Frustrated by their inability to attract foreign investment, South African officials recently surveyed corporate executives from around the world to find out why.
The Germans complained about crime. The British were concerned about the high rate of AIDS. Everyone was reluctant to do business with South Africa's assertive labor unions. But it was one U.S. executive's response that really crystallized the issue for the South African government.
"Why," the survey quoted the executive as saying, "we still see South Africa as one big game reserve."
For all its triumphs--the peaceful transition from white minority rule to a democracy, and the free-market reforms that have been widely lauded internationally--South Africa continues to have an image problem. "People don't even know we have paved roads in South Africa," said Mpho Mosimane, a spokesman for President Thabo Mbeki. "That told us that we need to do a better job of marketing."
To be sure, South Africa's image is nowhere near as bad as it was before 1994, when the apartheid government trampled the rights of the black majority and defied economic sanctions and ridicule from the international community. When Congress approved the sanctions in 1986, 360 U.S. companies were doing business in South Africa. By 1991, only 125 remained.
But the flood of foreign investment that everyone expected to follow the first all-races elections in 1994 has been a trickle. Today, 386 U.S. firms have operations in South Africa, or just about the same number as before sanctions were applied. Many here had hoped that a post-apartheid country would attract many more firms than in the past.
Total foreign investment over the last five-year period is less than $10 billion, which is at best half the level anticipated when Nelson Mandela became the nation's first democratically elected president.
"South Africa really inspired a lot of people with this feel-good tale of good versus evil," said Dwayne Gathers, director of the California Office of Trade and Investment here. "But when you look really closely at the situation, that's all a lot of Americans really know about this place. Sometimes I'm just floored at the lack of sophistication that people have in dealing with South Africa."
For instance, people in California don't realize South Africa is much farther away than China. "I tell people all the time that if you mail a package FedEx, then it will take two days to get here," he said.
"Everyone just sort of took it for granted that the money would start rolling in when Mandela was elected," Gathers said. "At the end of the day, there are a lot of places to invest your money, and South Africa just hasn't been at the top of anyone's list for a long while."
Mbeki's visit to the United States late last month was largely a recruitment drive. He met with hundreds of corporate executives and potential investors in New York, reassuring them that the government was addressing crime and AIDS, and holding the line on its austere economic plan, called Growth, Employment and Redistribution.
Still, South Africa's entrance into the pool of emerging market countries came just as competitors in Asia and Latin America--almost all with larger populations than South Africa's 42 million--were becoming darlings of investors and receiving most available money.
And opening South Africa's long-protected market has not come without growing pains. As unemployment increased, so did crime. In a recent World Economic Forum index measuring the economic competitiveness of 59 countries, South Africa ranked 47th. When business executives were asked to assess the protection provided by local police, South Africa ranked last.
"We've had a lot of break-ins, and we've had to spend thousands of dollars on electric fences and security, and it's just a major pain," said M.D. Hesse, chief executive of Wika Instrument Corp., an international electronics firm with a plant here.
The productivity of South Africa's work force is also a major question mark for investors. They are discouraged by the rising rate of AIDS, labor unions that aren't afraid to strike and the number of blacks who were poorly educated under the apartheid government and often don't have the skills to perform high-tech jobs. And the new government's affirmative action requirements and labor laws are seen as onerous.
"Sometimes companies feel that they can't meet the government's requirements to hire and promote blacks," said one U.S. official. "It's not that they can't do it, but they often feel it's too fast for them to comply with."
South Africa's reputation for corruption has also proved a barrier to investment. When Wika Instruments bid on a government contract last year, Hesse said that mid-level government officials made it clear that a bribe would help Wika's cause.
"We told them to go jump in a lake," Hesse said. "But you have to be aware of those hidden costs before deciding to do business here."
There are signs that South Africa will turn the corner, said Hesse and others. Mbeki has announced the creation of a special police force, much like the FBI, to target priority crimes, and has directed his cabinet to loosen its labor laws to encourage entrepreneurship. Rising gold prices could stem job losses in the mining industry.
South Africa's ability to round up foreign investment is crucial to the economic development of the rest of the continent.
"Any African renaissance will start here," said K.V. Schuurman, chief executive for the German Chamber of Commerce and Industry here. "South Africa is where the cake is baked. Everyone else is just making cookies."