(June 3, 1999, Gazette)
Giving developing countries time to develop was the message behind Timothy Thahane's recent public lecture at Memorial. Dr. Thahane, who holds two undergraduate degrees and an honorary doctor of laws degree from Memorial, is the deputy governor of the South African Reserve Bank. He inaugurated two new lecture series for Memorial with his address May 25: the Distinguished Alumni Lecture and the International Centre Distinguished Lecture Series.
Titled International Capital Flows and Volatility: A Challenge for Developing Countries, Dr. Thahane's lecture focused on the impact that world investment strategies are having on developing nations. He cited alterations that have taken place in the global investment industry over the past 30 years which have led to a significant impact on the economies of developing countries.
In essence, investors are no longer restricted to domestic markets as they were in the '70s; they now have the world at their investment doorstep. Dr. Thahane said the impact this has had on developing nations has been both positive and negative.
"In developing countries, domestic savings were insufficient to maintain a level of growth, there was a huge push to get foreign investment to come in … in a very short time we saw private capital flows to developing countries range from $175 billion i n 1993 to $328 billion in 1996."
That sounds like good news but the negative, according to Dr. Thahane, is that fund managers typically look for short-term profit. They go into a country, push the value of currency up by investing in such things as government bonds, and then they pull out, taking their money with them.
Dr. Thahane used his home country as a case in point. In the early months of 1998, $16 billion in investments flowed into South Africa. Four months later, when investors collectively decided to pull back on foreign investment as a result of economic in stability in Russia, $23 billion in investment money was pulled out of South Africa.
"How, as a finance minister, can you manage your budget with those capital flows?"Dr. Thahane asked.
Dr. Thahane said investors need to have a greater awareness that developing countries need long term investment money in order to develop — investment strategies have to be about more than quick returns.
The speaker also had some advice for Memorial. He said the university must continue its focus on international awareness and involvement.
"It is important for a university such as Memorial to realize that it is part of a global community. The sharing of skills is so important and your international centre is a focal point for that."