E Rasool: First National Bank breakfast

11 June 2007

The Brazil, Russia, India and China (BRIC) report by Goldman Sachs has
predicted that by 2050 the world would be a completely different place. The
report states that over the next 50 years, Brazil, Russia, India and China will
become much larger forces in the global economy. China could become the largest
economy in the world, overtaking the United South Africa (USA) in 2039. India
could overtake Italy, France, Germany and Japan in terms of Gross Domestic
Product (GDP) to be the third largest economy in the world. Brazil could
overtake Italy, France and Germany in terms of GDP to become the world's fourth
largest economy by 2040.

Those are important statistics, not because of its immediate impact on World
Cup 2010 but it begins to say which company we need to keep and who we should
align ourselves with if want to go forward. It tells us that that there is this
global shift and people all wonder why is the President with the Prime Minister
of India and China for example. It is largely because if South Africa wants to
become part of this BRIC block of emerging markets, then that is the company
you have got to keep. These are not countries and economies that are defensive.
They are countries looking for opportunity. They are expansionists, they may
even, particularly in the case of China, be in danger of imperialising and so
there is this expansion in vision that they have, and we need to understand
what they are doing, where they are going, which opportunities they are looking
for, which opportunities they are seeing, and to understand how we tie our
wagon to such engines.

That will take an enormous shift from mainstream business, because I think
that our orientation is still largely Western European and largely North
American.

Now, for a long time those are still going to remain, particularly from a
Western Cape perspective, our main trading partners. But those are tough
economies, particularly because they still need to maintain subsidies and so
forth as part of defending their turf both domestically and internationally. So
we need to understand how we fast track ourselves to join that company of
emerging markets. If we understand that as a whole and how the world will
change, we then begin to put into that context World Cup 2010.

Because there are going to be large numbers who, because of their passion
for soccer, will think that World Cup 2010 is just soccer. It is going to be
lovely soccer, but the fact of the matter is that it is good for the nation
that can easily fall into complacency, that can easily bask in the glory of a
miracle nation and therefore enhance its notion of complacency. It is good for
a nation like South Africa to have a guillotine that falls in 2010. A deadline
that looms a point at which we have to have facts on the ground to use an
unfortunate Israeli term, to have facts on the ground by 2010 in order to be
able to say that this is where we are going.

And that is what we are trying to do. We are trying to use World Cup 2010 in
order to galvanise our entire nation, but particularly our business communities
to realise certain deposits by 2010 that will poise our economy for take-off to
join that company of emerging markets, such as Brazil, Russia, India and
China.

So that means that not only must we be emotionally united around 2010. Our
goals must be united and particularly in the Western Cape, World Cup 2010 for
us was going to be an afterthought. We are thought very little of ourselves. We
were happy to build a 30 000 stadium in Athlone, leave something behind for the
disenfranchised, historically disadvantaged soccer playing communities that had
nowhere to play and Athlone had this enormous symbolic nature for us, and that
is what we were going to do.

It needed people from the outside to tell us that we are underestimating
ourselves. It needed a someone like Sepp Blatter to tell us that Cape Town must
become a face of World Cup 2010 and by virtue, we are not taking the opening
away from First National Bank (FNB) stadium, but the fact of the matter is that
they need us as Cape Town to stay in the World Cup for as long as possible.
Because the difference with this World Cup is that it is a residential one. It
is not like in Germany, France or in Italy, the fans coming by train the
afternoon and after midnight, whatever state they are in, they take the train
back, hopefully the right train.

Here you have got people who are on a long haul; we have to sleep over
because as long as the teams play they cannot commute between their country of
origin and the place where their team is playing. That means that we need to
put together an extraordinary set of circumstances, including hospitality, and
most importantly, tours and products in order to keep people busy. We must in
fact, and this is the potential we have, make Cape Town the base from which
people commute to other parts of the country to watch soccer. They must go to
Johannesburg, to the FNB Stadium, watch the opening and they come back and live
in Cape Town until their team plays again maybe in Bloemfontein, and do the
same.

That is how we have got to conceive of ourselves, and if we begin to
understand that, then it demands a certain set of actions from us. It then
begins to say would it be enough to have 25 000 five star beds and very few
three star beds? What is the right mix? Maybe there are so many people who want
to establish five start hotels, but we are missing the core market. So is there
a gap in the market in the Western Cape? In our three stars, bed and breakfast,
maybe even just places where people can slum it. How are we going to respond to
that opportunity? As we speak now there are about six new franchises, one six
star bed coming up off the ground in preparation for 2010.

It is not going to be enough if the predictions of 400 000 visitors are
going to be upheld and if we can get most of them staying here at the golf
estates, the wine estates, the hotels, the three star, the bed and breakfast
and others, then we can begin already to speak about an enormous opportunity,
notwithstanding the food that goes with it and notwithstanding the hospitality
industry that must be ready and the tourism products.

Now we cannot build this on the mountain, the island, the wine routes and
the Waterfront only. There must be other things that we must begin to look at.
And where are they? Because we can see on any good day, any of those things are
crowded. How do we diversify our tourism products that are available? I think
for government and people have this raging debate in the newspaper about the
2,7 billion that we will spend on Greenpoint Stadium. That Greenpoint Stadium
needed to be built in order to stay in the World Cup for as long as possible,
in order to make investment worthwhile in all the other things that I have just
spoken about.

But that 2,7 is probably a third of what we will spend on infrastructure
alone for public transport and for access. As we speak now, in preparation
volume soon, once they take all the scaffolding off the airport it will be
unrecognisable. And already we have done the deal with Emirates to fly directly
to Cape Town. Dubai is becoming a bit of the hub for the entire world, and if
we can link up directly with Cape Town, then I think we begin to corner a very
mobile and growing middle class market with disposable cash in the Middle East.
And those things become absolutely important as we go forward.

But that is a fixed investment at the airport alone. You feel the
inconvenience as the roads are divided, the N2, the M5 and so forth, in order
to deal with this. We have been able to bring the rail infrastructure timetable
forward. We were due to get our new carriages and our new railways by 2012. We
have persuaded the South African Rail Commuter Corporation to bring it forward,
to deliver the first 50 train sets by next year, including opening, extending
the line directly to the airport. I think we are watching the Gauteng monorail
lesson with great interest. I also happened to be in Malaysia at the time when
the story broke, so they have got their own ideas about monorails and the
companies involved. But maybe we have got a fairly okay rail network that is
maintained, efficient, predictable and extended in certain strategic places, it
will get people moving. And so maybe those are the kind of things that we are
beginning to put down.

So this soccer is as I said the guillotine that falls in 2010 and it helps
to galvanise money and people and partnerships as we go forward. What it means
is that as a business community of the Western Cape, we know that we have been
a little bit off the radar screen because we have not always had governments
that believe in black economic empowerment (BEE).

So there is a tremendous backlog and we were in danger of developing a bit
of a Cinderella complex about our credentials for BEE and being left out of
deals that had flushed capital and particularly black capital all over the
country. That has had its own problems, in the sense that when we feel as
insecure as what I think we felt over the first decade of freedom and
democracy, what goes naturally with it is that we fragment into recognisable
groups, whether it is language, Afrikaans and English or Afrikaans and English
and Xhosa, whether it is suburbs, northern suburbs and southern suburbs and
townships, whether it is religion, particularly Muslim, Christian, whether it
is size at a retail base level between the small and big ones.

I think that what we would need to do is to begin to understand how we can
overcome that in order to have good relations with established white business
as well. Otherwise we go in there seeking side deals in order to survive. I
think we need a relationship of integrity between all these different
components of business because I believe that the Cape will be big enough. So
this unity of purpose has to straddle all our divides in the Western Cape. What
makes it possible is the fact that we have this guillotine falling by 2010 and
we have got to get certain facts on the ground. Secondly, the Cape is big
enough, and that is why we will all be needed in this effort. Thirdly, the
government is aware of the role it must play in catalysing some of these
things. And so that is the reason that we are bringing properties like Somerset
Hospital site into market. We are not just bringing it into market, in a way
that capitalises those that are disadvantaged but also that unites them.

So it is not just throwing the meat out into the open, and see who will win
the fight for it, but constructing it in a way that everyone must benefit from
it, so we are experimenting with a guaranteed section for BEE of between 30 and
40%. Of course if anyone were to ask three, four years ago what will be the
value of Somerset Hospital we would have easily said 300 million. Today I think
it may be in excess of a billion.

That means that something has happened on that property that was occasioned
by World Cup 2010. The first thing was the building of the Greenpoint Stadium
right next to it. The second thing was the purchase of the Waterfront by Dubai
World. Suddenly it is had it is own impetus on property development in the
Western Cape.

Dubai World is interesting because it was the first indication that there is
an appetite for South Africa and particularly for Cape Town. The appetite is
shown by those who have disposable investment capital. The interesting thing
about the entire Muslim world is that they have got 70% of the energy reserves
of the world, 40% of the raw materials of the world, but only 10% of the export
products in the world. Meaning that there is an imbalance in how they do
business with the world. It means that there is a lot of money going into
conspicuous consumption within their societies.

The question is how do we help them break out of that kind of cycle? Firstly
their infatuation with the West and secondly the need to build empires in Saudi
Arabia, in Dubai which is all inward looking investment that is taking place. I
think what we are beginning to succeed in, if we can tone down the rhetoric and
allegations of corruption and other negatives and what we are beginning to see
is the possibility of that disposable investment capital coming to places on
Africa. Africa is increasingly becoming a compelling proposition. For the last
two years GDP growth in Africa has been on average over five percent, driven
largely by commodity prices including oil. Only three countries in Africa had
negative growth rate, all the others had positive growth. In the last year 31
of the 53 countries had elections.

So in addition to getting that investment to come to South Africa, we have
also got to make some of that investment and the Chinese investment, use South
Africa and particularly the Western Cape as the platform into Africa, because
what do we offer? We offer an internationally justifiable legal system, meaning
that if someone gets robbed here, they can be prosecuted overseas. Secondly, we
have a recognisable bank and a consistent banking system. You can make a
transaction overseas and it has impact here or vice versa, and we have a stable
democratic system that never mind how hard the debate is about succession, you
will know that you are dealing with a predictable set of policies. Those three
things basically means that the World Cup becomes a platform to attract the
world to say Africa is burgeoning, this giant is calming down, so it is not
fragmenting and this giant is awakening, it is discovering it is oil and
putting it on the proper markets, not on the black markets. This becomes the
platform from which to move forward, and so World Cup 2010 is then about
marketing us and our country in completely different and new ways.

We made the point that the World Cup, because of the 200 countries where
soccer is the religion, the World Cup will have a viewer ship of about 40
billion. Some people say that there are only six billion people in the world;
it is how many times they watch. It is the repeat pictures that they see. It is
the images that they see of all the time consistently over that six week period
and the period before and the period after, of a country that is happy, that is
progressing, that is efficient and organising this world event very well. The
is more that goes into the minds of decision makers all over the world and
together with the notion of an African World Cup, and Africa burgeoning, I
think that that is where our niche is for 2010. It is how we as business people
and as a country facilitate the entry of capital generally, but particularly
that new capital that comes from the Middle East, Subcontinent, Asia, South
East Asia and how we are able to locate them here and use this as a
springboard.

What they need then are both projects to anchor them here in Cape Town,
Western Cape, South Africa, and we will involve those kinds of properties and
other opportunities to market, like the Somerset Hospital site and others, but
also the new partners. They will need places to park their investment capital.
I am just worried that we are allowing the obscurantisms to dominate the debate
about staying here. We are allowing ourselves to be diverted by our own
passions for where the stadium should have been. And I do not think that we are
making haste in realising both the local opportunities as well as the
continental ones. I do not think we are thinking through projects and
partnerships to corner some of that investment capital for ourselves, but also
for the continent as a whole. I do not think that we are positioning ourselves
as that, because nobody will then need projects, they will also need partners,
because hand holding is a very important part, particularly with those who may
not have swum in our waters before.

They need to share risks. And if we do not risk the risks, who are we to
tell them to plunge their money? And this is what we have got to open up in our
minds about World Cup 2010. I really think that there is a confluence of
factors that have been very robustly brought together by the prospect of World
Cup 2010 and that are what it is only, a catalyst, an opportunity to converge
things that may not have naturally converged in sync. World Cup 2010 forces
things to converge at the same time. But if we are not part of that
convergence, we will be left out, because Dubai World has shown that it is got
money. If we do not stop them they will buy up everything and if we do not
construct deals in a particular way, we will be left out.

The state can play its role, such as building in the guaranteed part of
Somerset Hospital to make sure that we are in there and not the bulk of us left
out like in the Waterfront deal. The Waterfront was a rude awakening because it
showed that people can buy up our crown jewels, and we will have slept through
it. They can outbid us. We thought that R5 billion was a lot of money. Someone
came and just upped it to seven billion and left us all out. We are trying not
to do the same with Somerset and we are certainly trying to do the same with
any other thing that will come our way. So we will do our part as the state, by
bringing the opportunities, structuring it in a way that forces partnerships,
but I think that we need to wake up and be part of this convergence and at the
same time solve some of the enduring problems of the Western Cape such as
housing, because I think once we become some Monaco of the world. Once we
become the key investment destination of the world, once we confirm that we are
the tourism destination, the things that will then bite us are our own social
dislocation at this juncture, such as the gap in housing styles of people. It
then means that it is not a favour to be called upon to look after the poor,
but to give the poor ownership in this economy.

So what FNB does with the N2 Gateway, I think is critically important
because this whole thing only becomes sustainable when everyone shares in the
property move. Whether it is a subsidised house, a social rental house or a gap
house that people own part of the Western Cape, so all of these things begin to
converge and come into perspective, and I am hoping that we will not be found
wanting at the moment of our greatest opportunity. I am hoping that we will
enjoy the soccer, but not be overwhelmed by the soccer to the exclusion of
seeing that the soccer is a catalyst with a far bigger ambition, and that is
for South Africa to join the company of nations like Brazil, Russian, India and
China, that as they surge forward on the global market, we surge with them on a
completely new trajectory.

I think that we have made a lot of progress in our provincial growth and
development strategy to identify the key sectors that must turn over, and we
have tied all of that turning over process to work up 2010 to deliver major
deposits for the new economy that the Western Cape is capable of.

Ashiek makes the point about our relationship with the Gauteng economy. The
difference is we embrace the knowledge based economy already. Gauteng has to
plan for a post mining economy and that I think is the difference. What causes
our image now, the fact that we are so cosmopolitan, that we sometimes divide
and we have identity problems. If we can continue to manage that and manage it
far more harmoniously, we will find that it is precisely this cosmopolitanism,
this difference that is here, that is the engine of our creative drive. Mono
cultures stagnate; multi culturalism drives us forward in ever creative ways.
So do not go into your own group, interact, be robust with those who are
different to you, because it is in that, that the knowledge economy of the
Western Cape is embedded.

Thanks very much

Issued by Office of the Premier, Western Cape Provincial Government
11 June 2007