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Date : 13/11/2003
Source: Ministry of Trade and Industry
Title: Hendricks: South Africa Week gala dinner in The Netherlands


SPEECH BY DEPUTY MINISTER OF TRADE AND INDUSTRY, LINDIWE HENDRICKS, AT THE GALA DINNER DURING SOUTH AFRICA WEEK, Rotterdam, The Netherlands, 13 November 2003

Premier Van Schalkwyk
Ambassador Jana
Other dignitaries
Ladies and Gentlemen

Thank you for joining us this evening at the gala dinner of South Africa Week that has been held here in Rotterdam. I hope that you have enjoyed the wine tasting and the tourism presentation that we held earlier this week. South Africa has had a long history with The Netherlands and it is a relationship that we wish to build on and strengthen. Through events such as South Africa Week we are able to keep these ties strong and provide you with insight into our country.

I would like to take this opportunity tonight to briefly discuss with you some of the economic changes that we have gone through since 1994 and the work that we have done in order to transform our economy so that we have a solid foundation on which to build and to achieve our full potential as a country.

As most of you will know, the country that we inherited in 1994 when the first democratic government was installed had a number of problems. Not only were there outdated laws that needed to be reworked, amended and improved, but our economy was in trouble. What is not well known is that in 1994 our economy was bankrupt. The poor economic situation during the last few years of apartheid left our economy very weak and substantive change was required.

The first major area of change was to get our macro-economic situation stabilised. This resulted in us taking some hard decisions and implementing a fairly strict monetary policy. For example, we reduced our government deficit, paid back large amounts of international loans, and dramatically reduced our inflation rate.

The second area of change that we made was to provide strategic leadership to our economic sector and to redefine the focus of our economy. To consolidate our vision we developed an industrial strategy policy document that clearly outlines the direction in which we wish to take our economy. This strategy recognises that while we have substantial mineral resources in our country these resources are finite and we should not be dependent on our mining sector to drive our future economic growth. It was therefore necessary for us to take steps to structurally transform our economy and grow our industrial base with a vision of growing our manufactured and value added exports. Part of this growth was looking at how we could integrate the different aspects of our economy and utilise our primary sectors of mining and agriculture by adding value to these basic commodities and move our production to a higher point on the value chain. This strategy has informed our approach to trade negotiations, bilateral trade agreements, import tariffs, the incentives we make available to businesses, and infrastructure development.

The third area of change was to start developing a comprehensive enterprise development strategy that sought to bring new small business entrants into the market place. Our economy was and to an extent still is dominated by large corporations and without active intervention would inevitably stifle the small businesses. This saw us creating new institutions and channelling resources into SME support. The assistance of the international donor community in this area including The Netherlands should be acknowledged.

The fourth area that we needed to change was in the legislative arena where we not only had outdated social policies but also economic legislation. We also had to transform state institutions that did not meet the requirements of the modern industrial economy that we desired. Consequently, South Africa has had to revamp or rewrite hundreds of pieces of legislation over the past nine years as well as implement change processes in our government departments, implementing agencies and state owned enterprises. One example in the area of economic legislation is that we had to prepare a new Competition Act and create new dynamic institutions so that our laws and institutions would be robust enough to manage the complexity of mergers and acquisitions in a modern growing economy. A good example of institution change is my own department, the Department of Trade and Industry. Our focus needed to shift from an inward looking import substitution orientated department to an outward orientated organisation that promoted our vision of growing the manufacturing base, increasing exports, promoting industrial growth and attracting foreign direct investment. This transformation resulted in the Department of Trade and Industry improving its service delivery, improving the support that it offered businesses and improving its outreach so that more businesses are aware of what the department offers and can access its support.

Change is never easy and over the past nine years South Africa has had several ups and downs, however, there is substantial evidence to show that we have been successful in our approach. Today we have an economy that is currently going through its longest period of sustained economic growth - ever. Over the past eight years our average growth rate has been 3% per annum, with a slightly lower rate of just under 2% expected for this year. Our inflation rate is under control with our inflation target sitting at between 3% and 6%. Our volume of trade since 1994 has more than tripled and our exports have been consistently growing, with manufactured exports in particular increasing by an average of 7% per year since 1995. Manufactured exports have recently overtaken minerals as our biggest export sector and constitute 32% of total exports. We have also seen our industry becoming more competitive with labour and capital productivity improving, which has had a positive impact on the export sector.

In addition to the growth in the export market we are also seeing growth in domestic consumption, which has been one of the driving factors behind our continued economic growth during the global economic downturn that has affected most major economies over the past two and a half years. South Africa is also starting to become an attractive destination for foreign direct investment with many investors seeing that the country is economically and politically stable, has the potential for high returns on investments and is a gateway to the rest of Africa.

With all these successes behind us we have in the past year started to seriously tackle a fifth important area of change, that of the racial composition of ownership of capital in our country; what we have called our broad-based black economic empowerment (BEE) strategy. It is clear to us that South Africa will not be able to achieve high rates of economic growth or have long-term stability if all South Africa's people are not active participants in our economy.

Our approach to BEE has been pragmatic and is based on the following principles:

(1) Linking BEE to economic growth and not seeing a trade off between the two areas. We believe that our economy will grow through greater participation by more people, and through the creation of new wealth in our society. Internationally the experience has been that more equal societies have higher and more sustainable economic growth rates because of effective demand and consumption patterns.

(2) That our approach to BEE is broad-based so that it does not only affect a small minority of the black population. BEE will be looking at ownership, as well as increasing the number of black graduates who will have access to positions in companies, greater outsourcing by companies to black owned small businesses, and increased support for downstream beneficiation of the raw materials or commodities by black businesses.

(3) By making BEE inclusive so that it affects a broad cross section of our economy and not one or two sectors. Very importantly we have ensured that BEE is inclusive of women.

(4) By strongly associating BEE with good corporate governance.

It is important to note that for most sectors in our economy the new BEE legislation is not highly prescriptive and there is a very strong aspect of voluntary compliance by our industry. We have already see voluntary compliance by the financial service sector that recently released their sector charter. We are also seeing other sectors such as wine and sugar, the information and communication technology sector, the auto industry and the construction sector looking at developing their own charters. This voluntary compliance will see agreement amongst the industry players on how they will transform their own sectors in terms of ownership, equity, enterprise development, and beneficiation.

Certain sectors will be required to have sector charters; this will apply to sectors where there is government regulation and issuing of licences. This has already taken place in the mining sector and the oil and energy sector. In these cases the sector charters were negotiated between the government and the industry players so that broad consensus could be achieved.

To conclude, in my presentation tonight I have not been able to address you on the many challenges that we face, however, we are acutely aware of them and are addressing issues such as the high levels of unemployment, the high HIV/AIDS infection rates, inadequate housing for our poor, and the poverty that affects people particularly those living in peri-urban and rural areas through comprehensive social welfare programmes, extensive health care initiatives and the creation of a social safety net for the rural poor.

In my presentation I have looked at how we are successfully transforming our economy so that we have the foundations to successfully engage with an increasingly integrated and competitive global economy. It has not been an easy road but I believe we are starting to reap the fruits of these efforts and we are good position to take full advantage of the global economic upturn and the increasing opportunities that are opening up in other countries in Africa. Especially through the New Partnership for Africa's Development (NEPAD), which is a programme that has received significant support from South Africa, and playing an important role in opening up new opportunities in Africa through the work that it is doing to develop the private sector and economies of African countries, upgrade the infrastructure that links African countries, promote peace and stability in Africa, establish principles for good governance, and develop our human resources.

Finally, these broad national policies that I have spoken about have created the right environment for provincial governments to implement successful regional economic development programmes and I look forward to the address by my colleague, Marthinus van Schalkwyk, the Premier of the Western Cape Province, who will be speaking on the Western Cape Province.

I would like to thank you for listening to me tonight.

Issued by: Ministry of Trade and Industry
13 November 2003

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