Photograph — Finance TIme

South Africa has accused western countries of breaking protocol after their embassies wrote memorandums to president Cyril Ramaphosa, warning him that his failure to tackle corruption could be dire for foreign investments. These countries have since apologized, issuing a joint statement clarifying that the memo was part of discussions with South Africa’s president for investment in the country.

South Africa’s Sunday Times had reported that diplomatic missions from 5 western countries including the United States, Germany, Britain, Netherlands, and Switzerland sent memorandums to the president with an emphasis on the prosecution of people found guilty of corruption. South Africa’s Department of International Relations and Cooperation (DIRCO) issued a statement on the memorandums, calling them a “departure from established diplomatic practice” and claiming that the diplomatic notes should have passed through the department before arriving at the office of the South African president.

Cyril Ramaphosa was appointed as president of South Africa last year after his former boss and ex-president, Jacob Zuma was forced to resign amidst allegations of corruption and state capture. Upon his resumption in office, Ramaphosa promised to root out corruption in government, and hold guilty people to account. He also promised to raise $100bn in investments to resuscitate an economy which went into recession last year, while also reducing the country’s record youth unemployment.

While Ramaphosa is getting closer to achieving the latter, the former has proved a herculean task. Saudi Arabia has announced plans to build a $10 billion refinery in South Africa in January, fulfilling a pledge it made to Ramaphosa last year. UAE president also promised to invest $10 billion last year into the South African economy, especially in its mining and tourism sector.

On the other hand, while many names have been mentioned in the country’s corruption probe that began after Zuma stepped down, no arrests have been made. The commission set up to investigate the corruption charges last year revealed the price of a bribe offered by the Guptas, “a powerful and influential business family in South Africa” to the deputy finance minister to be as high as $US160 million. Despite these revelations, there has been no high profile arrest. Many have attributed this ‘no-show’ regarding the prosecution of suspected persons to Ramaphosa since there’s a possibility he might be implicated after being Zuma’s vice for many years.

The embassies had earlier called South Africa’s refusal to prosecute corrupt persons in government ‘obstacles’ to foreign investment. They also criticized South Africa’s inability to prosecute as a “shifting of goalposts.” While South Africa’s DIRCO claims it is “satisfied” that all the branches of the country, “including state agencies, are vigorously pursuing their respective mandates to address our current challenges.” corruption still induces discomfort like a festering sore in the country.

In the recently released 2018 Corruption Perception Index, South Africa has an unchanged score of 43 out of 100 from 2017, implying that there’s barely any improvement in the country over the past year.

Many investors don’t usually look farther than a country’s corruption perception before making investment decisions. In fact, South Africa is a bit familiar with this aspect; Zuma’s irrationality with firing finance ministers who sniffed out his seemingly corrupt acts during his administration had a profound impact on investments and the value of the rand.

Perhaps, South Africa’s Department of International Relations and Cooperation (DIRCO) could do well to focus on the message and not the messenger.

Comments

Elsewhere on Ventures

Triangle arrow