The visit of United States Secretary of State Hillary Clinton to South Africa, praising the country for its efforts in the fight against HIV and offering loans to fund renewable energy projects, was overshadowed by dire news on business confidence, which has reached a twelve year low.
The Business Confidence Index (BCI) dropped four points to 90.9 in July after posting a recovery in June, the South African Chamber of Commerce and Industry (SACCI) said.
The low confidence was attributed to policy confusion in the lead up to the ANC leadership battle, with ideological stand-offs in the economic ministries leading to policy paralysis and senior ANC leaders seemingly distracted by the coming leadership election. Weak global and economic environments were also blamed. Business groups were concerned about the slowdown of global economic growth and lower growth forecasts for South Africa. The central bank cut its growth forecast for 2012 to 2.7 percent from 2.9 percent last month and the finance minister has said growth will likely come in below 2.7 percent.
“The latest move in the BCI indicates that business confidence remains highly fragile and unpredictable,” said the SACCI in a statement.
Business leaders have acknowledged the challenges of doing business in Africa, including concerns about political stability and fears of potential takeovers of private industries by the government. While South African leaders continue to promise businesses free access to their market, some politicians continue to raise the possibility of nationalisation of mines and other industries.
The news could not have come at a worst time, with Clinton in the country for talks with ANC leaders. South Africa has the world’s highest rate of HIV infection, but Clinton said that efforts to stop the virus “have saved hundreds of thousands of lives”. In the capital of Pretoria, Clinton met with Foreign Minister Maite Nkoana-Mashabane and other senior officials in the second cabinet-level strategic dialogue between the two nations. She also participated in a summit of leading U.S. business executives and their South African counterparts with the aim of boosting trade between the two countries.
She also hailed the growing trade ties between the two countries. She noted that two-way trade had shot up 21 percent to almost $22 billion from 2010 to 2011. Nearly 98 percent of South Africa’s exports to the U.S. enter the country duty-free under the African Growth and Opportunity Act, which is set to expire in 2015. Nkoana-Mashabane urged the U.S. Congress to extend the act and Clinton said the administration would work with lawmakers on it.
The United States is also set to offer South Africa up to $2 billion in loans to fund renewable energy ventures involving American companies. This could signal a potential boon for both the electricity-hungry nation and U.S. business interests. The 18-year loans will be funded out of the U.S. Export-Import Bank, the government’s vehicle for promoting U.S. export sales by providing low-interest loans for services and goods produced by American industries.
South Africa has seen its growth slow in part because of an ongoing electricity crisis as public utility Eskom struggles to meet demand. Energy Minister Dipuo Peters said that investment in the country’s power generation remained vital if the country was to continue to grow.
“Without access to energy services, the poor will continue to be deprived of the most basic economic opportunities to improve their status of living,” Peters said.
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