Date: 10/07/2003
Source: Western Cape Provincial Government
Title: Rasool: Western Cape Trade, Tourism & Investment Conference, London
SPEECH BY WESTERN CAPE MEC FOR FINANCE AND ECONOMIC DEVELOPMENT, EBRAHIM RASOOL, AT THE WESTERN CAPE TRADE, TOURISM AND INVESTMENT BUSINESS MISSION AND INTERNATIONAL CONFERENCE, London, 10 July 2003
INTRODUCTION
My speech is a presentation on the economy of the province and the investment opportunities that lie therein. My approach is therefore to highlight the issues that I believe are important/relevant to an inward investor from the UK and identify some areas where opportunities may exist.
This Investment Conference comes after a highly successful fact finding visit to Northern Ireland and the Republic of Ireland where I was exposed to two successful but vastly different economies - one based on SME development - the other based on attracting big name investors from mainly the United States.
But the way in which we learn from these international experiences is to locate them within the context of the South African and Western Cape economies.
Sound macro and micro economic policies
South Africa now has more predictable monetary and fiscal policies - a fact that is well documented:
The fiscus's mandate is to reduce the fiscal deficit - which it has! With a fiscal deficit currently less than 2% (compared to 1990s of 6/7%), we perform even better than some developed countries.
South Africa is now amongst the top 10 of emerging economies (lying number 6) in terms of our ability to withstand crises as well as avoid them - we beat countries such as Russia, China and Egypt - compare also how our economy was able to withstand a more than 40% depreciation in our currency - unfortunately, a country such as Argentina did not do as well when its currency depreciated by an equivalent value.
Public debt has been reduced to 37.4% of GDP.
With respect to our monetary policy, it is clear that the monetary authorities have no doubt about their mandate either, which is to reduce inflation. After the Rand's depreciation, inflation rapidly increased to well over 10% in 2002, but is currently around 8.5% and is set to drop within the targeted inflation range (3-6%), as conditions for disinflation are evident.
It should therefore be evident that the monetary authorities are not likely to directly protect or influence the currency, meaning that our businesses will need to manage the currency risk very wisely - and we are certainly on a steep learning curve! At this point we are all hopeful of neither too strong nor too weak a rand, but a stable and predictable rand.
From a micro-economic policy and strategy approach, Government has acknowledged that much work still remains - the following are however important indicators of the gains made:
* Generally the Government is providing a more conducive environment for businesses to be more productive, within the context of achieving a more equitable society - achieving growth, with equity is by no means an easy task, a fact that all spheres of Government are very much aware of! Transforming an economy's institutional framework from one that essentially catered for a minority of the population, to one catering for 43 million, requires hard, but sensitive work
* Government continues to be committed to structural change, both within the public and private sector and is sticking to market related approaches such as the reduction of tariffs, deregulation, an integrated manufacturing strategy, emphasising competitiveness based on economic and business principles
* With respect to the International Government Efficiency Index, South Africa has improved its position from 37th in 2000 to 34th in 2002
* In terms of overall competitiveness, South Africa has improved its position from 42nd in 2000 to 36th in 2002.
A solid foundation for improved competitiveness
Prior to 1994, national economic growth showed 3 decades of decreasing growth, but since 1994, there has been a consistent increase in economic growth.
The reasons for this positive growth pattern include:
* The improvement in our competitiveness of our factor costs:
Since 1995, the Multifactor Productivity Index has grown by 2.5% per annum, the Fixed Capital Productivity Index has grown by an average of 1% per annum, the Labour Productivity Index has grown by an average of 5% per annum and labour productivity and average labour costs are converging South Africa now ranks 16th amongst emerging markets in terms of competitiveness.
* An improvement in our supply chains - Government has targeted the energy, telecommunications and transport (especially ports) for more efficient service, and has adopted a 'managed liberalisation approach'.
* We are also working towards more rapid skills development, with the sector and industry based skills development programme called the Sectoral Education and Training Agencies.
* There has been a marked improvement in our entrepreneurial culture, with more people (across all ages and race groups) engaging in business activities.
Balanced sources of growth, which include:
* Steady growth in: Private consumption, public consumption, tourism and exports
* National exports comprised 20% of GDP in 1996, but now (2001) make up 28% of GDP.
Quite significant is the steady growth in Gross Domestic Fixed Expenditure from the private sector - an important leading indicator for higher growth and higher foreign direct investment - The GDFI now averages 5-7% growth per annum, compared to an average of 4% in the 1990s.
Improvement in our access to key markets
Through relatively favourable trade agreements such as the EU-RSA agreement and AGOA, South Africa has been able to improve its penetration of our key markets in Europe and the USA.
Currently, the Government is working on similar agreements with Mecusor and China.
Once NEPAD gains more momentum, there is no doubt its successful rollout will benefit business - A survey conducted by Foreign Chambers representing foreign businesses in South Africa, revealed that 39% of foreign companies indicated that they will benefit directly by a successful rollout of NEPAD.
Positioning the Western Cape globally
Our emerging Growth and Development Strategy, which we call IKapa elihlumayo, proceeds from the basis that there is sufficient confidence that the Western Cape economy is performing relatively well in the global economy.
Our real growth in GDP was 2.8% in 2002 and iKapa elihlumayo - our strategy to grow the Cape - seeks to intervene to keep our growth in GRP on an upward curve so that we are not satisfied with a Gross Regional Product of
Source: Western Cape Provincial Government
Title: Rasool: Western Cape Trade, Tourism & Investment Conference, London
SPEECH BY WESTERN CAPE MEC FOR FINANCE AND ECONOMIC DEVELOPMENT, EBRAHIM RASOOL, AT THE WESTERN CAPE TRADE, TOURISM AND INVESTMENT BUSINESS MISSION AND INTERNATIONAL CONFERENCE, London, 10 July 2003
INTRODUCTION
My speech is a presentation on the economy of the province and the investment opportunities that lie therein. My approach is therefore to highlight the issues that I believe are important/relevant to an inward investor from the UK and identify some areas where opportunities may exist.
This Investment Conference comes after a highly successful fact finding visit to Northern Ireland and the Republic of Ireland where I was exposed to two successful but vastly different economies - one based on SME development - the other based on attracting big name investors from mainly the United States.
But the way in which we learn from these international experiences is to locate them within the context of the South African and Western Cape economies.
Sound macro and micro economic policies
South Africa now has more predictable monetary and fiscal policies - a fact that is well documented:
The fiscus's mandate is to reduce the fiscal deficit - which it has! With a fiscal deficit currently less than 2% (compared to 1990s of 6/7%), we perform even better than some developed countries.
South Africa is now amongst the top 10 of emerging economies (lying number 6) in terms of our ability to withstand crises as well as avoid them - we beat countries such as Russia, China and Egypt - compare also how our economy was able to withstand a more than 40% depreciation in our currency - unfortunately, a country such as Argentina did not do as well when its currency depreciated by an equivalent value.
Public debt has been reduced to 37.4% of GDP.
With respect to our monetary policy, it is clear that the monetary authorities have no doubt about their mandate either, which is to reduce inflation. After the Rand's depreciation, inflation rapidly increased to well over 10% in 2002, but is currently around 8.5% and is set to drop within the targeted inflation range (3-6%), as conditions for disinflation are evident.
It should therefore be evident that the monetary authorities are not likely to directly protect or influence the currency, meaning that our businesses will need to manage the currency risk very wisely - and we are certainly on a steep learning curve! At this point we are all hopeful of neither too strong nor too weak a rand, but a stable and predictable rand.
From a micro-economic policy and strategy approach, Government has acknowledged that much work still remains - the following are however important indicators of the gains made:
* Generally the Government is providing a more conducive environment for businesses to be more productive, within the context of achieving a more equitable society - achieving growth, with equity is by no means an easy task, a fact that all spheres of Government are very much aware of! Transforming an economy's institutional framework from one that essentially catered for a minority of the population, to one catering for 43 million, requires hard, but sensitive work
* Government continues to be committed to structural change, both within the public and private sector and is sticking to market related approaches such as the reduction of tariffs, deregulation, an integrated manufacturing strategy, emphasising competitiveness based on economic and business principles
* With respect to the International Government Efficiency Index, South Africa has improved its position from 37th in 2000 to 34th in 2002
* In terms of overall competitiveness, South Africa has improved its position from 42nd in 2000 to 36th in 2002.
A solid foundation for improved competitiveness
Prior to 1994, national economic growth showed 3 decades of decreasing growth, but since 1994, there has been a consistent increase in economic growth.
The reasons for this positive growth pattern include:
* The improvement in our competitiveness of our factor costs:
Since 1995, the Multifactor Productivity Index has grown by 2.5% per annum, the Fixed Capital Productivity Index has grown by an average of 1% per annum, the Labour Productivity Index has grown by an average of 5% per annum and labour productivity and average labour costs are converging South Africa now ranks 16th amongst emerging markets in terms of competitiveness.
* An improvement in our supply chains - Government has targeted the energy, telecommunications and transport (especially ports) for more efficient service, and has adopted a 'managed liberalisation approach'.
* We are also working towards more rapid skills development, with the sector and industry based skills development programme called the Sectoral Education and Training Agencies.
* There has been a marked improvement in our entrepreneurial culture, with more people (across all ages and race groups) engaging in business activities.
Balanced sources of growth, which include:
* Steady growth in: Private consumption, public consumption, tourism and exports
* National exports comprised 20% of GDP in 1996, but now (2001) make up 28% of GDP.
Quite significant is the steady growth in Gross Domestic Fixed Expenditure from the private sector - an important leading indicator for higher growth and higher foreign direct investment - The GDFI now averages 5-7% growth per annum, compared to an average of 4% in the 1990s.
Improvement in our access to key markets
Through relatively favourable trade agreements such as the EU-RSA agreement and AGOA, South Africa has been able to improve its penetration of our key markets in Europe and the USA.
Currently, the Government is working on similar agreements with Mecusor and China.
Once NEPAD gains more momentum, there is no doubt its successful rollout will benefit business - A survey conducted by Foreign Chambers representing foreign businesses in South Africa, revealed that 39% of foreign companies indicated that they will benefit directly by a successful rollout of NEPAD.
Positioning the Western Cape globally
Our emerging Growth and Development Strategy, which we call IKapa elihlumayo, proceeds from the basis that there is sufficient confidence that the Western Cape economy is performing relatively well in the global economy.
Our real growth in GDP was 2.8% in 2002 and iKapa elihlumayo - our strategy to grow the Cape - seeks to intervene to keep our growth in GRP on an upward curve so that we are not satisfied with a Gross Regional Product of
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