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Date : 21/11/2005
Source: Department of Minerals and Energy
Title: Hendricks: Nafcoc Annual Conference


  Keynote Speech at gala dinner, for Nafcoc Annual Conference by Minister of Minerals and Energy, Lindiwe Hendricks

President and members of Nafcoc
Distinguished Guests
Programme Director
Ladies and Gentlemen

Introduction

It is an honour to be here this evening to address you. The South African economy, as most of you would have experienced, is going through unprecedented growth. The Gross Domestic Product (GDP) data, the business confidence indices, and vehicle sales figures, amongst other data are clearly reflective of our current boom. I am sure most in this room can testify to the favourable business environment.

Economic development and growth is about improving the lives of people especially ordinary people and providing services. The growth we have been experiencing is insufficient to resolve the challenges faced by our county, and giving meaning to lives of millions, socially and economically. The need to accelerate our levels of growth to above 6% and halve unemployment by 2014 is an imperative, and through partnerships between stakeholders can be achieved. However, there are binding constraints that inhibit movement to a higher range of investment, job-creation and thus economic growth.

These constraints include:

* The relative volatility of the currency
* The cost and efficiency of the national logistics system and capacity of infrastructure and bottlenecks
* The shortage of suitably skilled labour at suitable cost
* Disjointed spatial settlement patterns which contribute to the labour costs
* The lack of sector development strategies. Barriers to entry and competition in some sectors of the economy
* Deficiencies in state organisation, capacity and strategic leadership with greatest impact felt at local government level
* Size of domestic market and distance from major global markets.

* Unnecessary regulatory obstacles to growth and employment that limits small, medium and micro enterprise (SMME) growth.

In addressing these constraints we will be unlocking the potential of our economy to achieve faster economic growth. If the binding constraints can be effectively addressed, it is expected that the growth rate and the employment rate will rise to the point that the objectives of halving poverty and unemployment will be achieved by 2014.

I am therefore pleased the theme for this conference takes one of these key areas on board by recognising that our continued success cannot be sustained unless greater numbers of people become part of the economic mainstream, and that small businesses are key component of this strategy. Indeed in addressing these constraints we require partnership and support from the private sector. I therefore look forward to this conference committing those who are currently benefiting from the favourable economic climate and government policies to see the importance of bring on board more enterprises amongst other things, and thereby making a contribution in support of government objectives to achieving faster levels of economic growth.

Accelerated and Shared Economic growth

Ladies and Gentlemen, in putting in place measures to accelerate growth more broadly the government has recognised the need to:
* Maintaining a favourable macroeconomic environment, which amongst other things will provide the predictability required to make decisions on long term investment into the economy.
* Address the backlog in transport infrastructure – of which government has committed significant resources.
* Lowering the input costs in our economy for example in the areas of steel, chemicals, and telecommunications, so we can open downstream opportunities for our enterprises both big and small to complete globally in these sectors.
* Attracting greater levels of investment into our economy; with an emphasis on particular sectors which we have identified as having potential for rapid growth.

Importantly, we are looking to existing operations and domestic companies to increase their levels of investment, as well as attracting international companies into the economy. The sectors that have been identified for growth include biofuels and minerals beneficiation, which I will talk more about shortly. Other sectors include chemicals; creative industries such as film and television, crafts; furniture; agriculture and agroprocessing industries.
* There are also strong plans afoot to increase the levels of our technological capabilities by supporting sectors involved in cutting technologies for example the aerospace industry, the Pebble Bed Modular Reactor (PBMR), and the information and communications technology (ICT) industry.
* We also recognise that with the increasing challenges placed on us by the global economy, we need to ensure that our people have the right skills in order to compete effectively. The mismatch between the skills our economy requires and the current skills available has the potential to limit our ability to grow, and addressing the education and skills levels is a vital component of our growth plans.

Critical to our plans are to ensure we increasingly find ways to address the second economy and move people into the economic mainstream; an area that ties into our programmes for small enterprises development.

Programme director, there are strong views about the best time for a government to invest in expansionary activities, and how to finance such investments. Fortunately we are in a strong position to finance much of our infrastructure needs without compromising macroeconomic stability, and putting the country at risk in the event of a global downturn.

Ladies and Gentlemen, you should not underestimate the significance of what your government is doing to alter the economic landscape, and the scale and scope of our investment into the economy - last seen in our country decades ago. The private sector and the entrepreneurs that sit in this room tonight need to ensure that their businesses are geared up and in a strong position to benefit from as well as contribute to this expansion in the economy.

Department of Minerals and Energy in the economy

Programme director, in looking at the different sectors of our economy, often businesspeople fail to see the huge opportunities in the Minerals and Energy sectors. While it is true that our service and manufacturing sectors have long outgrown the minerals sector in terms of contribution to Gross Domestic Product (GDP); mining and minerals are, and will remain a significant part of our economy for many years to come. The energy sector will also continue to grow as our economy expands and its energy needs increase, which has been recognised by our shared and accelerated growth strategy.

The South African minerals and energy sector has historically not been favourable towards black business or small businesses development. It was seen as the domain of large multinational conglomerates, and for many years such enterprises were the focus of government policy. In the past few years we have seen a notable shift in how we view these sectors and have deliberately made significant interventions to open them up and improve access that black businesses, women owned businesses, and small business have into minerals and energy. This shift has in some instances required legislative changes and in others it has required a significant change in government’s approach.

We have as a result created opportunities and an enabling environment for businesses to enter the minerals and energy sectors. In line with the theme of this conference I would like to briefly outline what the Department of Minerals and Energy is doing to contribute towards creating new and sustainable SMMEs in South Africa.

Small Scale Mining

Ladies and Gentlemen, the South African government has identified small-scale mining as one of the vehicles for stimulating rural economies and job creation as a contribution towards sustainable livelihoods, especially in the rural areas.

The strategic goal is to bring about commercially viable and environmentally sustainable small-scale mining projects in South Africa. To enhance the developmental aspects of small-scale mining and its potential towards rural development.

It is estimated that about 1000 jobs can be created for every seven to ten sustainable small-scale mining projects assisted. To support the sector we have officials in all regions to assist small scale miners and we have established the Small-Scale Mining Board, which amongst other things will be looking at alleviating the technical and financial constraints faced by small scale miners, as well as improving skills levels. And already we have seen success in obtaining funding, facilitating joint ventures and getting projects off the ground. Currently, the department supports in excess of 30 small-scale mining in all nine provinces with varying types of commodities and these projects have the potential of creating 4500 sustainable jobs.

SMME in Mining Industry

Through the Mining Charter we have created greater scope for the entry of small businesses into the mining industry, and significant opportunities exist for small businesses to become suppliers. We have seen through initiatives such as the Zimele scheme that small businesses can successfully enter this industry as suppliers to mining houses. To supply products that directly go into mining operations such as conveyer belts, fans, electronic equipment, safety products, and clothing etc. as well as providing ancillary products and services such as food and housing.

The Department of Minerals and Energy has been working with the South African Mining Preferential Procurement Forum, which has developed a database of accredited small business and Black Economic Empowerment (BEE) suppliers who are and can supply products and services into the mining industry. Such efforts are helping to facilitate access into this industry.

As I mentioned earlier as part of the Accelerated and Shared Growth Strategy a number of opportunities, particularly for SMMEs, exist in the processing of minerals such as diamonds and other precious metals, in jewellery manufacture, as well as downstream processing of minerals such as iron ore, magnesium, platinum, etc. We are looking forward to our Diamonds and Precious Metals Bills unlocking the opportunities for small enterprises in these areas.

Energy Sector

Programme director across the energy sector there are opportunities for small businesses and Historically Disadvantaged South Africans (HDSA) businesses.

Firstly, in the Liquid Fuels Charter, which encourages industry to empower the HDSA through equity ownership, employment equity, skills development and procurement. It has been agreed that at least a quarter of procurement by oil companies must be earmarked for HDSA suppliers. And as a strategy to enhance the participation of SMMEs in the oil industry, a Supplier Development Agency has been established to train and assist potential SMMEs suppliers.

Secondly, the development of the biofuels industry in South Africa will pave the way for small business and job creation opportunities in the second economy. This industry, ladies and gentlemen has the potential to be a significant creator of enterprises and jobs, and is one of the most exciting developments emerging from my department at present. In summary, biofuels are the production of fuels using crops such as soya, sugarcane and maize. Different types of biofuels can be mixed in with diesel, petrol or used in place of products such as paraffin.

Biofuel production has the potential to create sustainable businesses for emerging black farmers, businesses in the transport sector, and women owned businesses in rural area through the production of bioethanol gel. The success of biofuel production in Brazil has seen significant opportunities being created in their economy.

The third area of SMME opportunities in energy is that of electricity. In the next few years we will be seeing power plants being de-mothballed and new power plants being established to supply the increased demand. And in addition to a range of businesses that can be established once an area has been electrified, opportunities exist for example in mobile vending, electrification planners and designers, metering and instrumentation technologies, database assembly and management, revenue management and recovery. Electricity opportunities also exist in training and skill development of local communities to maintain the infrastructure that serves them, in partnership with Eskom and municipalities.

Conclusion

Programme director, ladies and gentlemen, to conclude, the prospects for our economy look increasingly more favourable. However, without making major investments into the economy and accelerating growth our current economic trajectory is insufficient. Small businesses form a critical component of our efforts to stimulate broader economic growth and I have outlined a range of areas where small business opportunities exist through the efforts of the Department of Minerals and Energy. These opportunities are being created across government and will contribute to us attaining our goals of 6% economic growth and halving unemployment by 2014.

Finally, the challenge that I leave with you is what contribution you, as key players in our economy, will make towards tackling the constraints in our economy and contributing towards our shared and accelerated growth.

I thank you.

Issued by: Department of Minerals and Energy
21 November 2005
   

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