Reuters As many African countries push for greater transparency, a controversial state secrets bill in South Africa has unnerved investors who worry the continent's top economy may try to hide widespread corruption, driving up the cost of business. South Africa's parliament last week passed a bill that allows any government agency to apply to have information “valuable” to the state protected. The bill also criminalizes the possession and distribution of state secrets. Critics say the bill will make it easier for the ruling African National Congress to conceal graft, at time when there is growing concern about cronyism within the government. For investors — already spooked by talk of nationalization by the ANC's radical youth wing, and mixed messages from Pretoria about foreign investment — the bill is a sobering reminder of the cost of doing business in Africa's top economy. “It's another nail in the coffin. It's extremely disappointing that it goes against the trend of what every other country in the continent is doing,” said Daniel Broby, chief investment Officer of London-based emerging markets asset manager Silk Invest.“The fourth estate is important in keeping checks and balances in any democracy, as is the judiciary. Both of those are areas we have looked to in the past to shore up the South African economy, and to provide a backbone against the sort of political discourse that takes place.” The bill, which still needs to pass some procedural hurdles before becoming law, also allows for the protection of commercial information, that “would cause financial loss or competitive or reputational injury to the organisation or individual concerned.” Opponents worry government officials would use that to hide involvement in questionable deals, such as in a multi-billion dollar arms deal currently under investigation, where several officials have been convicted of taking bribes. “The biggest single challenge in South Africa is corruption. We have to contain corruption or the economy will unravel,” said Koos Bekker, the CEO of Naspers, Africa's biggest media company. “This particular protection of information bill allows the classification of information which will make it very difficult to point out corruption.” Transparency International reckons that investing in a “relatively corrupt” country compared to an uncorrupt one can be 20 percent more costly. South Africa ranked 64 out of 183 countries in Transparency International's 2011 corruption perceptions index, slipping 10 places from the previous year and ranking the country in seventh place in sub-Saharan Africa. “The bad thing is the message that this type of legislation sends to investors. If you think about countries that have healthy, effective, functioning societies, they tend to be open, not closed,” said Adrian Saville, chief investment officer of Cannon Asset Managers in Johannesburg. While investors are willing to put money in markets that are perceived as being more corrupt or opaque, such as China or Angola, they expect higher returns for their risk. With an economic growth rate of 3.1 percent expected in 2011, and an unemployment rate of about 25 percent, South Africa can ill afford to chase away foreign investment. Johannesburg's benchmark Top-40 index briefly weakened on news of the bill's passage. Traders and fund managers said a bigger worry was the long
