I think you’re right that Zimbabwe does have something of an effect on the region, including South Africa, but I think it’s pretty minor amongst large investors. The South African government has an excellent record elsewhere on the continent, having spearheaded the African Union’s drive to promote good governance, and brokered peace deals in places like Burundi, Congo (DRC) and the Ivory Coast. Even more importantly, while the government is publically supportive of Mugabe, management of the economy and property rights within SA has won nothing but support from international bodies. There’s absolutely no indication of South Africa following Zimbabwe at all, at least not for a long time (and one would hope that the wealth would have spread by then already). There are a number of reasons why SA is still supporting Mugabe (though not, in my opinion, convincing ones), but agreement with Mugabe’s actual policies is not one of them.

Many African countries have been trying for a long time to communicate that the continent is made up of over 50 very, very different countries, of which only a few are the “basket cases” that make the western media. So for every Zimbabwe or Sudan, there are tens of stable and well-run countries — just like how for every Kosovo or Belorussia there are a number of well-run and stable European nations. The message from deals like the Barclays one is that some investors are, finally, realising this truth.

Excellent post. I see you have an interest in economics which I share though you seem to know more about it then I do. I agree with your sentiments in regards to China. At the end of the day growth rate in China is 9% versus (as you pointed out) 3-4% in South Africa. Makes that decision fairly simple. But I think Adams right that that growth rate in China won’t last forever and when it does investors will look for a new place to put their money.

I also agree with your point about infrastructure in Africa. Having driven around a lot of Southern Africa, I can say that they are a long way from most industrialized countries. But I would think that an even bigger threat to foreign investment is the stability of the governments. Last I heard the leader of South Africa was good friends with Mugabe. Any threat of South Africa heading in the direction of Zimbabwe I’m sure keeps out a lot of potention investment.

Now imagine a coin like your penny, but worth one sixth as much. And imagine another, worth one third as much as the penny. And another, worth almost as much as the penny. Now imagine the SA Reserve Bank busy pressing thousands and thousands of them, all the time, because people can’t be bothered not to lose them. Yes, it’s great.

Also, I personally wouldn’t mind getting rid of pennies here in the US. Of course, if snack machines would accept pennies, that’d be a different story. I’d be set for life then. But I never carry around pennies for the purpose of spending them.

What you say about South Africa as a stepping stone is, I think, true. Certainly Barclays is looking at the ABSA purchase as the foundation of a broader African roll-out. And even foreign investors who want to invest in the rest of Africa will often set up headquarters in Johannesburg.

As regards China: I agree that as it becomes industrialised, the profile of investment there will change. But I think that’s still a long way away — China’s economy is still far smaller than America’s, and even smaller when measured per person. So I think there are still tons of new opportunities there for companies searching for new markets. The problems with Africa as an attractive consumer market are (a) there isn’t much investment in Africa as an industrial workhouse at the moment, so no promise of new, wealthy, consumers who need to buy stuff, and (b) logistics. China has 1.5 billion people all near each other, with nice big rivers and railroads connecting them. Sub-Saharan Africa has only around 650 million people, seperated by huge mountain ranges, deserts, jungles and non-navigable rivers. There are efforts to improve this, but it’s going to take a long time before companies can easily transport goods to markets — which might be why it’s intangibles like cellphones that are really taking off.

Lastly, the Rand: It’s named after an area of the country called the Witwatersrand, which is Afrikaans for “white waters ridge”. It was called that because of the numerous little streams that existed before gold was discovered. Now it marks the area of Johannesburg and about 100miles east and west, or so. It’s the northern edge of an ancient inland sea, that for some reason has gold all around its edge. Paul Kruger, the president of the then-independent Afrikaner republic of the Transvaal, in which Johannesburg was founded, minted “Krugerrand” gold coins to help sell the newly-found gold. The British conquered the Transvaal in 1899, after which South Africa used the Pound until the South Africa Rand was introduced in 1961. Apparently it was stronger than the US dollar until 1981, when anti-apartheid sanctions really started biting.

There are R200, R100, R50, R20 and R10 notes (all in different colours, with animals on one side and major industries of the country on the other, if memory serves). Then there are R5, R2, R1, 50c, 20c, 10c, 5c, 2c and 1c coins. There is also a lot of popular talk about getting rid of the last two or three coins, which are really worth nothing these days.

“Africa is not the only developing country in the world. China, and increasingly India and South America…”

I was unaware that either the African nations or South American nations had unified into countries.

Now to make some real comments (Keeping in mind that I know a lot less than you about all of this stuff, Paul… a LOT less):
Is China that much of a threat to South African funds? I would imagine that as China becomes increasingly industrialized and capitalist, it will draw less foreign funds of the sort that developing nations compete for. Something else that might work in South Africa’s favor is that it might get used as a stepping stone for ventures in the rest of Africa. Foreign investors invest in South Africa because it has better infrastructure and is less risky. In turn, South Africa, who is less tentative about investing in the rest of Africa, works toward developing surrounding nations. Thus, South Africa benefits from incoming foreign funds, but also benefits from increased opportunities with the other African nations.

Anyway, like I said, this is not exactly my area of expertise.

Oh, one other question: Where did the name for South Africa’s currency come from? How does the currency break down? (Okay two questions… purely idle curiosity here)