Institute for Security Studies - South African Economic DiplomacyIt is time for the government and private sector to identify a common vision and strategy for improving South Africa’s participation in the global economy so as to maximise the contribution to growth and development. To do this, however, requires supportive state-business relations, which have not yet been fully realised in South Africa. This ISS Paper outlines concrete steps that could be taken to strengthen South Africa’s economic diplomacy through greater links between government, business and parastatals.

There is no doubt that South Africa is pursuing economic diplomacy initiatives on a regular basis. However, these currently take place in the context of broader state-business relations that are fraught with challenges. Government has shown an on-going mistrust of the business community in South Africa, especially those firms who are active in other parts of the continent where there is a perceived clash between profit-seeking activities and the South African government’s broader developmental goals. This is demonstrated by attempts to put in place some kind of code of conduct or ‘guidelines’ to govern investment in neighbouring economies. The result of this dysfunctional relationship is a series of ad hoc engagements that do little to deepen commonly held development objectives between the state and private sector.

Organised business in South Africa is in disarray with tensions having re-emerged along racial lines with the reformation of the Black Business Council and the failure to have one coordinated voice on key policy issues through Business Unity South Africa. Without structures in place for firms to collectively engage on policy matters, including economic diplomacy, there is little follow through on any of the discussions that take place. The risk also increases of vested interests being able to dominate the engagements with government. Frustration has developed on both sides with the current processes available to discuss policy issues, such as the Presidential Business Working Group meetings.

South Africa has made economic diplomacy a priority but does it implement it effectively? Economic diplomacy has been defined in the South African context as ‘policies and activities that promote trade, FDI [foreign direct investment], tourism, and technology transfers to South Africa, and positively position the country in the world through imaging, branding, marketing and public diplomacy (domestic and international)’.[i] In today’s globalised economy, it is important to ensure that there are effective engagements at the international level that support the development objectives of a nation. This includes actively participating in setting the ‘rules of the game’ through regional and multilateral processes, like at the World Trade Organisation.

Like much of the development and implementation of foreign policy, economic diplomacy remains the mysterious domain of a few government officials and some researchers.  This needs to change as there are many non-government stakeholders driving economic activity.  The Department of International Relations and Cooperation (DIRCO) has recognised that an effective economic-diplomacy policy requires cooperation between the government and the private sector.[ii]

There is no escaping the reality that economic activities, like trade and investment, remain largely driven by business. For example, the television broadcasting activities of Naspers are a primary contributor to the sharing of information on South Africa with neighbouring countries. South African retailers, banks and telecommunication firms are increasingly visible presences across the continent. Governments can pursue policies that support the private sector and can negotiate the ‘rules of the game’ that enable such activities to flourish.  Without both groups working in tandem and towards common goals, there will remain unfulfilled potential and, in the worst case, competing objectives that lead to tension both at home and abroad.

South Africa is clear that it will continue to play an active role on the continent to promote Africa’s development and growth both through economic diplomacy and other foreign policy tools. This includes continued leadership of peacebuilding activities in post-conflict states and fragile economies. This is one area where a more focused strategy for engaging South African business could show real dividends not only in development terms but also in commercial gains. Parastatals that have the capacity to engage outside of the domestic space (such as Transnet) could be used to anchor economic diplomacy initiatives that complement the peacebuilding work underway in countries like the DRC, Burundi and South Sudan.

Economic diplomacy is not just a fancy term found in foreign policy documents and then forgotten. It is a set of tools that can unlock contributions to improve the livelihoods of South Africans and those in neighbouring countries through increased levels of trade and investment.  The government, private sector and parastatals are all active participants in our country’s economic diplomacy.  It is important that they start pulling in the same direction so as to take advantage of the strengths and resources that they all bring to the table.

The paper was posted on 28th January 2015 and is available at the Institute for Security Studies website.

[i] Brendan Vickers and Rok Ajulu, South Africa’s Economic Diplomacy: Trade and Investment Promotion, report prepared for the Presidency’s Fifteen Year Review by the Institute for Global Dialogue, Pretoria, March 2008, 5.

[ii] Department of International Relations and Cooperation, Building a Better World: The Diplomacy of Ubuntu, White Paper on South Africa’s Foreign Policy, Pretoria: DIRCO, 2011, 28.