Theme: South Africa as a business and investment destination
Programme Director
Mr Marcus Jadotte, Assistant Secretary for analysis, US. Department of Commerce.
Mr Antwaun Griffin, Deputy Assistant Secretary for US Operations. US Commercial Service
All guest present here today
Ladies and Gentlemen,
Allow me to convey greetings from the people of South Africa, who on their behalf I wish you a successful conference.
Your visit, during the month of September, coincides with the period when the South African nation is celebrating her heritage.
This year's theme is "Our indigenous knowledge, our heritage: Towards the identification, promotion and preservation of South Africa's heritage".
We remain grateful to peoples of the world, for supporting the liberation struggle of South Africa.
As we celebrate our heritage, we do so with the knowledge of the persistent existence of patterns of inequality, unemployment and poverty which afflicts our people.
We do so with the knowledge that the poor celebrate heritage as the poor, while the rich enjoy heritage from a different position.
Sustaining the imbalances would mean that South Africa is sustaining the historical features of an identity that oppressed a certain section of society on the basis of their skin colour.
South Africa is a developmental state where the state occupies the centre in driving transformation of the economy.
The state is mandated to lead the transformation process leading to the economic liberation of the people.
The success of that process would place us as a country in a position where all can refer to heritage with pride.
The South African government has been consistent in its call for the eradication of poverty, unemployment and inequality that continue to bedevil our economic and social outlook.
The President of the country, His Excellency Jacob Zuma in his 2014 State of the nation captured this as follows:
"We have to embark on radical socio-economic transformation to push back the triple challenges (of inequality, poverty and unemployment). Change will not come about without some far-reaching interventions. The economy takes centre stage in this programme".
By far-reaching interventions I refer to interventions by the state to direct the path and the programme that the country should pursue at any particular moment.
Policy stance on investment
South Africa will continue to welcome most forms of foreign investment over the coming years and will remain a key destination for investment in Africa, especially in banking, telecommunications, tourism, mining, transport and manufacturing sectors.
State Owned Companies (SOC) continue to play a key role in South Africa's economy especially in the energy and transport sectors.
This therefore means that investment in the energy and transport networks, will remain a key priority for the South African government in order for us to lay the foundations for sustained long-term growth.
Furthermore, South Africa also has advanced capabilities and is globally competitive in many areas of manufacturing, including mining and transport capital equipment production.
We would like to grow and expand our global participation in these sectors and supply chains, through potential partnerships and collaboration.
The prudent fiscal and monetary policies and the roll-out of the National Development Plan (NDP) will further facilitate business and investment opportunities.
Though not supported by certain section of economic thought, we believe that the state owned companies are a critical vehicles towards achieving the objectives of a developmental state.
This should not be seen as reducing ground for private sector participation.
In fact our drive is to realise both the private and public sector contributing towards identified national objectives.
The report on the study conducted through the Presidential Review Commission provides the scenario as follows:
"Traditionally governments of large emerging economies have depended on the performance of the private sector and State Owned Enterprises to drive their economic agenda and enhance competitiveness of their countries".
We believe that the South African situation is in line with that of other developing countries in so far as state owned companies and the economy are concerned.
The Department of Public Enterprises has oversight of six SOC. These are:
- Denel which is the original arms manufacturer for our defence force and a critical player in the international defence environment.
- Transnet which is the custodian of rail, ports and pipelines and is responsible for delivering reliable freight transport.
- Then we have Eskom which is a power utility positioned in the top 20 utilities in the world in terms of its power generation.
- ALEXKOR which operates in sea and land diamond mining through its joint venture with the Richtersveld community in the Northern Cape.
- SAFCOL, a rural based company which is critical in the upliftment of rural communities through timber plantation and forestry management.
- Then we have SAX which is a regional airline which provides feeder air services that connect with the network of South African airways.
Programme Director,
Our country is still in the midst of an ambitious investment programme announced by His Excellency the President in 2012 in his state of the nation address.
Build Programme
In the next four years, Eskom (the state-owned energy utility company) and Transnet (the state-owned logistics company) intends reaching the order of R460 billion through their build programmes.
The South Africa economy is however expected to grow on average by 3.2 percent a year between 2015 and 2030.
This will be underpinned by improved electricity supplies, the expansion of the black middle class and regional integration.
Major infrastructure investments under way or planned, and the implementation of the National Development Plan (NDP), will drive business activity.
As a feature of a developmental state, the Build Programmes necessitate a high degree of competency in planning, management including project management and procurement competencies due to the increased quantum of delivery.
Transnet has substantially increased its targeted infrastructure expenditure over the seven-year period beginning in 2012 from R110-billion to over R312-billion for the period until 2019.
This investment has been aimed at addressing the capacity constraints and inefficiencies of our national logistics system.
Two thirds of this amount will be invested in improving the rail network and investment in rolling stock.
This will complement the concerted effort to move freight from road to rail.
Through these extensive investments and improvement in efficiencies, rail freight volumes are expected to increase from 230 million tonnes per annum to 330 million tonnes per annum in the 2018/19 financial year.
These investments position Transnet to be an agent for increased logistics linkages with the rest of the southern Africa region.
Companies with an investment appetite in the local rail industry may make contact with Transnet on how they can contribute to these ambitious plans.
Any desire to tap in the said investment must be informed by the knowledge that Transnet uses its procurement spend to drive transformation by working to:
- promote economic transformation through the advancement of Historically Disadvantaged Individual (HDI) ownership,
- Promote economic empowerment through the active participation of black people in management,
- Redressing of previous disparities in employment by taking into account the historical social inequalities.
- By focusing on preferential procurement this is done through procurement of goods and services from HDI's and companies with compliant B-BBEE levels.
Ocean Economy
Transnet is also an operator of the national ports. The country has seven commercial ports, which are crucial in ensuring seamless movements of bulk freight in and out of our country.
These ports have proven to be valuable in supporting regional integration as they are critical conduits in economically leveraging the extensive ocean economy at our doorstep.
The strategic positioning of our country lies at the confluence of the two big oceans,Indian and Atlantic oceans.
They have not been fully exploited up to now.
We are committed to change this.
It is estimated by recent government studies that the South African oceans have a potential to contribute to the Gross Domestic Product (GDP) up to R177 billion and contribute between 800.000 and 1million in direct jobs.
This will be achieved through investment in marine transport; manufacturing activities (such as coastal shipping, trans-shipment, boat building, repair and refurbishment); offshore oil and gas exploration; aquaculture and marine protection services; and ocean governance.
Transnet has reprioritised its investment to support growth of the oceans economy, by fast tracking investment in new facilities and refurbishment of existing facilities at the ports of Saldana, Cape Town, East London, Richards Bay and Port Elizabeth.
This is expected to crowd in private sector investment in the oil and gas as well as the marine transport and manufacturing sectors.
SA Express
SA Express has developed a long term strategy called the 20:20 Vision in order to assess, review and define a new business model that will improve the sustainability of the airline into the next 20 years.
The focus over the next few years will be to expand SA Express' operations on the African market and to partner with South African Airways to establish other hubs in Africa.
The airline is in the process of completing its network plan working in collaboration with the other state owned airlines, South African Airways and Mango.
This process will lead into the development of a fleet plan in the next few months.
The airline's fleet renewal programme is an area where companies with an interest in aviation may invest.
Eskom
The South African government going into the future continues to be occupied with the expansion and renewal of its energy infrastructure.
Eskom is in the midst of a build programme which will deliver additional generation and transmission capacity to the country.
Some of the biggest coal fired power stations in the world are being constructed in South Africa. These are Medupi and Kusile.
Medupi alone will add 4 332 megawatts of nominal capacity, or more than 10%, to the national grid."
The same level of intensity is unfolding on the second coal-fired power station, Kusile (which will deliver 4 800 megawatts) and Ingula, a pumped storage hydro-electricity plant.
These three power projects are expected to deliver more than 10,000 meggawatts of electricity.
Linked to these projects, has been an improvement to the transmission network of our country.
This is just the beginning.
South Africa is looking to replace some of its older coal fired power stations with newer technology.
On the renewables front Eskom has committed to contract at least 3 725 megawatts of renewable energy.
By 2030 it is expected that 33% of the country energy needs will emanate from the green energy sources.
By 2019 total wind capacity added will be 4 500 megawatts and additional solar capacity will be 600 megawatts.
The total renewable capacity added from 2019 to 2030 will be 7 200 megawatts.
We acknowledge the country's need for private sector partnership on electricity generation in order to meet the growing power demand.
Hence our strong focus on getting the additional megawatts on the system both from Eskom's new build programme as well as from the private sector.
As a result, our government continues to facilitate the introduction of Independent Power Producers (IPPs) and at the same time pursuing regional integration of the energy sector.
This therefore means there are greater opportunities in the field of Public Private Partnerships (PPPs).
There are also investment opportunities for IPPs especially in the renewable energy sector.
However, this does not mean that there is no space for IPPs in the non-renewable energy sector.
Coal IPPs are a real option to close the power capacity gap.
The state-owned forestry company, Safcol with Eskom are also exploring the use of torrefied biomass.
Denel
Denel is one of the foremost armaments companies in the world.
It is strategic state owned company with world-class landward and aerospace defence capabilities.
The company products includes, amongst others, combat turrets, artillery systems, vehicle systems, missiles, small and large calibre munitions, and satellites.
Denel Rooivalk Combat Helicopter, which was deployed to the Democratic Republic of Congo in 2013 has proven to be game-changer in supporting the United Nations peace enforcement mission.
This product is a demonstration of the technological capability in our country.
Through Denel, South Africa is one of the few countries in the world with strong capabilities in the design and development of unmanned aerial vehicle systems.
The drive is to expand the capability to cater for civil use.
South Africa is open to collaborations with interested companies and countries in this area.
Denel Aviation, the OEM of the Rooivalk Helicopter is an accredited and certified MRO company for both fixed and rotary-wing aircraft.
Denel Aviation is now accredited MRO service provider for Russian made helicopters, making it the first such centre in the African continent.
Denel Spaceteq is a vehicle that will drive our country into the area of space technology.
Plans are afoot to collaborate with a number of African countries to launch a common satellite to cater for our different specific needs.
Mechem, a division of Denel has been an important partner to the United Nations, donor community and governments in post conflict.
The demining capability of Mechem has allowed for the rehabilitation of productive land and safe return of affected people to work the land.
ALEXKOR
Alexkor is a significant example of how SOCs can drive transformation of the mining sector through their partnerships with the community.
The Alexkor PSJV is a success story which yielded 74000 carats in the last financial year.
In the first quarter of the current financial year, a 38 carat stone was discovered.
Alexkor is expected to commence deep sea mining of alluvial diamonds in the current financial year.
This should increase its current 1% contribution to the national rough diamond output significantly.
SAFCOL
SAFCOL has in the past few years been one of the main contributors in the saw-log sector, providing direct employment to an average of 4000 people in South Africans and 500 Mozambicans despite economic challenges.
September is a month of celebrating Arbor, ensuring the greening of our urban areas and townships.
South Africa recently held a successful World Forestry Congress where SAFCOL participated through the sharing of knowledge of the company's management of scarce plantation resources of both softwood and hardwood sawlogs.
Safcol's sawlogs are planted on a long term rotation.
Conclusion
The government is committed to moving towards ensuring economic liberation for the people and thus dismantling the institution of poverty, inequality and unemployment.
In achieving these economic objectives, the South African government will be leaning even more on the strategic state-owned corporations in our department's stable to ensure delivery of what has been termed radical economic transformation.
I thank you
