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Investment

Mixed business response to South Africa

A landmark election in South Africa left German officials uncertain about the investment environment in the temperamental nation on the southern tip of the African continent. Multinationals believed otherwise.

People expect change, when the word "landmark" is used in conjunction with an election. But German industry representatives were "cautiously optimistic" about the results of South Africa's closely-watched national and provincial polls on May 7.

You could not blame them. The tumultuous times the Rainbow Nation endured over the past years - and more recently - were still fresh in their minds. Government intervention in the economy spread unease among international investors last year. Drawn-out strike action also scared off big corporate players, particularly in the automotive and components industry - a sector that generates 30 percent of the country's manufacturing output.

German premium carmaker BMW confirmed that labor instability dashed South Africa's hopes of producing a new model of the prestigious brand back in October. The company's production spokesperson, Andreas Klugescheid, told DW that the industrial action had been problematic, but that the situation was now relatively stable.

BMW's strong commitment

"BMW is sticking to its fundamental commitment to South Africa," Klugescheid said. And they are not the only ones who were upbeat. A report last month by the United Nations Economic Commission for Africa (ECA) painted a very different picture to the wary response from abroad not too long ago.

“Toyota SA would be investing approximately 33.2 million dollars in a parts distribution warehouse and a new assembly line in Durban," noted the ECA report. "German auto component group, Friedrich Boysen GmbH is putting 16.4 million dollars in a new 10,000 square meter plant and Beijing Automotive Works to stake 17.9 million dollars in a plant expected to service the whole of sub-Saharan Africa."

'An impulse for better conditions'

There was certainly impetus from overseas. However, it all depended on the new government's willingness or ability to harness that enthusiasm. The German-African Business Association said policy change was essential to encourage investment - and that, in turn, would help boost the domestic job prospects. About 600 German firms currently employ more than 90,000 South Africans. Still, the organization remained "cautiously optimistic that the South African government will now try to win back the trust of German companies."

The association said the most promising outcome of the election was a surge by the opposition Democratic Alliance (DA), which was thanks to a strong urban turnout. The DA's share of the vote jumped from 17 percent at the last election to 22 percent this time, according to the incomplete results. The party looked set to top the ballot in both Johannesburg and Cape Town. The German-African Business Association pointed out that its strong showing was "an impulse for better conditions for foreign investors."

The ballot marked the 20th anniversary of South African post-apartheid democracy. Still, the only issues that made voters a little emotional were a string of major corruption scandals and unnervingly high unemployment. Any anger was not enough to put a stop to the 20-year rule of the African National Congress (ANC).

Preliminary results handed a comfortable majority to the party once led by Nelson Mandela. A thumping 62.5 percent of the popular vote equated to a parliamentary majority that would give embattled President Jacob Zuma a second five-year term. The result would potentially give Zuma the clout to push through pro-business reforms in the face of union and leftist opposition.

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