Date: 15/10/2003
Source: Deputy Ministry of Trade and Industry
Title: Hendricks: Working luncheon, Turkey
SPEECH BY THE DEPUTY MINISTER OF TRADE AND INDUSTRY, LINDIWE HENDRICKS, AT WORKING LUNCHEON OF BUSINESSPERSONS (PROPELLER CLUB), Istanbul, Turkey, 15 October 2003
Chairperson
Members of the Business Community,
Distinguished Guests,
I am honoured and grateful to be meeting with you today, given the further strengthening of relations between our two countries as a result of the official visit of the Deputy President of South Africa, HE Mr Jacob Zuma, currently to Turkey.
We are meeting during an exciting period in our country, as we are preparing to celebrate the 10th anniversary of our democracy.
When we look back to the dark period of apartheid oppression and isolation that we have gone through, we feel proud but yet humbled by the progress we have made over the last 10 years.
The legacy of apartheid left various socio-economic imbalances, as well as deep and painful memories. In 1994, when the people of South Africa ushered in a democratic dispensation, they decided to put the past behind them.
We began to work for reconciliation and to start building a better and prosperous life for all South Africans.
We believe we have done incredibly well so far. At a political level we have consolidated democracy and achieved political stability. In addition, we have made great strides with regards to meeting basic needs and improving the quality of life of all our people.
For example, millions of black South Africans who did not have homes, water, electricity and other basic needs, now have access to these, in only nine years of the new democratic order.
We are certainly aware that we still have a long way to go before we can say we have achieved all our objectives. But we have made a good beginning.
INVESTING IN SOUTH AFRICA
We are speaking to you today because we believe the international business community can play a key role in helping us to achieve economic growth through trade and foreign direct investments.
As we move towards the end of the first decade of freedom, we proudly carry the message to the world that South Africa is alive with opportunity.
We say this with the belief that we offer a perfect trade and investment climate to the international business community for many reasons and allow me to share some of these with you briefly.
Firstly, there are lots of opportunities to earn a high return on your investment in South Africa and many examples of both international and local companies that are doing so. South Africa is a growing economy and aside from the slight slowdown this year we have over the past eight years averaged 3% GDP growth. Such growth has taken place despite the global downturn that has occurred over the past two years. Two of the key reasons behind our above average performance is the growing competitiveness of South African industry, which has led to an increase in exports, and the growth in our domestic demand for goods and services.
Secondly, South Africa has a robust manufacturing sector with a wide variety of products and lots of expertise. Companies locating in South Africa will not only have the opportunity to source their inputs at very competitive prices but will often have a domestic market for their products and services. In addition, South Africa's growing international presence has resulted in a number of favourable trade agreements with other countries, which has helped to facilitate the growth of South Africa's export markets.
Thirdly, South Africa is one of the largest economies in Africa and there is a strong link between South Africa and the rest of the African continent. For example, South Africa has strong political and increasingly strong economic relationships with other African countries. The result of this is that the number of South African firms that are operating in other African countries is growing at a rapid rate. This gives investors the opportunity to use South Africa as a gateway for the rest of Africa, particularly as South Africa has the one of the best infrastructure and logistics mechanisms on the continent to take products and services to other African countries. In addition, through its commitment to developing the African continent and a programme called the New Partnership for Africa's Development or NEPAD, South Africa is using its expertise and development finance to assist several other African countries with infrastructure upgrade projects, which includes Road, Rail, Ports and Telecommunication.
Fourthly, we have a progressive and effective legal system in South Africa and the rule of law is important for South African's. The country has a good foundation of legal precedents for all contractual issues and a competent judiciary should contractual disputes be taken to court. South Africa also has a strong set of corporate governance rules and work is being done to continually ensure that they are up to date and in line with international best practice.
Fifthly, despite what some sceptics say, there is little corruption in South Africa and South African's are intolerant to corruption when it is discovered - especially the press. Transparency in government operations is a requirement under the constitution and this is enforced through regular audits and the oversight role played by our Parliament.
Sixthly, South Africa is a socially and culturally diverse country. This allows for expatriate workers to feel accommodated and feel at home. It also makes living in South Africa an interesting and enjoyable experience.
Lastly, South Africa is an excellent place to visit for business or holiday's - it has beaches, game parks, mountain resorts, quality hotels, good food, first-rate shopping, and other entertainment activities that one would expect to find in first world big cities.
DTI SUPPORT AND INCENTIVES FOR INVESTORS
The decision for a company to invest in another country or to expand its operations in a country is a difficult one. The Department of Trade and Industry (the dti) in South Africa realises this and have developed a number of incentives to make the decision to invest in South Africa more attractive. These incentives are applicable to both international and domestic investors.
An example of one of our incentives is the Foreign Investment Grant, which compensates foreign businesses for the costs of moving new machinery and equipment from abroad to South Africa. As with all dti incentives there are approval processes that firms need to go through in order to obtain the incentive as well as certain criteria and a maximum amount that applies to the incentive. In this case the incentive only applies to certain industries, new machinery and technology, and has a maximum allowance of R3 million. There are other criteria that apply and more information can be obtained from the dti website www.thedti.gov.za or through our office here in Turkey.
Another incentive that is offered by the dti is the Strategic Industrial Projects incentive, which gives both foreign and local businesses a tax break on new investments over R50 million in certain industries. The tax break, which can be up to R600 million, is based on the value of the investment and can be carried forward until the firm starts to make a profit or can be applied to other existing operations that a firm has in the country. Some of the criteria that apply to this incentive include the use of local suppliers and job creation.
Furthermore, we have incentives that cater for smaller investments such as is the Small and Medium Enterprise Development Programme (SMEDP). This incentive gives a cash grant to firms that have new investments or are expanding their current operations. The grant is a tax-free cash amount that is a percentage of the value of the additional or new investment. Criteria for the grant includes the value of the investment, which would only be considered up to R100 million and the maximum grant value, which is R3 million.
Industrial Development Zones (IDZs) are another type of incentive offered by the dti and relates to geographical location. These zones are located near major transport nodes such as a port or airport. The benefits of the IDZs are around support to investing companies especially for greenfield's development projects, access to transport for exporting purposes, wavier of import duties for products that are produced for export, and subsidies in the provision of skills training for employees. Some major international companies are looking at establishing operations in these IDZs. One of the considerations that have been a positive influence in their decision-making, and which I did not mention previously, is the low cost of electricity in South Africa.
Once the investment decision has been made there are both private sector and public sector organisations that will assist firms with the practical issues of investing. From the private sector there are several international consultancies and merchant banks, both local and international that assist investors, from the Public Sector the dti has established a division called Trade and Investment South Africa (TISA). Amongst other things TISA helps investors with identification of possible locations for their operation, helps to facilitate work permits for expatriate workers, connect companies with relevant partners including finance houses, and will assist companies with information on possible incentives that they can apply for.
BEE IN SOUTH AFRICA
Before concluding, I would like to touch on a subject that is very important for South Africa, and that is Black Economic Empowerment or BEE. As most of you will be aware, the necessity for BEE stems from the dispossession of black people's wealth and assets by the Apartheid government and colonial rule before that. In order to ensure that there is greater equity and stability in South Africa a broad based black economic empowerment strategy was released earlier this year. In summary this strategy has several mechanisms to ensure that black people are given access to opportunities to develop their skills, enter management positions in companies, start and grow their enterprises, become suppliers to large companies and government, and in a certain sectors buy equity in companies.
You will no doubt be interested in how the BEE strategy will affect investors to South Africa. It should be clear that the South African government will continue with its approach of making South Africa an attractive place for international investors and through the effective implementation of our BEE policies we will see substantial growth taking place in South Africa. This growth will take place as economic relationships are normalised, the skills base is increased, more people enter the formal economy, new enterprises are started, and there is greater wealth accumulation and an increase in the income of ordinary citizens. We envisage that our BEE policies will see greater opportunities for investors to the country. In addition, the existing government incentives that I have just spoken about will continue to be available to investors and will be supplemented with incentives for firms that incorporate black economic empowerment.
CONCLUSION
To conclude ladies and gentlemen, today I have given you some indication of the reasons to invest in South Africa; should you have any questions during the course of the conference you are welcome to contact me or other members of the South African delegation. Otherwise you can contact the South African trade office here in Turkey.
I thank you.
Issued by the Office of the Deputy Minister of Trade and Industry
Source: Deputy Ministry of Trade and Industry
Title: Hendricks: Working luncheon, Turkey
SPEECH BY THE DEPUTY MINISTER OF TRADE AND INDUSTRY, LINDIWE HENDRICKS, AT WORKING LUNCHEON OF BUSINESSPERSONS (PROPELLER CLUB), Istanbul, Turkey, 15 October 2003
Chairperson
Members of the Business Community,
Distinguished Guests,
I am honoured and grateful to be meeting with you today, given the further strengthening of relations between our two countries as a result of the official visit of the Deputy President of South Africa, HE Mr Jacob Zuma, currently to Turkey.
We are meeting during an exciting period in our country, as we are preparing to celebrate the 10th anniversary of our democracy.
When we look back to the dark period of apartheid oppression and isolation that we have gone through, we feel proud but yet humbled by the progress we have made over the last 10 years.
The legacy of apartheid left various socio-economic imbalances, as well as deep and painful memories. In 1994, when the people of South Africa ushered in a democratic dispensation, they decided to put the past behind them.
We began to work for reconciliation and to start building a better and prosperous life for all South Africans.
We believe we have done incredibly well so far. At a political level we have consolidated democracy and achieved political stability. In addition, we have made great strides with regards to meeting basic needs and improving the quality of life of all our people.
For example, millions of black South Africans who did not have homes, water, electricity and other basic needs, now have access to these, in only nine years of the new democratic order.
We are certainly aware that we still have a long way to go before we can say we have achieved all our objectives. But we have made a good beginning.
INVESTING IN SOUTH AFRICA
We are speaking to you today because we believe the international business community can play a key role in helping us to achieve economic growth through trade and foreign direct investments.
As we move towards the end of the first decade of freedom, we proudly carry the message to the world that South Africa is alive with opportunity.
We say this with the belief that we offer a perfect trade and investment climate to the international business community for many reasons and allow me to share some of these with you briefly.
Firstly, there are lots of opportunities to earn a high return on your investment in South Africa and many examples of both international and local companies that are doing so. South Africa is a growing economy and aside from the slight slowdown this year we have over the past eight years averaged 3% GDP growth. Such growth has taken place despite the global downturn that has occurred over the past two years. Two of the key reasons behind our above average performance is the growing competitiveness of South African industry, which has led to an increase in exports, and the growth in our domestic demand for goods and services.
Secondly, South Africa has a robust manufacturing sector with a wide variety of products and lots of expertise. Companies locating in South Africa will not only have the opportunity to source their inputs at very competitive prices but will often have a domestic market for their products and services. In addition, South Africa's growing international presence has resulted in a number of favourable trade agreements with other countries, which has helped to facilitate the growth of South Africa's export markets.
Thirdly, South Africa is one of the largest economies in Africa and there is a strong link between South Africa and the rest of the African continent. For example, South Africa has strong political and increasingly strong economic relationships with other African countries. The result of this is that the number of South African firms that are operating in other African countries is growing at a rapid rate. This gives investors the opportunity to use South Africa as a gateway for the rest of Africa, particularly as South Africa has the one of the best infrastructure and logistics mechanisms on the continent to take products and services to other African countries. In addition, through its commitment to developing the African continent and a programme called the New Partnership for Africa's Development or NEPAD, South Africa is using its expertise and development finance to assist several other African countries with infrastructure upgrade projects, which includes Road, Rail, Ports and Telecommunication.
Fourthly, we have a progressive and effective legal system in South Africa and the rule of law is important for South African's. The country has a good foundation of legal precedents for all contractual issues and a competent judiciary should contractual disputes be taken to court. South Africa also has a strong set of corporate governance rules and work is being done to continually ensure that they are up to date and in line with international best practice.
Fifthly, despite what some sceptics say, there is little corruption in South Africa and South African's are intolerant to corruption when it is discovered - especially the press. Transparency in government operations is a requirement under the constitution and this is enforced through regular audits and the oversight role played by our Parliament.
Sixthly, South Africa is a socially and culturally diverse country. This allows for expatriate workers to feel accommodated and feel at home. It also makes living in South Africa an interesting and enjoyable experience.
Lastly, South Africa is an excellent place to visit for business or holiday's - it has beaches, game parks, mountain resorts, quality hotels, good food, first-rate shopping, and other entertainment activities that one would expect to find in first world big cities.
DTI SUPPORT AND INCENTIVES FOR INVESTORS
The decision for a company to invest in another country or to expand its operations in a country is a difficult one. The Department of Trade and Industry (the dti) in South Africa realises this and have developed a number of incentives to make the decision to invest in South Africa more attractive. These incentives are applicable to both international and domestic investors.
An example of one of our incentives is the Foreign Investment Grant, which compensates foreign businesses for the costs of moving new machinery and equipment from abroad to South Africa. As with all dti incentives there are approval processes that firms need to go through in order to obtain the incentive as well as certain criteria and a maximum amount that applies to the incentive. In this case the incentive only applies to certain industries, new machinery and technology, and has a maximum allowance of R3 million. There are other criteria that apply and more information can be obtained from the dti website www.thedti.gov.za or through our office here in Turkey.
Another incentive that is offered by the dti is the Strategic Industrial Projects incentive, which gives both foreign and local businesses a tax break on new investments over R50 million in certain industries. The tax break, which can be up to R600 million, is based on the value of the investment and can be carried forward until the firm starts to make a profit or can be applied to other existing operations that a firm has in the country. Some of the criteria that apply to this incentive include the use of local suppliers and job creation.
Furthermore, we have incentives that cater for smaller investments such as is the Small and Medium Enterprise Development Programme (SMEDP). This incentive gives a cash grant to firms that have new investments or are expanding their current operations. The grant is a tax-free cash amount that is a percentage of the value of the additional or new investment. Criteria for the grant includes the value of the investment, which would only be considered up to R100 million and the maximum grant value, which is R3 million.
Industrial Development Zones (IDZs) are another type of incentive offered by the dti and relates to geographical location. These zones are located near major transport nodes such as a port or airport. The benefits of the IDZs are around support to investing companies especially for greenfield's development projects, access to transport for exporting purposes, wavier of import duties for products that are produced for export, and subsidies in the provision of skills training for employees. Some major international companies are looking at establishing operations in these IDZs. One of the considerations that have been a positive influence in their decision-making, and which I did not mention previously, is the low cost of electricity in South Africa.
Once the investment decision has been made there are both private sector and public sector organisations that will assist firms with the practical issues of investing. From the private sector there are several international consultancies and merchant banks, both local and international that assist investors, from the Public Sector the dti has established a division called Trade and Investment South Africa (TISA). Amongst other things TISA helps investors with identification of possible locations for their operation, helps to facilitate work permits for expatriate workers, connect companies with relevant partners including finance houses, and will assist companies with information on possible incentives that they can apply for.
BEE IN SOUTH AFRICA
Before concluding, I would like to touch on a subject that is very important for South Africa, and that is Black Economic Empowerment or BEE. As most of you will be aware, the necessity for BEE stems from the dispossession of black people's wealth and assets by the Apartheid government and colonial rule before that. In order to ensure that there is greater equity and stability in South Africa a broad based black economic empowerment strategy was released earlier this year. In summary this strategy has several mechanisms to ensure that black people are given access to opportunities to develop their skills, enter management positions in companies, start and grow their enterprises, become suppliers to large companies and government, and in a certain sectors buy equity in companies.
You will no doubt be interested in how the BEE strategy will affect investors to South Africa. It should be clear that the South African government will continue with its approach of making South Africa an attractive place for international investors and through the effective implementation of our BEE policies we will see substantial growth taking place in South Africa. This growth will take place as economic relationships are normalised, the skills base is increased, more people enter the formal economy, new enterprises are started, and there is greater wealth accumulation and an increase in the income of ordinary citizens. We envisage that our BEE policies will see greater opportunities for investors to the country. In addition, the existing government incentives that I have just spoken about will continue to be available to investors and will be supplemented with incentives for firms that incorporate black economic empowerment.
CONCLUSION
To conclude ladies and gentlemen, today I have given you some indication of the reasons to invest in South Africa; should you have any questions during the course of the conference you are welcome to contact me or other members of the South African delegation. Otherwise you can contact the South African trade office here in Turkey.
I thank you.
Issued by the Office of the Deputy Minister of Trade and Industry
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