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Submitted by Alan Hirsch on
Firstly, a couple of methodological issues. The choice of data points overstates the problem. 1980 is not a good base year for any series on South Africa, with the highest real gold price in history. Also, per capita income declined quite dramatically in the last decade of apartheid (ending 1993), and per capita income has grown considerably more quickly since 2000 than in the previous three decades. Nevertheless, the basic thesis is correct--investment rates are relatively low, and amongst the major factors are the oligopolistic market structures which encourage rent-seeking and the low level of public investment (prior to the late noughties). The spatial disadvantages that Maikel points out are amongst several factors that reduce national and local competitiveness. The low rate of FDI results from a condition peculiar to South Africa--it is the reverse image of the high margins of oligopolistic companies which have no difficulty in attracting foreign investment through the stock-exchange. The capitalisation JSE is much larger in proportion to GDP than any other emerging market. (See the recent BRICS Report which shows that in 2010 SA's listed firms were worth 278% of GDP compared with 93% in India as the next highest.) Domestic oligoplies attracting cheap foreign indirect investment are the other side of the coin of low FDI. There is no single policy answer to the problem, and the answers are widely known in SA--ASGISA, the "Harvard report"the New Growth Path and the National Planning Commission's outputs have enough obvious common correct points. What concerns me particularly right now is the low level of innovation in SA, the absence of sufficient emerging innovative companies, and the lack of concern about this in SA.