  In 
addition, property ownership provided the very basis of 
economic activity, including home and business addresses, the 
government's population census, and legal protection of 
individual wealth.  All of these fundamental notions 
supported economic development. 
 
¶10. (U) De Soto admitted that he did not know a lot about 
South Africa, but he did know that its two economies were not 
unique to the developing world.  De Soto's work in Mexico, 
Egypt, and Tanzania proved that the majority of the "second 
economy" homes were owned outside of the formal legal 
framework.  Developing countries needed to first be conscious 
of the need for legal reform and then act to rectify the 
problem.  If successful, formalizing property ownership would 
lead to secure financial transactions, collateralization of 
debt, better debts and tax collection, the growth of an 
insurance industry, better quality housing, etc.  (Note: De 
Soto is set to co-chair with Madeleine Albright a United 
Nations Committee on property rights for the poor.  He was to 
meet South Africa's Minister of Housing Lindiwe Sisulu during 
his visit, but he was unsure if he would be asked to assist 
in assessing South Africa's legal framework for property 
rights.  End Note.) 
 
Investment in Infrastructure, Trade, and People Needed 
--------------------------------------------- ------- 
 
¶11. (U) Throughout the conference, speakers espoused 
strategies and solutions for improving Africa's investment 
climate and economic growth.  Ramaphosa advocated for 
increased investment in infrastructure, human capital, and 
free trade initiatives, to achieve sustainable, prosperous 
growth.  He stated that 20% of investment in Africa was 
foreign, but that Africa needed more, especially in 
infrastructure.  Ramaphosa added that Africa needed to join 
the arena of world trade by lowering its tariffs and other 
barriers to trade.  Noting that the United States would 
purchase 25% of its oil from Africa over the next ten years, 
he urged exporting countries to use this to fuel an economic 
boom instead of political conflict.  Finally, Ramaphosa 
stressed the need for improved education and healthcare in 
Africa.  He was concerned that an estimated 70,000 skilled 
workers were leaving the continent each year, and that more 
African scientists and engineers were working in the United 
States than in Africa. 
 
¶12. (U) Speaking on the opportunities and risks of investing 
in Africa, Anglo Gold Ashanti President Sir Sam Jonah (a 
Ghanaian) echoed the "pro-Africa" theme of the conference. 
Jonah advocated that companies should procure locally, uphold 
labor standards, not seek special tax treatment, increase 
transparency, and treat employees as stakeholders.  He argued 
that the rewards were large for first movers in 
public-private partnerships, and that African countries were 
becoming more "hospitable" to foreign investors.  At the same 
time, Jonah noted Africa's lack of infrastructure and the 
extra red tape of doing business in Africa. 
 
¶13. (U) Maria Ramos, CEO of Transnet (state owned enterprise 
parent of national railroad, port, airline, and pipeline 
companies), spoke about the dire need for infrastructure 
across Africa, and her plan to revitalize the transportation 
infrastructure in South Africa (ref C).  Transnet's strategy 
was already set in motion and included focusing on core 
businesses, restructuring debt, improving corporate 
governance, and investing in human capital. 
 
Comment 
------- 
 
¶14. (SBU) The Investec conference selected an ambitious 
mandate to fulfill.  The conference succeeded in oozing 
positive vibes about South Africa and Africa as an investment 
location.  However, a lot of work still has to be done to 
turn words into actions.  Infrastructure, human skill 
development, and legal frameworks supporting property rights 
have a long way to go in order to realize the full potential 
of Mbeki's "African Renaissance."  At the same time, 
conferences like this one do serve the purpose of 
invigorating South Africans with positive messages about 
their country and continent.  This conference was one effort 
in the struggle to attract more foreign investment to the 
continent. 
HARTLEY