Address by Deputy Minister Sue van der Merwe on the occasion of the WESGRO African Business Networking Forum, 24 August 2007, Cape Town, South Africa

Fostering better business and political ties between South Africa and Africa

Chairperson;
Honoured guests;
Ladies and gentleman,

C’est un grand plaisir pour moi d’etre ici aujourd hui avec vous.

Thank you very much indeed for inviting me to this important initiative of WESGRO, the West African Business Networking Forum. Networking platforms between government and business are an increasingly important vehicle through which we can work together as business and government in realising our respective and collective goals.

The establishment of such a forum provides us with the opportunity to foster better business and political ties between South Africa and the rest of Africa, and we should perhaps reflect on the synergies between our foreign policy agenda and business interests beyond our borders.

South Africa ’s foreign policy is premised on our domestic policy and the two are mutually reinforcing. It is important to remember that our engagements beyond or borders must in the first instance reinforce the vision we have for our own people of a better life. Our foreign policy is therefore guided by this vision of “A better South Africa, A better Africa in a better world”.

The modern world is characterised in many ways by the politics of expediency and pragmatism over the need for collaborative partnerships to deal with common challenges in an increasingly complex and interdependent world.

The theme for this session therefore is appropriate, not simply because it reinforces our foreign policy agenda but covers nations in what could be regarded as two of Africa’s most crucial regional economic communities, the Economic Community for West African States (ECOWAS) and the Southern African Development Community (SADC). These regional economic communities in the south and the west of our country include countries that are geographically located along the Atlantic coast of Africa stretching from South Africa and Namibia in the south, through Angola; the Democratic Republic of Congo; Nigeria; Ghana; Cote d’Ivoire and as far a Senegal in the western bulge of the continent.

The regions are rich in resources, in diamonds and gold, in platinum and oil. These are indeed riches which should translate into the prosperity of the peoples of our regions. However, these countries are also characterised by harsh conditions, desert and jungles, beauty and danger.

Sadly these abundant resources and this beauty has been the sources of much conflict and turmoil in our respective regions and it is this that our generation must address to enable our continent to emerge out of its dark recent past and into a prosperous and enlightened future, where we can all flourish.

Our foreign policy agenda is course far broader than just these two regional economic communities (REC’s), it is important to remember that RECs are important building blocks for the continental political and economic integration. But for the purpose of these discussions here today, and considering the speakers who will address you here today, I will locate my address within the context of business networking for the enhancement of greater trade and investment along the Atlantic Coast of West and Southern Africa as part of the process towards further integration on our continent.

Ladies and gentlemen,

Our government has consciously developed our foreign policy to place human development at the heart of our international relations. This in the belief that human development is the key factor in advancing our continents rebirth and therefore in advancing our own national interests. To develop and to harness the human potential of our people is to set us on the right path towards the rebirth of our continent and the prosperity of her peoples. Part of this development process is the creations of opportunities for growing our respective economies.

We in South Africa have therefore adopted the developmental state approach towards realising this objective. This entails, amongst others, progressive interventions by government and the creation of a conducive environment wherein civil society generally and the private sector in particular can play a meaningful role in contributing to the development of our people.

The developmental state’s approach also entails the promotion of public-private partnerships in an effort to eradicate unemployment and poverty.

The South African business community on the whole has responded positively to government in this regard, and has generally been supportive of government endeavours. These positive responses and goodwill are the basis of a dynamic and enduring partnership between government and business for the achievement of our goals and in the implementation of our foreign policy agenda.

We in the Department of Foreign Affairs execute our foreign policy mindful of the fact that we operate in a world characterised by ever-increasing globalisation. In a 2005 report on the Social Dimension of Globalisation, the International Labour Organisation observed that:

Globalisation has set in motion a process of far reaching change that is affecting everyone. New technology, supported by more open policies, has created a world more interconnected than ever before. This spans not only growing interdependence in economic relations - trade, investment, finance and the organisation of production globally- but also social and political interaction among organisations and individuals across the world.

The potential for good is immense. The growing interconnectivity among people across the world is nurturing the realisation that we are all part of a global community. This nascent sense of interdependence, commitment to shared values, and solidarity among peoples across the world can be channelled to build enlightened and democratic global governance in the interest of all. The global market economy has demonstrated great productive capacity. Wisely managed, it can deliver unprecedented material progress, generate more productive and better jobs for all, and contribute significantly to reducing world poverty.

We realise must of course that with the positive also come the negative.

This is particularly so for a country like ours that faces huge developmental challenges. We also operate within a continent that not only faces developmental challenges but also faces the real threat of further marginalisation as a global player due, in part, to a prevailing sense of Afro-pessimism. It was out of this recognition that African governments, on behalf of their peoples embarked on the processes of establishing the African Union and its developmental vehicle NEPAD to ensure that they take the development of the continent into their own hands and thus create a better life for all.

But we recognise that the success of our country is linked inextricably to peace, stability and prosperity on our continent

The interests of the African continent are central to our foreign policy. Our national interest can best be realised by working through and working with the rest of the African continent within present globalisation processes taking place.

The renaissance of the continent will entail the adoption and implementation of policies and programmes that will create the environment for the development of competitive fast growing economies which create sufficient jobs for all jobseekers; with a redistribution of income and opportunities in favour of the poor; a society capable of ensuring that sound health, education and other services are available to all; and an environment in which homes are safe and places of work are productive.

Ladies and gentlemen,

There are therefore distinct roles for government and business in achieving our national objective. A look at WESGRO’s vision and mission reveals that there are synergies in our approach to realising these objectives and therefore much room for collaboration. You vision to make Cape Town and the Western Cape the most competitive business destination in the world by 2014 is ambitious. But the acclaimed author Daniel Hudson Burnham once wrote:

Make no small plans; they have no magic to stir our blood and probably themselves will not be realised. Make big plans; aim high in hope and work, remembering that a noble, logical diagram, once recorded will not die, but long after we are gone be a living thing, asserting itself with ever growing insistence.

 The Accelerated Shared Growth Initiative for South Africa (ASGISA) is a strategy by government to fast track certain key prioritised growth initiatives aimed at growing the economy faster, creating more jobs and alleviating poverty.

The overall thrust of ASGISA has resonance with your own mission to:

• attract and retain direct investment, grow exports and globally marketing the business image of the Western Cape
• Live the aspirations and spirit of the new South Africa
• Contribute to the growth and development of Africa through …commitment to NEPAD
• Drive shared growth and strategic alignment as priority approaches to development
• Benchmark yourselves against global best practice

We have said our domestic interest drives our foreign policy and work on the continent. Let us reflect a bit on these local imperatives that will be the basis of our engagement on the African continent.

The Western Cape Province has many strategic and geographic advantages: the first is the connectivity to the rest of the country through road and rail infrastructure and connectivity to three inland provinces, making access to domestic spatial development initiatives possible in order to harness the maximum potential for its economic growth; another is that the Cape has the opportunity to develop a relatively untapped maritime sector to further enhance its economic potential for growth and development; and related to these two is the initiative to link West Africa to through the Trade and Investment Corridor with the Western Cape.

I believe this is an important and progressive initiative and should be pursued. Not only is this a positive business proposition but it is important in the context of historical and current debates on the integration of our continent to ensure the political, social and economic renewal of our continent. We are locked in many ways in a common destiny guided by our shared vision to reconstruct our continent by its own resources and own energy.

As government, we seek to create conducive conditions for both outward and inbound investments. We also seek to create the opportunities for growing mutual trade by working with others to contribute to a stable Africa and markets through bilateral and multilateral relations.

We have said that global challenges have grown in complexity and no country of the world can afford to adopt an isolationist approach.

Amongst other things, this means that we need to rely on other government departments and indeed other non state players, whose mandates increasingly transcend our borders in the search for solutions to challenges that we face as states in today’s world. We could for example consider departments that deal with issues of health, water and security issues amongst others. There is therefore great scope for increasing co-operation between state and non-state institutions in achieving our commonly shared objectives.

I have no doubt that the decision to encourage and develop business links with other countries on the African continent is based on sound business sense rather than the altruistic principle that this is simply the right thing to do! But there is a growing realisation, not only within our own country but also globally, of the immense potential that exists on the continent. One only needs to look at the interest that has been demonstrated in recent years by important countries such as the United States of America and the Peoples Republic of China in search of military bases and natural resources respectively. This presents us in the continent with immense opportunity and challenges, and, if we make the right choices, bargaining power to make deals that suit us both from political and business stand-points.

If our presence and reach on the continent, through peacekeeping missions, disaster relief, bilateral political and economic relations, multilateral co-operation through SADC, the AU and NEPAD ultimately has the desired effect, then we are on the correct path towards ensuring that both as a country and as part of the continent we are poised to face these challenges as well seize the opportunities presented to us.

Ladies and Gentleman,

As you are aware, President Mbeki and several cabinet ministers recently returned attended the African Union Summit in Ghana which debated the issue of continental Union Government aimed at uniting our continent and ultimately creating the conditions for peace and prosperity. A key outcome of the Summit was the centrality of Regional Economic Communities, to which I referred earlier, in the pursuit of sustainable economic growth and development.

Amongst the key developments that took place on the margins of the Summit, was the launch of the Pan-African Infrastructure Development Fund (PAIDF). This should be of much interest to you as members of WESGRO as there real opportunities to be leveraged which also coincide with your vision and mission. The Fund estimates that over the next ten years, at least US$150 billion of infrastructure investment opportunities are expected to be created due to infrastructure demands in energy, water and sanitation, transport and communication technology. The contributions to the fund currently stand at US $625-million, which originates exclusively from within our continent.

The Fund represents investment opportunities structured in the following way:

• a range of investment instruments to help diversify African pension fund portfolios;
• competitive instruments based on public-private infrastructure investments to increase total portfolio risk-adjusted returns;
• a long-term investment horizon with flexibility to match pension fund liabilities;
• the mitigation of risk at key levels;
• An opportunity to participate in an initiative for Africa’s reconstruction that will help to put in place the drivers for Africa’s future growth.

I would also like to draw your attention to the Economic Report on Africa 2007 titled “Accelerating Africa’s Development through Diversification.” The report argues that growth in Africa has increased but it is still not enough. According to the report, overall real Gross Domestic Product (GDP) growth of 5.7 per cent was achieved for 2006 compared to 5.3 per cent in 2005. As many as twenty eight countries recorded improvements in growth in 2006. Improvement in macroeconomic management in many countries, and strong global demand for key African export commodities underpinned this growth. Regrettably, there was a deceleration of growth in West Africa and Southern Africa, which without a doubt poses a challenge for WESGRO and would in all probability, be a major source of debate here today.

West Africa experienced the greatest decline in GDP growth in 2006 due mainly to a decline in growth in Nigeria from (6.0 per cent in 2005 to 4.2 per cent in 2006) and this it is believed as a result of social unrest in the Niger Delta. For the purposes of discussion here today, I would briefly like to reflect on two case studies that will be the subject of discussion during the course of today’s networking session.

The first relates to Nigeria as a major economic player in our relations with West Africa.

Nigeria is widely regarded as the economic driving force within the West African community of nations. The country is largely dependent on oil and gas reserves for revenue generation and exports. However, the country has embarked on liberalising its economy to reduce the strong role played by the state and to push private sector-led growth.

Most of South Africa’s trade with and investment in Nigeria took place after the 1994 democratic elections. South Africa’s engagement with Nigeria had a positive effect on some sectors of that economy, notably in telecommunications. South Africa is still a relatively small player in the Nigerian economy overall competing with the US, Britain and now new entrants China and India.

South Africa has identified several sectors of the Nigerian economy of which both the South African private sector and State-owned enterprises can be involved in such as minerals and energy, agriculture, agricultural training, technology and knowledge transfers in agriculture, co-operation in biological sciences such as veterinary services and genetics, infrastructure development such as power generation and transport and finally the arms industry.

The involvement of South African companies in the Nigerian economy has not gone without its challenges. There is a perception in some quarters that South African businesses have replaced the former colonial business community and is now behaving in similar fashion to the old dominant colonial business community. We need to dispel these negative perceptions.

Without a doubt, Nigeria remains an important political partner for the South African government in advancing our vision of a better life for all as well as creating business opportunities for our private sector. However, there are challenges that need to be dealt with and this can only be done effectively through building genuine and enduring partnerships. As Duncan Mbonyana from Eskom Enterprises correctly observed:

Business on the continent is a relationship, not just a transaction. If you miss the relationship you will have endless trouble with the transaction.

As with governments, the business community needs to spend much time and energy on building relationships on the continent. Building a relationship is of course not an event, it is a process and takes time. These are the inherent challenges and risks that come with doing business anywhere and I hope that during your discussion session on this issue, you will reflect on how, through the South Africa-Nigeria Business Forum, these risks can be minimised. For our part as government we will continue to ensure that we protect South African businesses through the conclusion of Bilateral Investment Protection and Promotion Agreements or BIPPAs and other bi-lateral agreements.

Regarding the Southern Africa region it is important to note that growth improved in 2006. With increased public spending and high Foreign Direct Investment (FDI) flows, South Africa maintained the same growth rate of 2005 through 2006 although private consumption declined due to higher oil prices.

Notwithstanding the slowdown in oil production, Angola remains the fastest growing economy in Southern Africa (17.6 per cent).

The IMF has expressed some concerns though that “ the non-oil sector must be more competitive if it is to become the source of sustained high real growth. At present, the authorities seem to have focused on infrastructure investment to facilitate the development of the non-oil sector. Carefully targeted investment would help address supply-side bottlenecks. However, it is critical that the cost of doing business is reduced, including the streamlining of costly and time-consuming registration requirements. Strengthening the legal and regulatory framework for business, contract enforcement, and property rights would also be necessary to encourage business activity.”

These are the two countries which will be the subject of your discussions a little alter toadaya nd I am sure there will be a great deal of further information on these countries. But I have tried here to reflect on some of positive developments that have occurred in recent years, which are in stark contract to the negative stereotypes about our continent. I have, however, done so, whilst also highlighting the challenges that continue to face us with the view to dealing and overcoming them.

Please allow me at this point to turn briefly to one of the most important events in the history of our country - the 2010 Football World Cup tournament. South Africans are increasingly focussing on the benefits that will accrue beyond the event. More than seventy percent of our nation believes this major sporting event will impact positively on the long term sustainable growth and development of our economy.

With South Africa already being a destination of choice individual fans from across the world will be attracted to the uniqueness of what South Africa has to offer. The planned fan parks will ensure more than a million people come to South Africa despite limited tickets available for matches. The importance of public viewing spaces and fan parks should therefore not be underestimated.

Also, small businesses must benefit from the World Cup. The organising committee has to ensure that South African businesses – in particular those from previously disadvantaged communities – enjoy advantage through the procurement process.

Expenditure leading up to and including the 2010 includes a telecommunications network; an IT network; domestic transport; tourism; safety and security; the staging of official events; advertising and support events.

Transport will be key to the success of the event. At the recent Southern African Transport Conference the importance of airports was emphasised to economic growth and development. Cape Town International airport is having its central terminal building upgraded at a cost of R1 billion and a multi-storey parking will cost another R394 million. The National Department of Transport explained that projects would prioritise public transport and seek to satisfy both long-term and event-specific mobility.

SANRAIL, the company responsible for development of the national roads network indicated that the agency is involved in a number of projects to ensure adequate roads ahead of 2010 and beyond. These included road improvements and construction around the host cities. Emphasis must be placed on partnerships to deliver adequate transport for the delivery of a successful tournament.

A strong private sector is essential to Africa’s upliftment. Political stability and rising incomes are deterrents to conflict, and overall economic growth is the only way to begin the eradication of poverty.

The way forward is in the development of partnerships, both with local companies and governments, and for South Africa to provide leadership where it can.

Ladies and Gentleman, government and the private sector have a heavy responsibility of creating a better life for all our people. We must build on political victory that was ushered by the decolonialisation process that began in Ghana some fifty years ago by ensuring the total economic emancipation of South Africa and the rest of Africa. I am encouraged therefore by recent media report that WESGRO attracted R830 million in investment in the Western Cape in the financial year to March 31, with 3 690 jobs created in the process.

These are encouraging signs and we need to further strengthen the ties between our political and economic diplomacy. In this regard, we must use the growing partnerships between government and the business community to better understand the trade and investment environment in Africa and maximise on the opportunities that comes with our involvement on the continent. We also need to take a sober look at the challenges we will be faced with as we endeavour to embark on the journey of furthering our business presence on the continent and how we can respond to these in a manner that is consistent with the vision of a united Africa.

Some of the challenges that we both face with include the low levels of development and insufficient investment in people as resources; political and fiscal risk; a weak private sector; high dependency on donors; high business costs; insufficient air and road links; poor leadership and bad governance; corruption; high cost of finance and currency fluctuations.

These should not deter us, but we should strive towards overcoming these challenges with the full understanding that our vision is bigger than the obstacles in our way.

Our Deputy President yesterday hosted the leader of the Indian Congress Party, Mrs Sonja Gandhi in Cape Town. She and her late husband, her mother-in-law Mrs Indira Gandhi and Mahatma Gandhi are inspirational leaders of their people and indeed in the world. In her address to us yesterday the Deputy President quoted from Mahatma Gandhi the following passage: He said:

The seven blunder that human society commits and cause all the violence: Wealth without work; Pleasure without conscience;
Knowledge without character;
Commerce without morality;
Science without humanity;
Worship without sacrifice; and
Politics without principles.

I think we can all learn something from that.

Je vous remerci beaucoup et je vous souhaite beaucoup de success avec votre conference.

I wish you well in your deliberation and look forward to the report of the outcomes of this networking session.

I thank you.