Z Mkhize: KwaZulu-Natal Growth Coalition breakfast meeting

7 August 2007

Honourable Premier, Sbu Ndebele
His Worship Mr Obed Mlaba, the Major of Ethekwini
Her Worship Mrs Zanele Hlatswayo, Mayor of Msunduzi Municipality
Mr John Barton, Co-Chair of the KZN Growth Coalition,
Senior Government Officials present
Mr Mac Mia, Programme Director
Ms Dulcie Sokhela, recently elected President of Pietermaritzburg Chamber
Mr Themba Ngcobo, President of Durban Chamber
Mr Mike Lindsay, President of Ladysmith Chamber
Prof William Makgoba, Vice-Chancellor, University of KwaZulu-Natal
Members of the diplomatic corps present
Members of the media here present,
Ladies and gentlemen

Good morning and welcome again to this breakfast meeting. Breakfast meetings
in Durban during winter are quite pleasant. The morning temperatures are mild.
Traffic is fluid. And the food is of course good. We cannot say as much
regarding Cape Town's rain and Johannesburg's frost. Can we? What is more, as
has been observed, the economy of the province is booming, with the
Durban-Pietermaritzburg and Richards Bay regions proving to be the major
economic growth centres.

The observation brings me naturally to the objective of our meeting today.
We are here to deliberate on ways and means of accelerating the robust growth
we are enjoying in the province. We are here to find ways of spreading it
geographically throughout the province. And we are here to ensure that all the
people share the benefits of growth more equitably.

But unless we identify and remove the key constraints to growth and
development, we stand little chance of achieving these objectives. Nor can we
as people hope to join the ranks of the most advanced economies if we business
and government do not work in concert, in partnership. In saying this, I am not
really saying anything new: I am merely restating the position of the
provincial government. The hope, of course, is to leave no one in doubt of the
government's commitment to working together with business leaders as partners
in building a first rate economy.

It is in this spirit that I welcome your raising of issues pertinent to the
economic development of our province. Captains of our industry, I commend you.
I commend you because, in raising the issues that you have, and in the manner
that you have, you have proven yourselves the veritable vanguard of business in
the province.

I however note that the issues you have raised are essentially the same as
you had put before us previously. The point then is that the constraints and
impediments that tend to bedevil the business environment in our province are,
for the most part, subsisting this, despite the efforts we have made and the
successes we have had.

In a sense therefore, it is not for want of effort or commitment on the part
of government that a number of these constraints have remained binding. The
extent to which they remain active is a testimony to their intractableness. But
that is the nature of the animal. Economic development requires an implacable
campaign, sustained over the medium to long term. It is thus a marathon, not a
sprint. Has not that living legend, General Giap of Vietnam, said it was more
difficult to achieve economic development than to defeat the world's mightiest
army? It is indeed true.

Yet this realisation should not call for despondency. If anything it should
make us more determined, more resolute, to succeed and, I must add, more
patient, even as we hasten to close the development gap of ages.

It is our bounden duty as government to look into the outstanding issues and
address them. It is a sacred responsibility, and we will never shirk it. Even
so, we should work together with you as partners to find the most effective
solutions. I will return to this point later.

Socio-economic prospects of the province

How time flies! Two years ago I made a speech on the occasion of the launch
of the KZN Growth Coalition. It now seems like it was yesterday. In that speech
I pointed out that the economy of our province had tremendous potential that it
had many areas of comparative advantage and of potential competitive advantage,
which had not been actualised, and that it was posting respectable, if modest,
growth rates, considering we were taking off from a low base. But I also took
time to sketch a rather dismal socio-economic profile of the province, and to
engage in some crystal ball gazing. I had done so mindful of the fact that
economic growth is not an end in itself. It is meaningful; I agree but only to
the extent that it raises the socio-economic profile of the citizenry.

I had said in that speech that KwaZulu-Natal's development path appeared 'to
have stabilized around a Gross Domestic Product (GDP) growth of about 3.5% per
annum and gross employment growth of about 2% a year', and that, on that
trajectory, income per capita would rise by only 25% over the next decade, and
that unemployment would remain between 25 and 30%, with inequality and poverty
unlikely to decline significantly.

Furthermore, I had said that, based on the forecasts of a number of robust
and reliable applied economic models, an average annual economic growth rate of
4.5% between 2005 and 2009, and 6% between 2009 and 2014, would result
in:
* a 50% rise in income per capita, and
* a halving of the unemployment rate.

So, how well have we done? Regarding our growth performance, I am glad to
tell you that I was wrong: we are now well on a higher growth trajectory of
about 4.5%, which is significantly higher than the 3.5% around which I thought
we had stabilized; and we are now poised to assail the 6% or higher levels.

Employment creation has begun to strengthen, with about half-a-million jobs
created annually in the country, and with our province accounting for a
substantial percentage of these jobs. Already, in terms of contribution to the
national GDP, the province is second only to Gauteng.

The implication of this should be lost on no one. It proves, as the Premier
has said elsewhere, that 'Our programmes aimed at fighting poverty, creating
jobs, and promoting social inclusion and equality are beginning to bear fruit'.
For the first time in our recent history we can realistically hope to pull
significant numbers of our people out of the abyss and morass of poverty and
unemployment.

The development we have yearned and worked for is about to be upon us. It is
gathering pace and momentum, what with a number of mega projects that have
recently come on stream, or about to do so, and our firm resolve to sweep away,
the costs notwithstanding, all obstacles and constraints to growth and
development.

Major activities in the province

Never before in its history has the province been about to receive such
large-scale investment, in strategic and catalytic projects. About R10 billion
is to be spent in less than two years' time on the new airport, the trade port,
two major roads, and the 2010 soccer stadium, with the new international
airport and the Dube TradePort alone accounting for R6 billion of the spend.
The 2010 soccer stadium, which is to absorb R2.2 billion, is now under
construction; and so are the R350 million P700 corridor road from Richards Bay
to Ulundi and the R300 million P577 road from Mtubatuba to Hlabisa and
Nongoma.

On completion, as the Premier has said too, 'the Dube TradePort alone will
contribute R12.4 billion to the economy and will create thousands of new
jobs'.

And that's not all. Work is well underway on the Durban port improvement
project, and so is work on improving the logistics infrastructure around it.
The City of Durban has spent R200 million and Transnet has finalised plans to
spend almost R1 billion in the next 12 months or so, to widen the entrance to
the harbour. Indeed, over the next six years, more than R10 billion will be
spent, between the City and Transnet, on equipping the Durban seaport with
state-of-the-art facilities; and over the next fifteen years the figure is
likely to exceed the R20 billion mark. The objective, of course, is to ensure
that Durban retains and entrenches its position as the leading seaport of the
continent, in the face of competition, and that it provides the necessary
fillip to the nation's international trade.

On the tourism front, the province's performance has been spectacular and
its position ascendant. Statistics from the KZN Tourism Authority indicate that
the province received 11.6 million domestic visitors and 1.6 million foreign
visitors in 2005. These visits contributed over R20 billion to the provincial
economy in that year. And a few weeks ago, the Tourism Authority won a United
Nation’s World Tourism Organization Ulysses Award, an international prize for
the world's best in innovation in research and education in tourism and
knowledge management in tourism governance, thus becoming the first agency in
Africa to win the highly prestigious and coveted award. Before then, the A1
Grand Prix had taken place in Durban and had been televised to more than two
billion viewers worldwide, giving the city unparalleled exposure. All this will
surely augur well for tourism in the province and position it for further
growth, not to mention the tremendous boost it will get from the 2010 soccer
world cup event.

All these activities point to a tremendously enhanced potential for economic
expansion in the province, with an annual growth rate of 10% by 2014 quite
possible, even probable, if we succeed, as we must, in removing the obstacles
and constraints to growth that you have pointed out and in exploiting the
opportunities that our growing economy affords us.

The identified constraints relate to inadequate power supply and inefficient
railway, seaport, and airport facilities and services, as outlined by John
Barton earlier. They also relate to co-ordination weaknesses in the marketing
activities aimed at attracting investment and tourists to the province.
Concerns have also been raised regarding the lack of land for industrial
development, the dearth of professional and technical skills required to fire
growth in certain industries, and the delays in completing environmental impact
assessment studies and reports on proposed investment projects. And of course
there is the problem of crime, which remains at unacceptably high levels.

These problems are receiving attention. Our infrastructural inadequacies are
being confronted head-on, as the on-going efforts of Durban City and Transnet
in improving the Durban harbour and the logistics infrastructure around it, as
well as the efforts of the provincial government regarding the new
international airport, the Dube TradePort, and major road construction
projects, bear out.

Other problems are being dealt with within the industry cluster
arrangements. I have agreed to meet with Business four times a year, on a
cluster basis. I hope that these meetings will assist us to work together, to
better co-ordinate our activities, and to work in concert. This way, even the
most daunting of problems will prove, in the end, surmountable.

Goals and programmes of the Department of Economic Development

My Department, the Department of Economic Development, has set itself the
goals of reducing poverty by 50% and to grow the economy by 8% by 2014. In
pursuit of these goals, which now seem within reach, it is implementing a
number of programmes that seek to remove constraints and bottlenecks, promote
entrepreneurship and small business development, stimulate local economic
development, facilitate sector development and industry competitiveness, and
facilitate the process of empowerment.

Deserving of special mention are the efforts the Department has made and the
success it has had in aligning and co-ordinating the different activities of
government and its agencies towards the achievement of the province's economic
development goals. The initiative of the Department in this regard will, in
time, contribute towards resolving the co-ordination problem you have
raised.

The Department's programme aimed at sector development and improving
industry competitiveness embodies the cluster approach as a major plank. The
approach is proving quite successful in dealing with problems that occur within
industry value chains. However, across industry value chains, it is focused on
improving the logistics infrastructure and lowering the costs of its services.
In time therefore we can expect that the constraints related to infrastructural
inadequacies will become far less binding than they currently are.

To facilitate the process of empowerment in the province, the Department has
also finalized the provincial government's Black Economic Empowerment (BEE)
strategy. The strategy, which I have recently signed off, is a six-point
strategy that rests on four cornerstones and will be implemented through seven
programmes.

It is a six-point strategy in that it embodies six sub-strategies, which are
the following:

* provision of enterprise development support
* skills development, mainly for the unemployed youth
* empowerment of target group enterprises (including black-engendered and
youth-owned enterprises) through preferential procurement
* empowerment of persons or groups or communities to increase their ownership
and control of enterprises and other productive assets such as land
* enforcement of the Employment Equity Act
* encouragement of well established firms to engage in corporate social
investment, particularly in the areas of socio-economic development and youth
learnership and apprenticeship.

Its four cornerstones are skills development, preferential procurement,
promotion and enabling ownership and control of productive assets, and
financing.

And the seven programmes to implement the strategy are:

* information dissemination, call centre, and outreach
* skills development for the unemployed youth
* financing
* preferential procurement
* enterprise development
* partnership and stakeholder relations
* BEE monitoring and evaluation

The strategy also embodies a well-articulated implementation and
co-ordination mechanism, providing for a monitoring and evaluation component,
and clarifying roles for identified role players, which, of course, include
Business.

The forth-coming trade and investment conference
The province is preparing to host the first South African International Trade
& Investment Conference and Exhibition. It will be held from the 29 – 31
October 2007 at the International Convention Centre, Durban, under the auspices
of the official trade and investment promotion agency for the province, Trade
& Investment KwaZulu-Natal (TIKZN).

This event will serve to market South Africa as a premier investment
destination on the continent and facilitate the empowerment of the country's
small businesses. It will provide an opportunity for South African and
international organisations to forge relationships and form business
linkages.

It will also exhibit products and provide information on products and
services produced in South Africa. This should stimulate domestic and
international trade, and encourage foreign businesses to invest in the
different provinces of South Africa.

We as government fully support the initiative that this Conference
represents and would like it to figure prominently as an event in the annual
calendar.

Developments regarding the Dube Tradeport (DTP)

The DTP is still awaiting the Record of Decision (ROD) from the national
Department of Environmental Affairs and Tourism (DEAT), which will be issued
within the next two weeks. Construction will commence once the ROD has been
received, and will adhere to the stipulated ROD conditions.

The good news is that the engineering procurement and construction contract
has been signed with the preferred bidder, the Ilembe Consortium.

Matters of concern to the provincial government

I now would like to touch on a few matters that are beginning to irk the
provincial government. And I thank John Barton for touching on this subject.
We, as government, deplore the practise by some consortiums of 'dumping' their
BEE partners once the contract has been signed and paying them off. We find
this unconscionable and would like to point out that it negates the spirit of
empowerment and seeks to defeat its overriding objective. We hope that moral
suasion would suffice in dealing with the problem, and that it would elicit a
change of heart and attitude.

We certainly do not want to give our BEE legislation any peremptory
character, but we expect a much more than perfunctory compliance. As I have
stressed, we need to work together in the spirit of true partnership. Anything
else would be sub-optimal.

Fortunately, many private sector firms and groupings are approaching
empowerment with the right spirit. Although many examples abound to buttress
this, I will, lacking time, single out one for special mention: the
Tongaat-Hullet empowerment deal. I commend the firm for the role it played in
making the deal a success, and I congratulate Mr JB Magwaza and Mrs Hixonia
Nyasulu, on successfully leading the consortium that bought into the aluminium
part of the group. I single out the deal for its significance. It is the first
major BEE deal made under the leadership of a locally based African
businessman.

Too many businesses in the province seem, unfortunately, to still prefer
dealing with black businesses based in Gauteng. This behaviour is a reflection
of a perception we are working hard to change the perception that the KZN
economy is a 'branch' economy, of Gauteng supposedly, and that its business
culture is weak. The developments in the province, its strategic location, its
tremendous agricultural and tourism potential, its two seaports and associated
logistics infrastructure, its intense economic activity in the services and
manufacturing sectors these and many more point to a province on the verge of
an economic blossom and give the lie to the long-held negative perception of
the province.

And I should not forget to convey my displeasure at the spate of litigations
by private companies against large-scale government projects. These litigations
are having the unsavoury effect of impeding service delivery.

We are a democracy, and not even an iota of doubt about that. Accordingly,
we are not against people or companies exercising their constitutionally
enshrined rights. But when litigations are carried to frivolous levels, we
should begin to question their reasonableness. When they obviously hold back
service delivery, even to the poor and downtrodden, we should impugn the
motives of those behind them. When they have the consequence of embarrassing
the country, their authors earn and deserve our rebuke. A case in point is the
construction of the stadium contract, which has come under litigation. I take
this opportunity to appeal to all and sundry to exercise restraint even as they
exercise what they perceive as their rights and to balance them against the
collective rights of the entire citizenry.

Positive developments in sports

Permit me now to congratulate two remarkable gentlemen on their achievements
in the sports sector.

I salute Captain Salvadore Sarno for leading the Shosholoza team that
successfully participated in the American Cup sailing competition. His team
made us all proud, and I commend it for a job well done. When a South African
team takes on the best of the world and holds its own it demonstrates in a
telling manner what we as a country are capable of achieving.

I also salute Mr Patrick Sokhela for buying the AmaZulu Football Club. By
investing his money in the football ball club he has secured for the province a
presence in the soccer premier league. By so doing he has proven himself a
worthy son of the province. I urge all the sons and daughters of our province
who have the means to emulate his sterling example.

We trust that he will deploy his immense resources and considerable talent
towards rebuilding the Club and thereby restore it to its former glory. Mr
Sokhela and the AmaZulu Warriors, we wish you well.

Conclusion

I now would like to conclude by thanking you all for attending this
breakfast meeting, despite your extremely busy schedules. I commend you for the
role you are playing in the economic development process of our province.
Thanks to your efforts, the provincial economy is booming and is now even
poised to accelerate its growth. We will continue to work together to remove
all the constraints. Some of the outstanding issues will require that we
co-ordinate our efforts with the national government and the municipalities.
This we will do with a sense of urgency, mindful of the need to ramp up
economic growth and build a powerhouse economy in our province.

Ladies and Gentlemen, I thank you.

Issued by: KwaZulu-Natal Provincial Government
Date: 7 August 2007