A Erwin: Southern African-German Chamber of Commerce and
Industry

1 March 2007

Chairperson thank you for this invitation to address the Southern
African-German Chamber of Commerce and Industry today on the exciting
infrastructure programme that is currently unfolding in South Africa. It is a
particular pleasure to address the chamber since I have had a long link with it
in my former position as the Minister of Trade and Industry. The close links
that South Africa has with the German economy provides a very real opportunity
to expand and deepen that link. Germany being part of the European Union (EU)
is also located within South Africa's major trading partner.

Germany is our largest import partner and fourth largest export partner.
Investment by Germany totalled nearly EUR3 billion in 2005. This was primarily
in the automotive, chemical, mechanical and electrical engineering sectors.

In expanding our infrastructure in the key networks of energy, freight
transportation, air travel and broadband infrastructure the large State Owned
Enterprises (SOE) that report to the Department of Public Enterprises (DPE)
will play a key role. However, this involvement of the SOE will open many
opportunities for the private sector rather than close them. In addition to
these infrastructure companies the DPE is also responsible for the key defence
related industry company Denel. It too will have an important impact on the
manufacturing sector in the next few years. The South African economy is
certainly an exciting place to be in the next few years.

President Mbeki in his State of the Nation Address (SONA) reported on the
significant progress that has been made to accelerate shared growth. The
economy grew by 4,9% in 2006. Public and private sector investment has been
increasing at about 11% and total fixed investment as a percentage of the Gross
Domestic Product (GDP) is now at 18,4%. March 2005 to March 2006 witnessed the
creation of 300 000 jobs in the formal sector, outside of agriculture. The 2007
Budget Review indicates that growth is expected to average about 5% over the
medium term.

If we are to sustain this growth then energy in general and electricity in
particular are critical. There is no need to stress this to a Western Cape
audience. In April 2006 the projected spend for Eskom over five years was R97
billion. Just over R14 billion was set aside for the 2006/07 financial year.
About R11 billion of that amount has already been spent. Because Eskom
generated more electricity than was needed in the past, some of the power
stations were mothballed. Three of the mothballed stations are now in the
process of being returned to service and Camden, Grootvlei and Komati will all
be operational within this year. In respect of the generation of new capacity,
projects in Atlantis and Mossel Bay are on schedule to supply as from the
winter of 2007. Braamhoek is progressing well and is on schedule.

As the President indicated South Africa is planning that a larger
contribution to the primary energy source for electricity will be derived form
nuclear power. This will be a combination of conventional current technology
and the new fourth generation high temperature reactors offered by the Pebble
Bed Modular Reactor (PBMR). In regard to the PBMR the key projects are the
helium test facility, the pilot fuel plant and hopefully from 2008 the
construction of the first reactor at the Koeberg site. Major announcements on
the detail of the nuclear industry strategy for South Africa are due in the
first four months of the year.

With regard to rail, ports and pipelines, Transnet has allocated R64 billion
to ensure that it is able to meet current and future freight demands. Transnet
is now concentrating on improving the condition of strategic infrastructure and
on expanding capacity to meet the growth in demand. Key projects include
locomotives and wagon fleet renewal and modernisation; ore line expansions, new
port capacity and the new pipeline from Durban to Gauteng.

Additional container capacity will be developed at Cape Town Container
terminal, pending the outcomes of the revised environmental impact assessment.
It is anticipated that phase one at the port of Ngqura will be completed before
the end of this financial year and a business case for the construction of a
new container terminal at the port has been developed. The feasibility studying
for widening the Durban Harbour and deepening its channel is underway. And
civil contracts for the new container terminal at Durban Pier one has been
awarded.

South African Airways (SAA) has been separated from Transnet. In addition to
focusing on strengthening SAA's balance sheet, the separation will enable us to
more concretely shape the airline's role in respect of growing the tourism
industry, facilitating international trade and contributing to air transport
capacity on the continent. The introduction of Mango, our bustling new low cost
carrier has increased the accessibility of flight travel.

The rapidly expanding knowledge economy, preparations for the 2010 World Cup
and our bid for the Square Kilometre Array (SKA) has increased domestic
broadband demand. The new State owned broadband company to be known as
Broadband InfraCo will manage the national long distance Full Services Network
(FSN) held by Eskom and Transnet. InfraCo will support the new second network
operator, Neotel. It will be responsible for the implementation of long
distance backbone capacities between the Metropolitan Centres, while Neotel
will be responsible for the implementation of the distribution networks within
the metropolitan areas. In the near future the introduction of this new company
into the market should lead to a reduction of telephony costs.

South Africa's infrastructural development programme is integrally linked to
the New Partnership for Africa's Development (NEPAD) programme. Infrastructure
on the continent has to expand at a commensurate level if South Africa is to
reach its full growth potential. Hence SOEs are encouraged to incorporate NEPAD
related activities into their business plans. Eskom, for example, participates
in a Southern African Power Pool (SAPP) which ensures reliable and economic
power supply to all members of the Southern African Development Community
(SADC). It is heartening to know that SAGCCI has an investment support desk
that focuses on projects on the continent. This desk as well as Germany's
leading position in the Group of Eight (G-8) and the African Partnership Forum
of the European Union, can advance north-south co-operation in support of NEPAD
considerably.

Ladies and gentlemen, reliable, efficient and effective economic
infrastructural services will significantly reduce the costs of production and
delivery, thereby increasing the country's competitiveness. And investment is
the only real contributor to new employment opportunities. Investing in
infrastructure is thus an investment in long term economic development. While
public sector investment will have a direct positive socio-economic impact, it
will do so in an environment conducive to private sector growth. Government's
build programme offers a number of opportunities for private sector
participation. Currently we are experiencing supply chain constraints. Bold
investments, particularly in capital equipment and human capacity, are
required.

As I said at the beginning, this is an exciting time for economic growth and
bold investment decisions.

Thank you and happy investing.

Issued by: Department of Public Enterprises
1 March 2007
Source: Department of Public Enterprises (http://www.dpe.gov.za)