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DOZENS of Zimbabwe’s business leaders attended the annual CEO Roundtable this past weekend to discuss how to create a R700bn economy by 2030. The CEO Roundtable blurb says that, at independence in 1980, Zimbabwe’s economy was worth about R42bn against SA’s then gross domestic product (GDP) of R567bn.

In 2009, SA’s GDP had risen to about R2,5-trillion while Zimbabwe’s is now estimated to be the same as it was 30 years ago.

The 2030 target is a large mountain to climb for an economy a long way off its peak. The government is nevertheless extremely bullish about the economy this year. The 2011 National Budget Statement puts economic growth last year at 8,1%, up from 5,7% in 2009, led by 47% growth in mining and 34% in agriculture.

The Reserve Bank of Zimbabwe recently published optimistic economic forecasts. These included a doubling of tobacco output and large increases in production of sugar, maize and cotton. It also predicted mining growth of 44% this year.

New investment to the tune of R46bn to boost the ailing power infrastructure is on the cards as the sector opens up to private players — necessary to address the past decade’s serious de-industrialisation.

Tourist arrivals in the first three quarters of last year were nearly 800000, up from 533000 in 2009. Tourism officials in Livingstone, Zambia, which shares with Zimbabwe the region’s prime tourist attraction of Victoria Falls, concede they are losing tourists to their southern neighbour.

Export revenue doubled last year over the previous year — though, on the downside, so did foreign outflows, reflecting Zimbabwe’s import dependence and its underperforming manufacturing sector.

But looming political developments may arrest or reverse some of these gains. Most notable among these is the grinding up of Zanu (PF)’s election machinery following President Robert Mugabe’s statements that an election this year is unavoidable given the expiry of the government of national unity’s (GNU’s) two-year term. Mugabe has said he cannot extend the GNU for more than six months, after which elections must be held. But legal opinions suggest the GNU can govern until 2013 when, constitutionally, the next elections are scheduled — unless the parties agree to an earlier poll.

Already, heightened violence is being reported in rural and urban areas and rumours are surfacing of people being forced to pay for new Zanu (PF) party cards (essential for survival during an election).

There is also the question of missing diamond revenues. Finance Minister Tendai Biti has launched an inquiry into the whereabouts of R700m of diamond revenue earmarked for the Treasury, drawing fire from interested parties such as the state’s Minerals Marketing Corporation of Zimbabwe, which mined the diamonds with private operators.

Biti says the Treasury has received just R434m of the R1,2bn due to it, fuelling concern that Zanu (PF)’s control of the diamond fields, through the army and Defence Minister Emmerson Mnangagwa, has allowed it to divert revenue to the party for its election campaign.

Zanu (PF)’s sanctions propaganda machine has also been busy, trying to bluff the world that sanctions are to blame for Zimbabwe’s economic collapse and its slow recovery.

Political uncertainty and heightened investment risk emanating from Zanu (PF)’s indigenisation drive, which remains opaque in application and dominated by nationalistic rhetoric, is at the forefront here.

The weekend’s CEO Roundtable had its work cut out to devise ways for Zimbabwe to reach the 15% growth rate required to reach the proposed 2030 target. The country has a fighting chance only if the politicians pull back from their interference in the economy and its key assets.

A COLLEAGUE who flew in from Zimbabwe last week complained about his reception in SA. He said there was poor signage to the Gautrain, his chosen cellphone provider said it would take 24 hours to register his line, by which time he would have left SA, and a currency exchange bureau said his chosen US dollar notes were too dirty to exchange. Nothing life-threatening, but rather disappointing, he said, because SA sold itself as a world-class destination, raising expectations that one would not have on visiting other countries in the region.

A Zambian accompanying him wryly noted the signs erected above potholed roads proclaiming Johannesburg to be a world-class city. Africans from other countries often comment on what they feel is SA’s rather smug opinion of itself as an exception in Africa, based on its sophisticated economy and good infrastructure.

This opinion is bolstered by the country’s occupation of Africa’s exclusive seat on the Group of 20, its preferred candidacy for any permanent African seat on the United Nations Security Council and now the invitation to join the emerging-country Bric club (Brazil, Russia, India, China).

There is some resentment about SA’s tendency to assume, unasked, the position of the continent’s spokesman and, as a recent article said rather grandly, “the advocate of the African cause in the shifting sands of global economic power and institutional reform”.

Africans from other countries argue that SA’s leadership role has been created by countries and organisations from outside the continent rather than by African countries themselves. The political gateway concept raises questions about whether SA is also the business gateway to the continent by dint of its “exceptionalism”.

It is undisputed that SA has the most diversified and sophisticated economy on the continent, with the largest private sector, biggest capital base, world-class legal and commercial systems, air links to many African countries, political stability, relative competitiveness, strong regulation and other positives. The World Cup showcased SA’s considerable strengths.

Many top global companies run their Africa offices out of SA, the JSE is the financial centre of the continent and the country is a logistics and transport hub for its hinterland.

And it is not only foreign multinationals that have set up in SA. A number of African companies have migrated here, not just for the ease of doing business but also for lifestyle reasons. The lights come on when you flick a switch, water comes out of the taps, the road network is sound, there are good private schools and hospitals, world-class restaurants and good book shops. International companies can persuade top people to run African operations because they can offer them a soft landing in Africa.

A draw for foreign companies is also access to South African companies on the continent with a strong African footprint.

But while SA may have had the historical advantage of being a business gateway, this is rapidly being eroded by developments elsewhere, particularly as logistics and geography start to play a greater role in international business.

Nigeria is an economic hub for West Africa, Angola is a key point of contact for companies from Brazil and Portugal and those in the oil game, while Kenya and Mauritius are drawcards for Asian companies and offshore financial interests.

Dubai is growing its African ties, particularly through the expansion of flights to African cities, while London and Paris remain the headquarters for many multinationals with African interests. Even the tiny island state of Cape Verde is developing itself as a logistical transhipment point for northwest Africa.

SA has not capitalised sufficiently on its proximity to the rest of Africa and has failed to balance its continental interests with its quest for advantage in developed economies and non- African emerging markets.

Its official engagement with the rest of Africa has been ad hoc and unfocused. SA, unlike many other investing countries on the continent, has no economic strategy for its hinterland and even its political clout has been tempered by a lot of fence-sitting on difficult issues.

SA cannot afford to rest on its laurels, even as it celebrates its impending ascension as a member of Bric. It is losing traction in many African markets due to rising competition, and has mounting governance challenges at home. The days of “exceptionalism” are rapidly coming to an end.

THERE were two striking headlines in the news last week. One said the South African construction sector was facing its worst recession in 40 years, while the other said a construction boom in Nigeria was likely to see cement demand doubling this year.

Cement is a good indicator of how countries are faring, even though “experts” seldom use it, preferring to focus on commodities or financial sector performance to gauge wellbeing. A quick survey of the cement industry in Africa north of the Limpopo suggests that contrary to SA’s post- World Cup blues, Africa is awash with construction plans, constrained only by a shortage of cement.

A research note by Stanbic IBTC, Standard Bank ’s Nigerian operation, says local cement demand in that country is expected to grow by 45% this year, and production by 63%, driven by spending on infrastructure.

Nigerian billionaire Aliko Dangote recently listed his cement empire on the Nigeria Stock Exchange in the bourse’s biggest transaction ever. The company has invested in cement operations in more than seven African countries, including SA, where it paid more than R1bn for a 64% stake in local producer Sephaku Holdings.

Cement demand in East Africa is expected to rise by 33% next year, with construction listed as a major driver of economies in the region.

In Zambia, it is the same story, with the largest producer there, Lafarge Cement Zambia, increasing capacity by 830000 ton s a few years back in anticipation of rising demand locally and in neighbouring Democratic Republic of Congo. In Mozambique, four new cement projects have been approved this year for the southern region alone, with more expected in the north, where major mining projects are starting up.

Pakistan’s largest producer, Lucky Cement, estimates demand in Africa exceeds supply by as much as 7-million tons a year. It also estimates growth in the construction industry is growing at an average of 25% a year. The company, already a big exporter to African countries, is among a number of investors from India, Brazil, China and Europe planning to invest in cement projects in Africa, taking a long-term view of growth on the continent.

Demand is being driven by billion- dollar government infrastructure projects; resource demand, with the building of whole towns near new oil and mineral finds; and the growth of residential and retail/office property developments linked to a rising African middle class. African analyst Duncan Bonnett of consulting firm Whitehouse & Associates says the firm is tracking 35 new cement projects in southern Africa alone.

But one of SA’s largest producers, Pretoria Portland Cement (PPC), reported three successive years of declining cement demand and a 15% fall in headline earnings. The cement industry generally reported a drop in local and regional sales last year over the previous year.

Of course, the statistics obscure certain realities. One is that most African countries are seeing this growth off a low base relative to SA. Another is that planning can be affected by delays in state infrastructure projects. And some countries have protectionist measures in place to stimulate local producers, which struggle to be competitive because of high production costs. This is an upside, however, for companies basing themselves in those markets, rather than exporting to them.

Many African markets offer robust profit margins — Stanbic says that, in Nigeria, the industry margin was 25% last year and is expected to rise to 34% in 2012 — and supportive government policies to attract investment in cement, which offset some of the costly structural problems in African economies. The cement story in the rest of Africa has important messages for South African business. One is that opportunities are being exploited by less risk-averse investors from inside and outside Africa, reducing space for South African companies still sitting on the fence and hoping for the local market to deliver.

South African companies relying on exports to their traditional southern African markets may see demand slipping as these countries increase local capacity. Investing in the rest of Africa is a long-term game. South African executives had better start dusting off their African strategy plans sooner than later, before they miss the boat.

THE mood in Tunis last week was upbeat. The African Development Bank annual conference was a celebration of Africa’s resilience in the face of the global meltdown.

The tone of the meeting was reflected in bank president Donald Kaberuka’s opening speech. “An unusually strong momentum has built up in Africa over the past decade.” Although the mood about the continent was not yet “Afro-ebullient”, it was certainly not the “Afropessimism of the 1990s”, he said.

The note of optimism at the event in the African Development Bank’s home base, Tunisia, was buoyed by the release of an International Monetary Fund report earlier this month. The report predicted that continental gross domestic product (GDP) growth for this year would be 5% — double last year’s dismal 2,5%. It further predicted higher growth next year.

As the resources boom thunders on, growth in secondary sectors, such as telecommunications, services and retail, is helping to lift growth and make it more sustainable, delegates at the conference heard.

Remittance flows also survived the global crisis, despite dire predictions that there would be an enormous contraction in line with shrinking jobs in the developed world.

Interestingly, this was attributed to high levels of remittance flows within Africa itself, a fact that highlights the disaggregated nature of African development, which continental growth figures tend to obscure.

But when the dust settled at the conference, there was more sober discussion of the considerable economic and social challenges that will not be erased by higher growth.

Kaberuka himself voiced concern about maintaining the growth trajectory after a large energy infrastructure deficit. Speakers raised the perennial problem of agriculture.

Africa is exporting every commodity in large volumes, except food. It is a continent that still cannot feed itself and now it faces the spectre of climate change, fuelled (many believe) by the very resources driving growth.

Trade barriers, which have little to do with infrastructure and everything to do with the dead hand of bureaucracy and graft, are persistent.

Goods take three weeks to get from Mombasa port to the factory gate in Nairobi, for example. Intra-African trade remains about a quarter of intra- Asian trade. Intra-African investment, too, is low — about 3%, compared with about 30% in Asia. Gains in domestic resource mobilisation are in danger of being undermined by illicit capital outflows from many countries.

Savings are almost nonexistent, small companies — the backbone of Africa’s economies — struggle to grow, and spending on science and technology is less than 1% of GDP across the continent, hampering innovation and value addition.

 Predictions of another decade or two of growth will be compromised if structural transformation of African economies does not take place. It may simply entrench inefficiencies and policy weakness.

 Nigeria’s central bank governor, Lamido Sanusi, who also spoke at the event, highlighted a central problem. “The good growth we are seeing is predicated on growth in other parts of the world. How long can we rely on their growth for us to grow?”

The danger is that new revenues from resources, if not properly harnessed, may end up plugging revenue gaps, in the same way aid has done, rather than providing a catalyst for broad-based growth.

China was on the African Development Bank menu last week, and the debate seemed to be unchanged from that of five years ago — how can African countries negotiate a deal with the Chinese to ensure long-term benefits for the continent? Apparently we have still not figured this out.

African countries are still grappling with fundamental issues, such as how to build a sustainable tax base and how to make microfinance effective.

And then there is the usual problem of politics. Self-interest and rent- seeking by politicians in policy implementation and prioritisation is a curse that continues to dog the continent. Sanusi reflected that Nigeria had achieved 7% growth despite — not because of — government policies.

Africa, as a continent, is undoubtedly on an upward trajectory and there are marked improvements in many states, such as Ghana. But it is too soon to celebrate.

Economic growth statistics mask the vulnerability and skewed sectoral performance of many countries. This is particularly true of resource- based states that are contributing in large measure to the continent’s overall growth figures.

As one delegate said: “We want to know that when we see growth in services in Africa, that is about IT, financial services and tourism — not an increase in the number of miserable fellows selling oranges in the traffic.”

NIGERIAN President Goodluck Jonathan seemed to be riding high in his bid to be chosen by the ruling party as its presidential nominee for next year’s elections. That is, until two car bombs went off in the country’s capital a few weeks ago during a parade to mark the 50th anniversary of independence.

The propaganda war that erupted over who was responsible for the blasts may have damaged Jonathan’s chances of being a compromise candidate for a country traditionally run along a north-south political divide. Under an informal agreement reached within the People’s Democratic Party (PDP) after the end of military rule in the late 1990s, the top job should alternate between northern Nigeria, a predominantly Muslim region from where past military rulers hailed, and southern Nigeria, made up of multiple ethnic groups.

Southerner Jonathan’s ascent to power in May on the death of his predecessor interrupted the north’s term, represented by the late Umaru Yar’Adua, following two terms by Olusegun Obasanjo, a southerner.

 Jonathan was expected to step down in favour of a northern candidate for next year’s poll, but he has now said the north-south agreement was unconstitutional and proclaimed himself a candidate for the PDP nomination.

He has been a popular president, not just in his own region, and has even found support from northern politicians for his presidential bid. He launched his campaign with an announcement of sweeping reforms in the key power sector and promises to use oil profits for national reconstruction. But just as there was a glimmer of hope that the country might be moving away from its ethnic and religious constraints, Jonathan got into a war of words over who was responsible for the bombings.

Although the rebel group Movement for the Emancipation of the Niger Delta (Mend) claimed responsibility, Jonathan quickly asserted that the atrocities were the work of criminal elements.

Jonathan, while vice-president, was the key negotiator in the 2009 cease-fire agreement with Mend. Its culpability for a crime perpetrated at the heart of his presidency compromises his reputation of having a grip on security in the delta.

His northern rivals for power jumped on the propaganda bandwagon, asserting that the president, by “protecting” Mend, proved he could not rise above partisan interests.

Jonathan then had the campaign manager for one of his PDP rivals, former military ruler Ibrahim Babangida, arrested for questioning over the blasts, raising the temperature. As one journalist in Nigeria wrote, Jonathan “shot himself in the foot and then put the bloody foot in his mouth”.

 But the northern candidates’ attempts to undermine Jonathan are not covering them in glory either. Although they are high-profile politicians and more experienced than Jonathan, they do not offer Nigerians much they haven’t seen before.

The saga has reached all the way to the courtrooms of Johannesburg, where leading Mend activist Henry Okah has been arrested on suspicion of being behind the bombings — although he has proclaimed his innocence. Ironically, Okah, who lives in SA, further dented Jonathan’s ambitions, telling the media the president’s office had asked him to blame northerners for the bombings and get Mend to withdraw its statement claiming responsibility.

 Nigeria is poised on the brink of what could be the most auspicious economic period in its history, given investor interest in the market and the trajectory of reform in key sectors. So the PDP needs to choose wisely. But that may be a bridge too far for politicians more used to making decisions based on short-term self-interest rather than Nigeria’s long-term gains.