Address by Deputy Minister of International Relations and Cooperation, Ms Sue van der Merwe at the 3rd Annual Trade and Investment Seminar, Wednesday, 17 March 2010, Melbourne, Australia

Mr. Brian Tee, Parliamentary Secretary for Public Transport

South African High Commissioner to Australia, Mr Lenin Shope
Distinguished guests
Ladies and Gentlemen

South Africa today is very different from the South Africa of twenty years ago when we were the pariah nation of the international world.

We have built a rights based constitutional democracy, progressive in its protection of human rights, and committed to the dynamic pursuit of equal opportunity and redressing the inequities of the past.

We have forged a modern nation, diverse in its cultures, languages and people but united its commitment to building a developmental economy that is able to serve the needs of the people of our country and be the engine of economic development for our region and the continent beyond.

When the first democratic government came into office in South Africa in 1994 it found an economy plagued  by inefficiency, based on import substitution, high tariffs and subsidies, anticompetitive behaviour, and extensive government intervention in the economy.
Today the situation is very different.

We have a modern economy operating within a well-regulated fiscal and financial framework supported by sophisticated financial institutions and developed infrastructure offering increasing opportunity for investors and entrepreneurs both from with our country and from other countries across the continents.

Our companies function across the world, we have partnerships throughout the world.
We have reduced government’s direct role in the economy. We have promoted private sector investment and competition while building an increasingly focussed enabling environment on which to build our future prosperity.

We have significantly reduced tariffs and export subsidies, loosened exchange controls, cut the secondary tax on corporate dividends, and improved enforcement of intellectual property laws.

Our competition law which has been in effect since 1999 has been effective in rooting out anti-competitive and collusive action from large corporations.

Like countries across the world, the past 18 months have seen us sailing stormy seas.
We in South Africa experienced our first recession in 17 years.

But strong institutional regulation ensured that we did not see the same shocking financial institutional collapse that precipitated this crisis.

What is encouraging is that the strength of our public finances has enabled us to tackle the challenge head on.


 We have implemented a coordinated and effective response,

  1. investing heavily in critical infrastructure, as a key driver of economic recovery and strengthening our social security support system to ensure that the pain of recession is mitigated.

Effective and conservative management of our fiscus over the past decade meant that we had a low level of public debt, so that today we are able to sustain public spending and invest in our future prosperity by an assertive infrastructure investment programme.
In the current situation we maintain our fiscal prudence, but our well-regulated and effective fiscal policy has given us some leeway.

We have long recognised the inevitable consequences of unsustainable debt – consequences that have seen Portugal, Ireland, Greece, Spain, the United Kingdom and the US forced to take very painful measures to reduce deficit spending.

We on the other hand are now able to reap the benefits of our past conservatism to lessen the effects of the crisis.

While we are raising our deficit budgeting as we take counter-cyclical steps to bolster our economy, our record shows that we will manage this effectively and once more reduce our debt.

We are fortunately now officially out of recession. According to December 2009 reports, manufacturing output was 3.2% higher than in the corresponding month 2008 – representing the first annualised rise for 14 months.

Although there remains some uncertainty about the depth and rate of the recovery, forecasts suggest GDP growth of 2, 3% this year and 3, 2% next year rising to 3, 6% in 2012.

While the period prior to the recession saw sustained economic growth for over 8 years, we recognise that we have significant challenges in our economy.  We have an unacceptable wealth gap, unemployment plagues our communities and our economy needs diversification.

Committed as we are to a market oriented economy, the current economic reality has served to reinforce our belief that we cannot rely on markets alone, that economic growth and prosperity must be supported by an appropriate policy environment.

We need microeconomic policies that support expansion in targeted areas.
Like Australia, South Africa is rich in natural resources, which has led to a significant level of investment between us.  Our commodity base has been a major driver of our expansion, but we need to expand our advantage by developing downstream industry more effectively. This is an area in which we could develop further partnership
To this end we have recently launched a second phase of our industrial policy as a 3 year Industrial Policy Action Plan. This programme will lead us to focus beyond our traditional strengths in commodities and non-tradable services. We will expand production in value-added sectors with high employment and growth multipliers.

Our manufacturing sector – which constitutes a sizeable chunk of our value added production – needs to become more dynamic. In the past it has not performed optimally. This is mainly because the relative profitability of manufacturing has been low as a result of a number of factors including the high cost of capital; the monopolistic provision and pricing of key inputs into manufacturing; a relatively expensive rail and ports system and weaknesses in our skills base.

Our Industrial Policy Action Plan rests on a number of cornerstones to address these and other constraints that inhibit our efforts to build a more sustainable economic growth and development path.

Our Development Finance Institutions will provide increased funding to expand and diversify our industrial base and we will secure foreign direct and private sector investment in existing and new growth sectors.

We will invest heavily in strategic sectors such as transport and electricity generation which will generate opportunities for the production of inputs into infrastructure.
This will create opportunities for both local and foreign manufacturers and investors.
The electricity build programme alone, for example, is estimated to cost US$70 billion and plans are being put in place to ensure that 30% of our country’s power needs come from Independent Power Producers.

These and other cross-cutting interventions underpin focussed and significant interventions in three clusters of sectors in which there are very strong opportunities for foreign-owned companies to expand their existing operations in South Africa and/or invest in new sectors, industries and production capacities. Initiatives like these offer exciting opportunities for Australian companies and investors to expand their involvement in South Africa.

These initiatives are strongly supported by government. Industries such as metals fabrication, capital and transport equipment, green and energy saving industries and agro-processing, will receive government support will be benefit from large public sector investment.

Government support will also be enhanced in areas where we have been successful in the past  and where there is room for expansion areas like  automotives and  components, medium and heavy vehicles; plastics, pharmaceuticals and chemicals; bio-fuels; forestry, paper, pulp and furniture and Business Process Outsourcing.

We also identify sectors in which South Africa has a strong potential for long-term, advanced capabilities especially in the nuclear, advanced materials and aerospace industries.

We believe that this programme will drive economic expansion that will see South Africa reach a level of growth and development that will lead the transformation of the SADC region on an unprecedented path of upliftment.
Ladies and gentlemen

South Africa and Australia have a long standing economic relationship and since our democracy in 1994 this relationship has further strengthened.

Between 2001 and 2009 our bilateral trade increased by approximately 60% to AU$3.3 bn (2009). The balance of trade is in Australia’s favour.

South African exports are dominated by vehicles, chemicals, base metals and machinery whereas those from the Australia include mineral and chemical products, machinery and appliances.  The recession has taken its toll on trade in 2009 when bilateral trade suffered.   We need to work to rebuild progress.

Our investment relationship recorded the highest inflow into SA, AU$1.1 bn in 2008 mainly in the coal, oil and natural gas sector and South Africa investing AU$1.5 bn into Australia over the past 7 years. 

South Africa today is one of the most sophisticated and promising emerging markets in the world. We have a unique combination of a well developed business services support and a dynamic investment environment with many global competitive advantages and opportunities.

Africa is the new economic frontier.  South Africa offers a gateway into the vast untapped markets of the African continent, markets that expand as democracy is deepened across the continent.

Africa has seen a remarkable movement towards democracy and stability.  As Africa’s largest and most sophisticated economy – our GDP is 25% of that of the entire continent - we recognise that we have an obligation to play a leading role in the development of our region and continent. Our sophisticated and well regulated economy enables us to serve as the port of entry into vast untapped African markets.

We have the infrastructure to support the distribution of goods and services throughout Southern Africa. Our telecommunications network is sophisticated and we are fast becoming an important data hub, with the deregulation of the sector, and the recent launch of the Seacom cable. We recently saw the establishment of the first vendor neutral data storage centres, we are in the process of finalising a broadband policy and we have begun to see the costs of data services coming down.

In terms of regional integration the SADC FTA was launched in August 2008. 14 countries with a registered market of 170 mil people worth US$ 360 bn. When Angola and the DRC join it will be 77 mil people more and an additional market of $ 71 bn. We are also confident that our new Industrial Policy Action Plan, will lend considerable impetus to these efforts.

Earlier this month President Zuma visited the UK with a large business delegation.
The interest in South Africa by UK businesses was unprecedented. Our business delegation met with 240 British companies and we hear that the Confederation of Business Industries had to limit the number of companies that were able to meet with our delegation.

We secured a number of commitments for exciting opportunities in the rail sector, in technology development, in ICT, in training, energy and financial services sectors, as well as health.

We are currently working towards a high level visit to Australia.  I am sure that Australian business would be keen to seize the opportunities that such a visit might present. 
Australia’s commitment to Africa under the current government reaffirms our natural relationship, for we share not only history as commonwealth nations, and our connection via the Indian Ocean. . We both are dry lands with surf, sun and bush to offer tourists a remarkable experience.  We are both rich in natural resources. We both make some of the finest wines in the world. We are both sports loving nations.

But our experience and our solutions are often different. Through our different experiences we must forge stronger links, offering each other new perspectives and insight..

Later this year we will be hosting the FIFA world cup. This event has provided a significant impetus to our infrastructure development but more than that it will showcase South Africa to the world. It will be a visible proof of our ability to take on such a huge undertaking. It will not only show our incredible natural beauty and modern infrastructure, but also highlight Africa’s unique pulse and energy. I extend an invitation to you all to attend and see for yourselves the bounty and opportunity that South Africa has to offer.

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