Why African Economies Do not Thrive

The Budget Speech was great and you could feel the confidence of  Finance Minster Tito Mboweni.

 

But he missed the important matter which has been communicated to government for many years. No African economy has succeeded from Cape to Cairo. After 27 years as public accountant and working on this topic I can explain why African economies fail – they are not facilitating black citizens to enter business and manufacturing. South African is on the same route.

Everybody talks of foreign investors, without realizing that they are not many enough to cover every country, every town or village. Further, foreign investors avoid fixed direct investments (FDI – such as factories) into countries with depreciating currencies because they are forced by Accounting Convention 112 to write off or adjust in their head office books any loses due to currency depreciation in investee country. https://1drv.ms/b/s!Al0Akivut9H_olBTrB91TI9Vski0Instead, foreign investors  invest in shares and bonds, in and out, making money for doing nothing and there is no new factory per se, while forcing the currency to fluctuate, as they buy and sell for profit taking.

The exception is mining which allows foreign investors to boost their head office balance sheets with ore discovered and raise funding abroad from our resources here.

2.  The best area for inclusive growth is manufacturing, as opposed to tendering which is limited to a few. African countries have too few factories or formal businesses compared to the sizes of the population.   The correct number of formal businesses should be 5% of the population.  South African had 600 526 in 2011, which is 1.07% of the 56 million population, instead of 2.8 million. Other countries have worse ratios than South Africa.   Zimbabwe has about 70 000 businesses mixed between formal and informal, which is 0.004 of the population of 16 million, short by 730 000.  Only formal businesses provide full employment and tax base for government revenues.

People migrate to places or countries with relatively higher numbers of factories or employers such as South Africa and Europe. Therefore, countries should endeavour to create more formal businesses by facilitating black Africans. Foreign investors or whites people alone cannot achieve it

But government will not listen until Dondo or October say it. Please read the full text linked here.

https://1drv.ms/b/s!Al0Akivut9H_pBSOgp_wCEZbO2qq

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