BUSINESS ADDRESS BY THE SOUTH AFRICAN MINISTER OF TRADE AND INDUSTRY HONOURABLE DR ROB DAVIES SWITZERLAND ZURICH 21 JUNE 2O12 1
Program Director Federal Council Didier Burkhalter President Swiss Mem Industry Mr. Hans Hess Captains of Industry Distinguished Guests Ladies and Gentleman It is indeed an honour for me make some remarks at this Swiss Mem - Industry day. This industry day signifies a deepening of the economic relationship between Switzerland and Emerging Markets. Let me take this opportunity to express my sincere gratitude to President of Swiss Mem, Mr. Hans Hess for inviting South Africa to be part of this program. South Africa and Switzerland have a long standing economic relationship and since our democracy in 1994 this relationship has further strengthened. Our economic relationship is managed through the Joint Economic Commission which is running parallel to this event. Switzerland is one of South Africa s major trading partners in Europe. In 2011 Switzerland ranked as 8th largest export destination for South Africa. South Africa s exports to Switzerland show an upward trend over the five year period ending 2011. Total exports from South Africa increased over this period from R 8.8 billion in 2007 to R 21.2 billion constituting an average growth rate of 30 percent over this period. However the structure and composition of exports needs to reflect more value added products from South Africa. Switzerland is also an 2
important foreign direct investor in South Africa ranked 7th largest. Swiss companies have invested in our manufacturing, mining and services sectors. During this visit we will deepen our economic ties and enhance our trade and investment relationship and technical cooperation. Ladies and Gentlemen, since The Economist regrettably labelled Africa the hopeless continent a decade ago, a profound change has taken hold in this continent. Labour productivity has been rising and is now growing by, on average, 2.7% a year. Trade between Africa and the rest of the world has increased by 200% since 2000. Inflation dropped from 22% in the 1990s to 8% in the past decade. Foreign debts declined by a quarter and budget deficits by two-thirds. Over the past 5 years, 7 African countries were among the 10 fastest growing economies in the world. There is a seismic shift in global trading patterns with new pillars of growth and dynamism led by emerging markets. Africa today is posting an average growth rate of 5.5% and remains robust. A new optimism is permeating much of Africa. The mood among the Africans is better than at any time since the independence era two generations ago. True, Africans have a remarkable capacity for being upbeat. But it is seems that this time we really do have something to smile about. The past 10 years of unprecedented growth in sub-saharan Africa has helped fuel this positive attitude even when most of the rest of the world faces global economic crisis. Africa s growth is now underpinned by a permanent shift in expectations. In many African countries people have at last started to see themselves as citizens, with the rights that citizenship brings. 3
The number of Foreign Direct Investment (FDI) projects in Africa grew 27% from 2010 to 2011, and have grown at a compound rate of close to 20% since 2007. This broad-based progress is underscored by a substantial shift in mindset and activities among Africans themselves, with increasing self-confidence and continued strong growth in intra- African FDI (which has expanded by 42% since 2007). Three of the top five fastest growing investors into new projects in Africa are African. More Africans are moving out of poverty and are becoming middle-class consumers. These said Africans are increasingly in a position to drive investment, support entrepreneurship, and improve education. Sure, the African middle class still has comparatively little to spend by Western or Asian standards. But better economic policies, governance, and use of natural resources, coupled with more business-friendly policies have led to Africa's consistently high growth levels. Africa s population is set to double, from 1 billion to 2 billion, over the next 40 years. As Africa s population grows in size, it will also alter in shape. The median age is now 20, compared with 30 in Asia and 40 in Europe. With fertility rates dropping, that median will rise as today s mass of young people moves into its most productive years. The ratio of people of working age to those younger and older the dependency ratio will improve. This demographic dividend offers a huge opportunity to Africa today. For these reasons Africa s integration is imminent as it seeks to address the challenges posed by its small and fragmented markets, its insufficient diversification of trade and its low levels of intra-african trade. This forms part of a lot of very practical work, often not very well known, that is being done to achieve renewal and development on the 4
continent. Because of costly barriers, intra-african trade is unusually low on average 10% - less than half the level in other emerging market regions. Creating larger regional markets should increase specialisation and competition, providing a boost to manufacturing by offering improved economies of scale in industrial production. This Tripartite Free Trade Area, will eventually create a market of 26 countries reaching from Cape to Cairo with a population of about 600-million people and a combined GDP of US$1 trillion. The massive infrastructure developments that have been undertaken in Africa will also eliminate most of the hindrances to growth. It is widely known that Africa s inadequate infrastructure is one of the main factors inhibiting trade, integration and economic development. For this reason, Africa has committed to US$ 85 billion funding for African infrastructure in 2010. South Africa, has, embarked on a US$ 400 billion infrastructure program to redress the infrastructure inadequacies. Our infrastructure drive is about providing housing, sanitation, public transport and running water in the urban areas for millions of South Africans who are urban residents. It is about connecting rural communities to economic opportunities through building dams and irrigation systems, connecting farms and villages to the energy grid and building schools and clinics. It has been calculated that if the continent continues to narrow its infrastructure gap, economic growth will receive a further large boost perhaps by as much as 2 percentage points a year. And so we are hopeful about Africa s future. The course won t necessarily be smooth or easy. But this is a continent that is looking forward. Within Africa, South Africa is positioned as a manufacturing centre of excellence, with a diversified base of industrial sectors. South Africa has an open economy and provides a sound business case for 5
investment and profit. South Africa is one of the most sophisticated and lucrative emerging markets in the world. We have political and economic stability, as well as sound macro-economic management. South Africa has a large number of competitive industries, abundant natural resources and well-developed transport and logistical infrastructure. South Africa has a world class financial system, a sound constitution and protection of property rights. It is an economy that is connected to the world, and in particular, which is integrated into the Southern African region and our continent as a whole. In the World Economic Forum s Global Competitiveness Report, South Africa was ranked the highest of the Sub-Saharan countries and 2 nd after China in the BRICS group of countries. Overall South Africa was ranked 1 st in regulation of securities exchanges, 3 rd in the quality of our private institution, 10th in investor protection and 25 th in the market size pillar. In the World Bank s Ease of Doing Business report, South Africa outranked all the other BRICS countries, excelling in the areas of ease in getting credit and investor protection. In 2010, we launched our New Growth Path framework, to help us achieve inclusive growth and create jobs. We identified six jobs drivers to help us achieve the much needed growth leading to jobs. These are infrastructure development, agriculture, mining and beneficiation, manufacturing, the green economy and tourism. Our industrial policy seeks to expand production in value-added sectors with high employment and growth multipliers. The Industrial Policy Action Plan rests on a number of cornerstones to address these and other constraints and which are significant to our efforts to build a more sustainable economic growth and development path. Firstly, a commitment to securing larger volume of concessional funding for our 6
Development Finance Institutions to expand and diversify our industrial base at the same time as securing foreign direct and private sector investment in existing and new growth sectors. Secondly, to ensure that large, repeat fleet procurement in strategic sectors such as transport and electricity generation generate opportunities for the production of inputs into infrastructure thereby generating opportunities for both local and foreign manufactures. These and other cross-cutting interventions underpin focussed and significant interventions in three clusters of sectors in which there are very strong opportunities for Swiss owned companies to expand their existing operations in South Africa and/or invest in new sectors, industries and production capacities. These sectors are the subject of a range of high level industrial support measures by government. New focus areas including - metals fabrication, capital and transport equipment, green and energy saving industries and agro-processing, will be qualitatively new areas of focus of government support and in which the benefits of large public sector investments can be leveraged. Secondly we will build on and broaden interventions in sectors in which we have hitherto performed well and in which there is considerable scope for expansion, namely, automotives and components, medium and heavy vehicles; plastics, pharmaceuticals and chemicals; bio-fuels; forestry, paper, pulp and furniture and Business Process Outsourcing. Thirdly, sectors in which South Africa has a strong potential for longterm, advanced capabilities especially in the nuclear, advanced materials and aerospace industries. Switzerland has a diversified economy having a manufacturing, technology and services sector. Switzerland also has expertise in environmental management, energy efficiency, high tech industries, 7
medical equipment and knowledge sectors. South Africa is keen to develop such partnerships with Switzerland in enhancing our productive capability, technology transfers, skills development and localization. The services of our investment and trade promotion and enterprise development organisations and institutions are at the disposal of Swiss companies interested in exploring opportunities in South Africa and the region. the dti offers a one shop stop service for investors, a suite of incentives and support to facilitate your entry into South Africa. We are confident that there are enormous opportunities in our country and the sub-continent, particularly for upgrading existing or new investments in manufacturing across a range of sectors both for domestic demand and export, including to the emerging African markets. In conclusion, Ladies and Gentlemen, as an open economy we welcome new investments and collaborative partnerships in key areas of opportunities - all uniquely poised to deliver real competitive advantage. I would like to extend a warm invitation to you to become part of a country Alive with Possibilities Thank You. 8