Address by Minister of Trade and Industry, Mandisi Mpahlwa at the South Africa�Democratic Republic of Congo (DRC) Business Forum

Excellencies
Honourable Ministers
Distinguished guests
Ladies and gentlemen

It is an honour to be associated with this important event which is yet further evidence of the positive tendency for increased co-operation between Southern African states on matters pertaining to our regional economic integration, growth and social development.

The South African government has adopted a bilateral strategy for economic engagement with the Democratic Republic of Congo with the objective of achieving mutual economic growth and development through outward investment facilitation, infrastructure development and trade liberalisation.

In line with our continental wide approach, this strategy adheres to the New Partnership For Africa's Development and thus endeavours to foster closer collaboration with our partners on the continent to address the challenges of improving infrastructure; growing our human capital; ramping up industrialisation and product diversification in our economies; strengthening our institutions as well as facilitating access to finance.

Certainly, governments have the responsibility to create an enabling environment for trade and investment, by promoting good political and economic governance, by strengthening institutional and human capacities, by developing a regulatory environment that not only facilitates and attracts foreign investment to our economies but also safeguards them.

We need legal frameworks strengthened, bureaucratic procedures simplified, incentives for investment that encourage a move away from resource-driven low value production to higher value added production processes, and we need to develop critical infrastructure that would support industrial development and export capacity. We need efficient transport systems and cost-effective supply chains. We need to address the question of standards so that our exports are able to meet conditions set in target markets.

These matters are all important if we consider for example the enormous potential of both South Africa and the DRC. Mr President, the DRC is a prime example of a country which possesses vast mineral wealth, hydro-electric energy potential as well as abundant resources for a robust agro-industry. Such potential can only be fully exploited through sustainable investments that are not merely extractive but have a sustainable developmental impact.

One of the first steps we must take in achieving sustainable growth is addressing the issue of infrastructure development. In this regard, we have adopted a Regional Spatial Development Initiatives (SDI) methodology as a technical measure to support our partnerships with our sister countries on the continent. It is a proven methodology and the success of South Africa�s domestic SDIs resulted in the programme being utilised as a foreign policy measure for regional integration and post-conflict reconstruction since 1999. Mozambique was our first partner in this initiative and the success of the Maputo Corridor is evidence of the effectiveness of this methodology.

Through focusing on defined geographic areas, usually along existing transport corridors, the SDI methodology allows for the creation of a critical mass of integrated private sector and infrastructure development projects necessary to instigate a sustainable economic development process. The methodology enhances the attractiveness of an area for investment through advocating the removal of bureaucratic, administrative and institutional impediments to trade and investment as well as through identifying and packaging viable economic projects for private sector investment.

The methodology thus places emphasis on the public�private partnership as the feasibility studies and subsequent packaging and marketing of the identified projects are publicly funded and then transferred to the private sector for investment.

Your Excellencies, we are glad to report that during the South Africa�DRC bi-National Commission of 15 to 16 March 2006, an Agreement was reached to implement the SDI methodology in the DRC. Following consultations with the DRC government, it has been agreed that the Bas-Congo SDI be prioritised due to its potential to serve as a catalyst for improved regional integration. To date, a pre-feasibility study has been concluded highlighting the vast economic potential within this SDI. Upon implementation, this SDI would offer a number of investment projects for the private sector and offers great potential for the diversification and industrialisation of the economy of the DRC.

We mentioned the critical role for the private sector in utilising the lead our governments have taken so in the development of this SDI. In taking up these opportunities, we encourage joint venture partnerships with local companies, not only as a risk management issue, but also to facilitate skills and technology transfer to the host countries. Evidence shows that the partnership between foreign investors and local operators often results in higher productivity by domestic firms in both up- and downstream industries, whereas fully owned foreign affiliates can have a negative effect on domestic partners including the possibility of market displacement.

Government has certain measures in place to support the South African private sector in this outward investment drive. The bilateral investment treaties which we enter into with governments on the continent are meant to ensure protection of investments in the territories of signatory governments. Furthermore, the Export Credit Insurance Corporation has a mandate to underwrite bank loans and investments made by South African companies outside the country on capital projects.

Business missions are also supported to encourage outward investment by South African companies. During these missions the Department of Trade and Industry (DTI) provides partial funding for accommodation and travel to potential exporters and investors through the Marketing and Investment Assistance scheme.

To facilitate access to finance, the Industrial Development Corporation (IDC), which is a DTI agency, is utilised not only as an industrial financing institution and equity partner but also as a catalyst for investments on the continent. Our experience has proven that where the IDC chooses to invest on the continent, global investor confidence is boosted. The IDC is therefore a critical institution in the government's outward investment drive.

Clearly, ladies and gentlemen, the South African business community has a very critical role to play in collaborating with the South African and DRC governments to implement its bilateral economic strategy of achieving mutual economic growth and development with the continent through outward investment facilitation, infrastructure development and trade liberalisation.

And the opportunities are increasing. Two-way trade between our countries stood at R2,6 billion in 2006, substantially higher than the R1,8 billion in 2005. Despite this improvement, the trade balance is still skewed in favour of South Africa. We believe that this imbalance should be reduced and one of the ways to ensure such an outcome would involve investments which contribute to the diversification and industrialisation of the DRC economy. Secondly, we must address market access for goods and services. On the side of the South African government, the trade liberalisation commitments that we have made under the Southern African Development Community (SADC) Trade Protocol are intended to ensure that countries in the region have access to the South African market and that we continually seek to source goods and services from the region. Such liberalisation, however, needs to be matched by strong industrial policies on the part of all SADC member states as well as the commitment to implement the requirements of the Protocol on Trade.

Finally, ladies and gentlemen, I would urge everyone to think creatively to optimise our partnerships. Currently the World Economic Forum on Africa, are debating the issues of investment in Africa. What is clear is that the world has developed a renewed interest and that India and China in particular are keen to secure much need energy resources from our continent. As Africans, we must be aware of the potential threats that can emanate from relying on extractive industries for our growth. But we must also not lose the opportunity of using the current interest to diversify our product base to higher value adding products. In other words, why must someone make razor blades from our iron-ore and sell it back to us at 100 times the price of the raw materials? In developing this high value added industrial activities, I think we will need each other as partners, which will allow us the benefit of a stronger position to ensure that even as we are trading our non-renewable energy resources, that in the long term, our economies will be strong and diverse enough to secure a bright future for all.

I thank you

Issued by: Department of Trade and Industry
15 June 2007