L Hendricks: Water for Growth and Development panel discussion

20 June 2007

Members of the diplomatic community
International guests
South African water sector members
Distinguished guests
Ladies and gentlemen

I would like to welcome everyone to this presentation and panel discussion
on water for growth and development. Our guest speaker today is Mr David Grey,
a Senior Water Advisor in the World Bank, we also have a number of
distinguished panellists for the discussion after the presentation.

For many years now economists have been vexed with the problems of how to
simulate development, particularly in Africa and other underdeveloped or
developing regions. There have been a number of different theories put forward
and many have looked at the experiences of how the developed world achieved its
industrialisation, with a view to drawing out the relevant experiences and then
emulate them in developing countries. In recent years we have seen respected
development economists like Alice Amsden looking at Asian economies and drawing
out the success factors such as knowledge and investment in human capital.
Others have taken a different approach by looking at factors such as the impact
of trade relationships and low currency values in stimulating development or
the importance of investment and removal of distortions in the economy in order
to attract investment. Some of these theories have shown themselves to be sound
advice for politicians in developing countries while others have yielded
disastrous results and led to social unrest and long term problems for
developing countries.

Much has been said and written on these problems and institutions such as
the World Bank and International Monetary Fund (IMF) have in recent years moved
away from the notorious Structural Adjustment Programmes advocated in the past.
And today it is recognised that if we do not look at development from a
holistic perspective we are doomed to failure.

The research contribution by David Grey in looking at the role of water in
economic development therefore adds value to our thinking and it helps to raise
the debate to a new level on role of developing and investing in water
infrastructure as well as importance of the institutions that manage that
infrastructure.

In development economics the debate on correlation between events is often
fierce. Specifically in the context of the issue of water for growth and
development, the critical question we must ask is, "Does investment in water
infrastructure and institutions stimulate economic development or does economic
growth yield sufficient resources that allows a country to provide water
infrastructure and basic services to its people?" The view which Mr Grey will
no doubt go into during his lecture, and one which is articulated in his paper,
"sink or swim? Water security as a key to unlocking growth," is that in many
situations water is necessary for development and indeed the dangers of not
managing water have the potential to retard development, particularly for
countries that are vulnerable to the impact of climatic activities.
Undiversified economies that are dependent on crops or even a single export
crop would be most at risk.

The research outlined in Mr Grey's paper by Brown and Lall on positive
correlation between poverty levels and countries which experience difficult
hydrological situations is therefore very relevant and I look forward to an
elaboration of these ideas during our discussions today.

What is important for us as politicians is to determine how we utilise these
findings and take on board the approach advocated. We need to ask ourselves
what is the impact of this approach for our own economy. And more directly,
should we on the basis of these ideas be substantially increasing our
investment in water infrastructure and water institutions? Furthermore, if we
do increase our investments, how does such an increase in expenditure in water
fit into our existing development plans as a country? These are some of the
issues that would be of interest to discuss during the panel session.

It is quite important that we discuss this topic of 'Water for Growth and
Development' in the correct context. I would also urge us all that we relate
our deliberations today to the broader government strategy of accelerating
development and growth and achieving better levels of empowerment of our
people, to mount an effective challenge on poverty and non-employment as
articulated in the Accelerated and Shared Growth Initiative for South Africa
(AsgiSA) spearheaded by the Deputy President of our country.

Over the past 18 months the South African government has taken an approach
of stimulating economic growth by unlocking the binding constraints that have
been identified in our economy. Some of the binding constraints that we have
identified are:

* relative volatility of the currency, and current strength
* cost and efficiency of national logistics system as well as certain parts of
our infrastructure
* shortage of suitably skilled labour and disjointed spatial settlement
patterns
* barriers to entry and competition in sectors of the economy
* regulatory environment and burden on small medium and micro enterprises
(SMMEs)
* deficiencies in state organisation and capacity impacting on delivery.

With the interventions in response to these constraints as:

* infrastructure programmes, which will see a massive amount of
approximately R450 billion being spent over the next few years
* sector investment strategies
* education and skills
* second economy and SMME interventions
* macro-economic issues such as exchange rate volatility, budgeting, etc
* public administration issues and delivery.

In taking forward the principles of AsgiSA by my department, during my
recent National Assembly Budget Vote speech I said in my introductory remarks,
"Coming new into this portfolio I have learnt over the past year just how
important water, sanitation and forestry are to our society and the
contribution these sectors play in economic development, social upliftment and
in our quality of life. By contrast we are well aware of the degradation that
results from lack of access to such basic services as clean water and adequate
sanitation."

And during the National Council of Provinces (NCOP) budget debate I
elaborated on this concept of water for economic growth and poverty eradication
by saying, "The Department of Water Affairs and Forestry (DWAF) also has an
important role to play in using water for both economic growth and in
contributing towards poverty eradication; it is therefore necessary that during
the coming year we use our budget towards achieving these broader government
objectives. Through current initiatives such as the Masibambane Programme, our
greening programme and our support programme to resource poor farmers we will
be contributing towards poverty alleviation. This support will be provided by
running projects such as food gardens, planting of fruit trees, rain water
harvesting, skills development for rural women as well as other projects that
can bring food to the table of the poor using water as a strategic
resource."

It is clearly a prerequisite to achieving faster economic growth that we
have sufficient water resources and that water is available for targeted
industries. We have seen during the sod turning of our most recent dam, the De
Hoop Dam in Limpopo, that the impact this dam will have in unlocking
opportunities for platinum mining in that area. It will also provide access to
clean water for over 800 000 people and contribute to lifting people out of
poverty. This dam forms part of our AsgiSA programme and already our current
plans for this dam which were done in consultation with relevant stakeholders
and communities have looked at many of the economic opportunities that will
arise from this dam. But if one follows the argument of David Grey then it may
be necessary for us to consider whether our investments are sufficient or if
additional investment in the water infrastructure and water institutions in
that area are required in order to further contribute to the economic
development of the area, where unemployment currently sits at between 70% and
75%.

In the DWAF there has been some distinction between water for poverty
alleviation and the water that is used for economic activities. And while we
have made major progress in tackling the challenges of providing water to our
people, we need to assess if we should be doing something different when we
provide households with access to clean water so that this resource is used
more effectively and as a tool for economic growth, particularly for
impoverished communities. We also need to consider during our planning of our
long term water and sanitation infrastructure needs whether we should change
our approach by for example increasing the construction timelines to allow for
more labour intensive construction and thereby contribute directly to job
creation and other economic opportunities.

Through the Masibambane Programme and our policy review process, DWAF has
been engaging with the role of water for economic growth. The discussion today
is therefore coming at a good time.

To conclude ladies and gentlemen, Mr Grey points out in his paper that there
is been insufficient work done in this area and that "the economic history of
water in the development and growth of nations and regions is little
understood." Clearly we then need to look at this issue in greater detail as it
can have significant impact on how we approach water development not only in
South Africa but across the African continent as part of a broad suite of
actions to promote development and under the framework of New Partnership for
Africa's Development (Nepad).

If we are to be effective in creating a better life for our people then we
need to look at how we can make an even greater impact in the delivery of
services to people. If that requires a shift in how we approach water
development then we must be open to change.

I thank you!

Issued by: Department of Water Affairs and Forestry
20 June 2007