Date: 31/03/2012

Source: The Democratic Alliance

Title: DA: James: Address by the federal chairperson, at the Eastern Cape provincial congress

With better policies, we can build on the province’s economic assets and beat poverty and
unemployment

Fellow Democrats. Good afternoon. Thank you for inviting me to come and speak to you at
the DA Eastern Cape Provincial Congress.

It brings me great pleasure to be here in the beautiful City of Grahamstown.

But colleagues, the well-known friendliness of the Eastern Cape’s diverse peoples; the
splendour of the Wild Coast; and the stark beauty of the Great Karoo cannot hide the fact
that this province faces considerable challenges that need to be met head-on with well-
researched, and effective, policy solutions.

Let me set out what some of these challenges are.

To begin with, the Eastern Cape is our country’s poorest region. This is reflected in
provincial per capita GDP figures which show that the Eastern Cape is significantly worse-off
than even poor provinces such as Limpopo and Mpumalanga.

A tangible measure of this poverty, however, is the percentage of people who have access
to sufficient food. According to Stats SA, fully one-tenth of all Eastern Cape residents are
severely food insecure. This means that one out of every ten households goes hungry.

This directly impact on the province’s future development prospects.

Malnourished children find it difficult to concentrate in school, which leads to poor and
declining education standards, and ultimately lower job prospects and potential earning
power in the future. Adults who do not get enough nourishment are similarly less productive.
They earn less, on average, and are more likely to die young.

Addressing poverty clearly needs to be the DA’s number one priority in the province. The
best way to do this is by stimulating job creation.

We have a steep hill to climb. Official unemployment for the Eastern Cape sits at 27.1% of
the economically active population, approximately 4% higher than the equivalent national
figure. If we take discouraged job-seekers into account – people who have stopped looking
for formal employment – the figure is much higher: 40%.

These figures are underpinned by a number of factors including labour market rigidities; high
barriers to entry for young job-seekers; and structural problems in the economy.

Two of the most important, however, are educational attainment and skills development. It is
here that the ANC provincial administration’s failings are the starkest, and for the people of
the Eastern Cape, the most tragic.

This is clearly illustrated by the fact that, in 2011, the province featured the country’s worst
matric results: only 58.1% of learners who took the exam passed. This was .2% lower than
the previous year when it achieved 58.3%. Matric results don’t tell half the story.

The Department of Basic Education’s Annual National Assessment Report, which measures
the literacy and numeracy of grade 3s and 6s across the country, found that Grade 3
numeracy rates in the province have declined from 35% to 28%, while literacy rates have
declined from 36% to 35%.

For the hundreds of thousands of learners who pass through the Eastern Cape education
system, their chances of finding a job are severely limited even before they leave school.

Fixing the education system clearly has a critical role to play in addressing the inter-related
challenges of poverty and unemployment in the Eastern Cape. As part of the 8% Growth
Project – the DA’s national policy development and review initiative – we are examining a
number of policy solutions that speak to the problems in education.

These include: new legislation that will make teachers’ right to strike subject to certain
limitations; introducing a special allowance to supplement the salaries of teachers who
possess scarce subject knowledge; introducing minimum qualifications for school principals;
opening additional Maths and Science schools; and providing additional training for teachers
to improve their literacy and numeracy teaching skills.

Of course, improving the supply of school-leavers and college graduates with a solid
grounding in maths, science, and South African languages is only half of the equation.
Tackling poverty and unemployment effectively and sustainably requires that we also
stimulate demand for labour.

International experience shows that the only way to do this effectively and sustainably is
through high rates of inclusive, job-creating economic growth. The Eastern Cape boasts a
number of economic assets that, with the right policy changes, have the potential to put this
province on a high-growth path.

First, with no fewer than four major universities – Rhodes University, Nelson Mandela
Metropolitan University, Walter Sisulu University, and the University of Fort Hare – as well as
numerous other training and vocational colleges, the Eastern Cape has the intellectual
assets it needs to become a regional research and development hub, and a key player in our
country’s knowledge economy.

Capitalising on these assets, that is, turning this latent research potential into commercial
opportunities, requires the right incentives, a facilitative policy framework, and a supportive
institutional environment that encourages entrepreneurial activity. A fundamental component
of this institutional environment is access to fast and reliable broadband internet.

A recent study by the McKinsey Global Institute shows that internet availability and access
increasingly underpins economic growth. With $8 trillion exchanging hands through e-

commerce each year, the internet’s contribution to growth in the large emerging economies
of China, India and Brazil was 7% of growth over the last fifteen years, and 11% over the last
five.

Our universities need sophisticated, integrated broad-band technology if they are to realise
their potential and contribute to economic growth in the region.

Second, the province is the centre of our country’s motor industry. This is a major asset.
Both Volkswagen South Africa and Ford Motor Company of Southern Africa have
manufacturing plants in the Eastern Cape, while General Motors and Mercedes Benz South
Africa have assembly plants here.

With this asset base, the question then turns on how to create the right environment for
these firms to expand their operations, and employ more people. The two issues cited most
frequently by industry analysts are (i) productivity and (ii) competitiveness.

In order to boost the productivity of the sector, our policy focus needs to be on training and
re-skilling of current and future employees in the sector, who will have to be proficient at
working the increasingly sophisticated technology that has become standard in today’s
global economy. This needs to be market-led, rather than imposed in a top-down fashion by
the state.

Enhancing the productivity of the sector also requires that we find ways to inject greater
flexibility into the labour market. As part of the 8% Growth Project, the DA is examining a
number of productivity-enhancing policy solutions, such as a demand-driven Skills
Development Reimbursement Programme, which will incentivise on-the-job training, and
reforms aimed at fixing rigidities in the labour market.

The competitiveness of the province’s motor industry is shaped both by the cost and ease of
doing business in South Africa, and the speed and efficiency with which manufacturers can
get their goods to market. In this regard, the World Bank’s Doing Business Report, which
ranks South Africa 144th in the world for ‘trading across borders’, is particularly illustrative.

According to the report, exporting a shipment of – let’s say Mercedes-Benz cars – takes an
average of four weeks to go through the myriad steps involved, including the preparation and
submission of 15 separate documents. For companies, such as General Motors, that run
assembly plants, waiting for imported parts to get through customs can take even longer: 32
days. The province’s poor and declining transport and supply infrastructure adds to these
woes.

Singapore, by contrast, measures the speed by which products are imported and exported in
seconds.

The DA is committed to developing policy solutions that will enhance the competitiveness of
the auto industry in the Eastern Cape. Ideas currently on the table include proposals to
radically simplify import and export procedures; streamline the customs clearance process;
and promote substantial investments in transport and communications infrastructure.

We are looking to international best practice to hone our policy ideas. For the motor industry
specifically, Spain’s Basque Country is at the cutting-edge of innovation.

There the regional government sought to grow the sector by encouraging an economic
‘cluster effect’ of motor manufacturers and related industries, initially by entering into a
public-private partnership to establish an Automotive Intelligence Centre: a business
development nodal point that serves as a specialist R&D centre; an industry infrastructure

hub and training site; and ‘contact point’ for companies wishing to collaborate to increase
their international competitiveness.

The experiment has been hugely successful. From being a relatively small industry, the
Basque Country’s auto sector now produces every part of the car production process. 30
multinational companies with links to the industry have offices there, and the sector now
generates 18% of the region’s GDP. We would do well to learn from such examples.

The third economic asset deserves attention because its job-creating potential is the
province’s rich environmental endowment. Blessed with a significant portion of South Africa’s
farm land, the Eastern Cape is the centre of the country’s livestock production, with specific
emphasis on cattle, sheep and goats. The Langkloof Valley and the Alexandria-
Grahamstown area, moreover, specialise in fruit farming, and tea and coffee cultivation,
respectively.

The province features some of South Africa’s prime nature tourism sites – including the
world-famous Addo Elephant National Park, the Mountain Zebra National Park, and the
Baviaanskloof Wilderness Area – and as such is becoming a prime destination for adventure
tourism. Holiday makers flock to resorts on the beautiful Sunshine Coast, such as Cape St.
Francis, Jeffrey’s Bay and Port Alfred.

Capitalising on these natural assets, however, requires that we create a policy environment
which is both supportive and facilitative.

For established and emerging farmers, this means ensuring that agricultural extension and
support services are effective, and of high quality. For land-reform beneficiaries, this means
providing information support as well as promoting access to credit so that people starting
out in the sector can make investments in capital equipment, and essential agricultural
inputs such as seeds and fertilizer.

For the tourism sector, it means creating an environment in which it is simpler and easier to
do business. Policy priorities on this front include: reducing the regulatory barriers faced by
tourism operators; investing in world-class transport and communications infrastructure; and
ensuring the safety and security of both local and international visitors.

The Eastern Cape faces seemingly intractable challenges. Poverty is widespread. Too many
people go hungry. Unemployment is unacceptably high. However, the province also features
a number of notable economic assets that, combined with intelligent policy choices, could
unlock rapid economic growth and lay the foundations for prosperity for all.

To make this happen, however, the provincial administration will require a radical
transformation. Corrupt officials and so-called ‘cadres’ need to be sacked. Tender
compliance and monitoring will have to be significantly beefed-up so that precious resources
are not wasted. A graduate recruitment programme needs to be put in place to attract the
best young talent so we can begin to build a world-class public service.

The ANC will tell you that, to tackle poverty and unemployment, we need to dismantle the
Constitution. The DA says: ‘we don’t need a new Constitution, we need a new government!’