Jeremy Warner's Outlook: About time. Suddenly foreign investors are getting it about South Africa's attractions

With Africa topping the scheduled agenda for the G8 summit at Gleneagles in a couple of weeks, political leaders might do worse by way of background reading than to mug up on the "Freedom Charter", the set of principles on which South Africa's ruling African National Congress party is founded.

With Africa topping the scheduled agenda for the G8 summit at Gleneagles in a couple of weeks, political leaders might do worse by way of background reading than to mug up on the "Freedom Charter", the set of principles on which South Africa's ruling African National Congress party is founded.

Now enjoying its 50th anniversary, this overtly socialist and in many respects utopian vision for the future for South Africa was recently reaffirmed without modification by the ANC.

Many business leaders would recoil in horror on reading it, for there is little in there to encourage the view that the ANC would pursue the market-based approach to economic development that has served Europe and America so well. To the contrary, the document is strongly suggestive of the command economy applied with disastrous results to large parts of the rest of the African continent.

If there were not already enough reasons for international capital to shun Africa and instead concentrate on the apparently sounder and faster-growing economies of Asia, a literal reading of the Freedom Charter provides all the excuse needed. Yet though the ideology and roots of the ANC are socialist, the practice has been somewhat different.

Far from seizing the means of production or expropriating the land, the ANC has proved a pragmatic, cautious and generally liberalising influence on the economy. There's been no wholesale nationalisation of corporate assets or land, and beyond measures to support Black Economic Empowerment, labour protections and the introduction of a progressive tax rate regime, little overt attempt to redistribute wealth.

The public finances have been rebuilt, inflation and interest rates have been brought down, and the corruption of the pre-Democracy era has been purged. Only last week, President Thabo Mbeki sent a powerful message to both his party and the outside world against the corrupt practices of other African regimes by sacking his deputy, Jacob Zuma.

In other parts of Africa, Mr Zuma's offences would have been swept under the carpet, the more so as he draws his support from the populist wing of the party, which wants more urgent delivery of a social dividend.

Yet none of this has so far been rewarded with high levels of foreign investment. South Africa has obeyed the rules of international capital. Its rewards have been sadly lacking. Growth has been steady but unspectacular, trailing by some distance the more rapid rates of growth seen in the emerging markets of Asia and eastern Europe.

The hope and optimism that greeted the birth of the Rainbow nation has only partially been fulfilled, with international capital remaining largely suspicious. Rather than seeing South Africa's myriad of positives, foreign business has instead focused on a cliched view of the negative - poor life expectancy, extreme poverty, disease, crime, limited market potential and the possibility that everything could be lost in a Zimbabwe-like social and political meltdown.

Until recently, that is. Indeed, the signs of a turning tide grow ever more unmistakable. Perhaps finally South Africa is to be rewarded for her good behaviour.

Over the past two years there has been a marked upturn in the flow of foreign capital into South Africa, and although much of this is speculative money earmarked for the property hotspots of Cape Town and Durban, there's been a notable upsurge in business interest too. This has been most obviously showcased in Barclays' $5bn acquisition of South Africa's biggest retail bank, Absa, the largest inward investment into the country since the fall of apartheid.

Where Barclays has led, others are certain to follow. Government officials confirm foreign interest in buying at least one of South Africa's other leading banks. As yet, these inflows are nowhere near those enjoyed by China, India and large parts of south-east Asia.

Yet there is undoubtedly a change in sentiment going on. Those international investment banks that have stuck patiently with the South African story report unprecedented levels of interest and activity. In a recent research note, Deutsche Bank rated the South African stock market a strong buy.

Over the past week I've been travelling to some of the major cities of South Africa as the guest of Gavin O'Reilly, the chief operating officer of Independent News & Media (INM). Here I have to declare an interest, for INM is the owner of The Independent and therefore my ultimate employer. My bias thus exposed, I nevertheless think it right to point to INM's involvement in South Africa as an instructive and inspiring one.

INM bought into the South African newspaper market almost immediately after the fall of apartheid via the country's dominant supplier of English speaking titles, the Argus Group. At the time this was an incredibly gutsy thing to do. The risks of buying into such a young and potentially unstable democracy were obvious, and they were not ones even much larger media groups were prepared to take. Yet the investment has paid off handsomely. Revenues have since risen threefold and profits fivefold.

Today, the potential for growth is arguably better than in any other part of the group. With growing levels of literacy and prosperity, circulation and advertising revenues are being steadily expanded away from the company's once exclusively white readership into the black and coloured communities. The newspaper market is widely seen as mature and slowly dying in the UK, yet in South Africa it is dynamic and fast-growing.

Group revenues in South Africa are expected to rise 16 per cent this year, with strong double-digit growth in operating profits. More African language titles are planned following the success of the company's Zulu language paper, Isolezwe, and a new daily tabloid, modelled unashamedly on The Sun, has proved a runaway hit. Despite the country's many social problems, for the newspaper industry at least, South Africa would seem a better wager than the UK or most other developed markets.

But what of Black Economic Empowerment, the intrusive and apparently arbitrary nature of which many business leaders cite as another powerful reason for shunning South Africa? Here too, the risks are widely misunderstood. Companies don't necessarily have to sell or give equity away to black empowerment groups if they can demonstrate a transfer of wealth in other ways, through for instance positive discrimination in employment, purchasing policy, or in INM's case, bringing readership profiles closer into alignment with the racial mix of the overall population.

Business by its nature hates government interference of any variety, but prescriptive measures to help Black Economic Empowerment is a small price to pay if they also promote social harmony. Only last month, lack of progress on social services and housing provoked violent demonstrations in a number of cities, a sharp reminder of the dangers for this still youthful democracy.

Given South Africa's history, with the vast bulk of wealth concentrated in the minority white population, it would be unreasonable and socially dangerous to expect a wholly free market approach to the economy. Black Economic Empowerment is a positive for business if it underpins social and economic stability. The problem lies rather with the fact that the government hasn't yet figured out how to apply it consistently, proportionately or transparently.

If South Africa stands on the threshold of economic renaissance, it's much harder to be optimistic about the rest of sub-Saharan Africa. For all South Africa's third world attributes, the ANC inherited what in many respects was a first world economy, with relatively advanced infrastructure, strong companies, a robust legal system and a glorious climate.

The coastal resorts of Cape Town and Durban are places where business people would be happy to live. Regrettably that cannot be said about much of the rest of this troubled and poverty-stricken Continent. Still, for Africa's largest economy at least, the outlook has never looked better, and it's just possible that others may learn from its example. Investors may finally be getting the message. China is not the only emerging market with potential.

j.warner@independent.co.uk