Thabethe at the Africa Investment Forum
10 October 2006
Chairperson
Honourable ministers
Distinguished delegates
Ladies and gentlemen
I would like to extend a warm welcome to all of you who have gathered here
on this occasion of the fifth Africa Investment Forum. I am pleased to be here
to open the Forum. The Department of Trade and Industry (the dti) and
Commonwealth Business Council (CBC) have been partners in the last Forums,
together with the New Partnership for Africa's Development (NEPAD) Secretariat
in our common vision to promote intra-Africa investment and trade flows. Our
Forums have contributed considerably to mobilise African capital and to promote
intra-Africa trade whether directly or indirectly.
In last year's Forum an undertaking was made to ensure that sentiment gives
way to practical solutions. Instead of discussing the same issues, we need to
move to "practical conversations". Hence, we need to look for solutions that
will impact positively on the continent's ability to attract investment and
reduce poverty. There is a need for the Forum to be about more than debate. It
should produce tangible targets and not only diagnosis.
Last year was billed the 'Year of Africa', an initiative given impetus
especially by United Kingdom (UK) Prime Minister Tony Blair to decisively turn
around the fortunes of the continent. The plan was simple: determine what needs
to be done, hence Mr Blair's Commission for Africa, which produced a
comprehensive report on the subject, and at the same time use the UK's
presidency of the Group of Eight (G-8) and European Union (EU) to force Africa
up the international agenda. The outcome was mixed. I am therefore glad to see
that there will be a session to discuss the impact of G-8 commitments on the
continent. I have been informed of the active involvement of the NEPAD
Secretariat in these discussions through Prof Mucavele. NEPAD is an agreed
socio-economic development framework of the continent and any engagement by the
developmental partners of the continent should be through this framework.
The challenges facing the continent are well documented and I would not like
to emphasise on them but would like to touch on the critical ones which I hope
the Forum will deliberate on. The first one is the inability of the continent
to attract foreign direct investment (FDI), limited trade between Africans and
trade with the rest of the world, skills development, lack of improvements in
the productive capacity of the continent to name but a few.
The limited market size and growth potential (i.e. in terms of per capita
income) of our individual markets, skills shortage and poor infrastructure are
some of basic primary challenges of attracting foreign direct investment on the
continent.
Globally the perception of Africa is generally negative and all too often
associated with images of civil unrest, war, poverty, diseases and mounting
social problems. International media places an undue emphasis on the negative
representations about Africa which does not truly reflect the African
continent. This in turn impacts negatively on the ability of African countries
to attract Foreign Direct Investment (FDI). Most of FDIs reach mainly developed
countries, and the emphasis is on manufacturing and finances. The question is
what will happen to less developed countries where the emphasis is primarily on
agriculture, extractive industries and public utilities?
The relationship between Africa's economic development and the media has
been a weak one. Media coverage of Africa tends to be biased in the sense that
reports predominantly focuses on disasters, poverty, diseases and rarely
focuses on economic development issues. In this regard it is important that the
media make a concerted effort to provide coverage that is fair, unbiased and
provides a true reflection of Africa in all its diversity.
Media has a crucial role to play in challenging and altering the negative
perceptions about Africa that is necessary if Africa is to secure the FDI
required for its growth and development. This can be achieved through the
communication of information to the public. The media in its coverage of Africa
must provide a balanced picture of the continent reporting on both the
positives and the negatives.
A number of African countries have been making serious efforts to liberalise
external trade to attract FDI. In 1999, there was an estimated stock of $865
billion worth of foreign direct investment in the world. The developed
countries attracted nearly three quarters of the total inflow of FDI. Africa
has during the last three decades managed to attract from 8 dollars to almost
15 dollars per $1 000 of Gross Domestic Product (GDP) between 19770-1997. In
2004 Africa managed to only attract $20 billion US dollars compared to $106
billion into Asia and the Pacific and $69 billion into Latin America and the
Carribean (United Nations Conference on Trade and Development [UNCTAD],
2005).
Africa's geographical, historical and structural features have traditionally
attracted FDI into export-oriented primary production activities with limited
linkages to the rest of the economy. This situation has not changed much in
recent years and has contributed to undermining a self-sustaining and dynamic
investment process.
The continent needs to address administrative barriers if it wants to
attract FDI. A favourable environment with stable rates and effective
competition policies has to be created. Lower transaction and business costs
and human resource development with diverse and modern skills are critical to
attracting investment. Africa needs resource-driven, market-driven and
efficiency-driven FDIs. This is necessary to ensure integration of Africa into
the global economy.
However, we cannot integrate with the global economy unless we increase
market access and trade within Africa. Integration will increase the market
size and potential for learning-by-doing, eventually making African firms more
competitive in the international arena. Despite four decades of integration
efforts, intra-Africa trade, an important indicator of the intensity of
regional integration, accounts for only 10,5% of Africa's total trade.
Central to integration is the inclusion of women in business; women are the
backbone of the second economy and make significant contributions to the
economy. In recognition of this contribution and to facilitate the integration
of women the dti is in the process of presenting its strategy on gender to
cabinet. This strategy aims to address the market failures with regards to the
empowerment of women.
As part of Accelerated and Shared Growth Initiative for South Africa
(AsgiSA) it is further aimed at accelerating and ensuring an equitable share of
our economy between men and women. Part of the concrete deliverables that will
come with this strategy is the launch of the long awaited women's fund. The
women entrepreneurs' directory for procurement purposes has already been
released. Our strategic framework will also facilitate the proper
entrepreneurial skilling of women through the Women Empowerment Programme
(WEP). We aim to establish an emporium that will exclusively showcase samples
of women's products in order to create markets for women.
To ensure that we monitor the growth of women's enterprises, we commissioned
a second national research report on the status quo of women entrepreneurs in
order to co-ordinate and plan correctly. To fully capacitate the
institutionalisation of women's structures we hope to establish a supportive
fund to cover all basic costs of supportive women's organisations.
South African Women's Entrepreneurs Network (SAWEN) is our vehicle to expose
more women to the national and global economy. As part of doing business with
the rest of the world, we have alliances with other critical women's business
organisations in Africa and Europe. Nationally we have established offices that
provide counselling, advice and networking services for women entrepreneurs. We
have been forced to be creative in our approach to create an enabling
environment for women to join the mainstream economy due to a devastating
legacy left by three centuries of colonialism and institutionalised
oppression.
Ladies and gentlemen, in confronting the challenges of African economic
development we must also ensure that development is sustainable. As we
celebrate the fact that, Africa is on a dynamic path of economic growth, we
must participate fully in processes that will assist our countries in
attracting trade and investment as well as increasing Africa's global share of
exports. These relate to challenges involved in moving goods across borders,
the high costs of transport, inadequate infrastructure, the lack of financial
and human resources and a host of social factors that conspire to inhibit
growth.
Furthermore, Africa's exports remain stubbornly in the agricultural
products, minerals and commodities basket. To succeed in expanding our global
share of exports not only is it necessary to diversify exports but also to
ensure that Africa can compete internationally. Simply put, we must find ways
that can add value to our natural resources so that we do not export them only
to buy finished products made from the same resources from the same countries
we exported to.
Africa is not a poor continent; it is rich in natural resources. In light of
these riches, the diversification of our exports base through beneficiation is
a necessity rather than a "nice to have" if we are to move away from our
historical dependency on mineral extraction and commodity production. We will
therefore need to find innovative and creative ways of adding value to our
exports that will meet the needs of global market demand. To find and develop
such innovation is far from impossible.
Having highlighted the challenges, I would like to emphasise that it is not
all doom and gloom. African states are building a new architecture of
institutions, such as the African Union, and showing their determination to
resolve long-standing conflicts and new emergencies. Most African countries are
at peace, and have more democratically elected governments than ever before.
Many are experiencing macro-economic stabilisation, rapid economic and social
recovery, constitutional and civil reforms.
The discovery of oil in many African countries may also be attributed to the
macro-economic stabilisation experienced in Africa (though a mixed blessing).
African countries are taking concrete steps towards integrating their
economies, building regional communities, adopting common currencies and
increasing trade with each other enabling them to benefit from larger markets.
As we speak, initiatives are under way to promote regional economic integration
on the continent.
However, as we celebrate these achievements we need to also address the
challenges that are still facing us as the continent. I hope as you deliberate
in your discussion you will offer practical solutions to the challenges
identified above.
The Africa Investment Forum is based on the view that the private sector has
a central role to play and can be the catalytic agent of growth and
development. Hence it is critically important for business and the state to
work closely together. It focuses on challenges and market constraints that are
limiting growth and development and encourages the establishment of
partnerships in dealing with market reforms.
One of the key objectives of NEPAD is to mobilise resources through
partnerships for Africa's development, hence the Capital Flows Initiative was
launched. The aim of the initiative is to achieve the estimated seven per cent
annual growth rate needed to meet the Millennium Development Goals (MDGs),
particularly the goal of reducing by half the proportion of Africans living in
poverty by the year 2015. The initiative involves plans to increase domestic
savings, as well as improvements in the public revenue collection systems.
However, the bulk of the needed resources will have to be obtained from outside
the continent.
NEPAD focuses on debt reduction and Official Development Assistance (ODA) as
complementary external resources required in the short to medium term, and
addresses private capital flows as a longer-term concern. A basic principle of
the Capital Flows Initiative is that improved governance entrenched in the
African Peer Review Mechanism (APRM) process, is a necessary requirement for
increased capital flows. Participation in the Economic and Political Governance
Initiatives is therefore a prerequisite for participation in the Capital Flows
Initiative.
The priority identified though this initiative is to address investors'
perceptions of Africa as a "high risk" investment destination, especially with
regard to security of property rights, regulatory framework and markets. The
next priority is the implementation of a public-private sector partnership
(PPP) capacity-building programme through the African Development Bank and
other regional development institutions, to assist national and sub-national
governments in structuring and regulating transactions in the provision of
infrastructural and social services. The third priority is to promote the
deepening of financial markets within countries, as well as cross-border
harmonisation and integration.
It is therefore critical for business to ask itself what will be its role in
the economic development of the continent. The world sees vast opportunities in
the continent, which is why South Africa has been afforded the opportunity to
host the 2010 World Cup. While public sector investment remains critical the
private sector needs to grab the opportunities presented by this with both
hands to create an environment conducive for development. Business must take
the lead and create opportunities for growth. The continent will not succeed
from public sector investment alone.
The 2010 World Cup is expected to lead to direct expenditure of
approximately R12,7 billion; and contribute R21,3 billion to the GDP of South
Africa. It is expected to create new employment opportunities; and generate
additional revenues. The challenge is to ensure the broad based benefit to the
South African society. Hence, we need to ensure that small medium and micro
enterprises (SMMEs) also benefit from this opportunity.
I am sure the Minister of Sport and Recreation will emphasise this point
during his intervention during the Forum. But I also felt that it is necessary
that I also touch on it, South Africa is ready for 2010, this point cannot be
emphasised enough. Our President has assured the soccer fraternity and I would
also like to do the same. There is no way South Africa and hence Africa will
let the opportunity go wasted. As the host of 2010, South Africa carries the
hopes of all Africans and the continent will come together to ensure that South
Africa successfully holds the Soccer World Cup.
In conclusion, the contribution of the private sector and the SMMEs to the
growth of the continent in terms of output and job creation is enormous. In
this regard, there is a need to address the practical and real concerns of
entrepreneurs. This is essential to empowering the private sector and to grow
SMMEs. Forums like these create a platform for us to dialogue and address key
issues that impact on the economic growth of the continent, hence the need to
focus on practical solutions that will add value to people at grassroots
level.
I wish you successful deliberations that will bear tangible outcomes. I
thank you!
Enquiries:
Henriette van der Merwe
Tel: (012) 394 1640
Cell: 072 316 5533
Bongani Lukhele
Tel: (012) 394 1643
Cell: 083 291 8689
Bethuel Mnguni
Tel: (012) 394 1647
Cell: 083 624 8888
Issued by: Department of Trade and Industry
10 October 2006
