Researchers: Malaysia shows ugly side in trade with South Africa

comments     Susan Loone     Published     Updated

While Prime Minister Dr Mahathir Mohamad is famed for his fiery rhetoric on South-South investment to challenge western dominance of world economy, the reality behind his words is less than inspiring, for example in South Africa where, according to researchers, Malaysian investment has been dogged by controversy.

According to research professor Vishnu Padayachee and senior research fellow Imraan Valodia, the most controversial investment was the Umno-linked conglomerate Renong Bhd's involvement in the city of Durban.

In a recently published book, Ugly Malaysians? South-South investment abused , the duo from Durban's University of Natal School of Development Studies said the controversy arose when the sites for Hilton Hotel and Durban's Point waterfront were sold to Renong at a substantial discount on the market value despite high bids from other developers.

Despite a favourable deal, RocPoint, the joint venture property development company formed between Renong and the African National Congress-linked black empowerment group Vulindlela, has not developed the prime tourist site on Durban's Point, they said.

"In both cases, prominent ANC-aligned businessman Mzi Khumalo is alleged to have played a prominent role," wrote Padayachee and Valodia in the chapter "Developing South-South link? Malaysian investment in post Apartheid South Africa".

"A number of South African investors have expressed an interest in developing the site but have apparently been unwilling to deal with the Malaysians."

The 171-page book edited by Universiti Malaya's political economist Prof Dr KS Jomo also features articles by other writers on Malaysian investments in South Africa, Cambodia, Tanzania and Malaysian transnational logging companies abroad.

Privileged access via PM's entourage

In his introduction, Jomo said the book deals primarily with investments encouraged by the Malaysian government, ostensibly in line with the South Commission's promotion of South-South investments.

Before the East Asian currency and financial crises in 1997, he said, it was common for scores of prospective Malaysian investors to accompany Mahathir on his official trips abroad.

"[But] for many, if not most, these trips rarely translated into actual investments although there may well have been other benefits gained from having been part of or seen to be part of the PM's extended entourage," wrote the UM don, well-known for his criticism of Mahathir's economic policies.

"Thus, a select few Malaysian private investors perceived to be closely associated with the PM were able to secure privileged access to lucrative business opportunities," he added.

However, Jomo said that this "new dispensation" also generated considerable resentment, not least among host government officials who were not partaking in the "gravy train", and rival prospective investors.

This group, he added, often unanimously believed that Malaysian investors would never have secured the business opportunity but for the privileged access allowed by the host government.

Umno-linked companies

Meanwhile, Padayachee and Valodia reported that another controversial case has been the "rapid rise and subsequent collapse" of SMG Holdings, Samsudin Abu Hassan's vast interest in South African economy.

SMG was reported to be facing severe financial difficulties and recently sold off a number of interests in South Africa with a number of other potential investments not reaching fruition, they said.

Although a number of Malaysian companies have acquired interests in South Africa, the major actors have been companies with very close ties to Umno like Renong and SMG, they claimed.

According to the writers, Umno appears to have intensified its direct interest in South Africa after the ban on the ANC was lifted in early 1990.

"By the end of the year, ANC-aligned economists and activists were speaking enthusiastically about the Malaysian model."

In 1993, following their "political patron's injunctions", Samsudin and Renong's (former chief executive officer) Halim Saad were dispatched to South Africa as the Malaysian regime's advance team, added the writers.

"The Malaysian state and state-linked corporate sector became major funders of the ANC election campaign, injecting some SAR6 million into the election coffers just before the elections."

According to them, the "fixer" of these donations was a Malaysian called Lim Kok Wing, who was accountable to Mahathir and (then) Umno treasurer and finance minister Daim Zainuddin.

Replicating Malaysian experiences

They said Malaysia also served in the early 1990s as a funnel for other Asian countries' donations to the ANC.

To some extent, they said, Malaysian investors like Samsudin saw the possibility of replicating their Malaysian experiences in South Africa. As on the Kuala Lumpur Stock Exchange, Malaysians were able to acquire small companies on the Johannesburg Stock Exchange at favourable prices.

"With their ANC links, they looked forward to special advantages and contracts which would foster rapid growth and returns to their investments," said the writers.

In financial terms, the investments by Malaysian Telekom and Petronas in Telkon SA and Engen respectively have dominated the country's involvement in the South African economy.

Malaysian investments have been particularly active in financial services, hotels and gaming and the South African property market.

Malaysia has emerged as a source of foreign direct investment into South Africa second only to the US, and above South Africa's traditional sources of foreign investment, Germany and the UK.


This is the first part of a four-part series based on the book Ugly Malaysians? South-South investment abused (Institute for Black Research, Durban, 2002) which highlights the growing resentment abroad to various foreign direct investments by Malaysian firms.

Tomorrow: Malaysian investment in Cambodia.



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