launch of Macquarie First South
14 August 2006
Good evening ladies and gentlemen
Distinguished Board Members and Executives
Dear friends
Thank you for the opportunity to share this auspicious occasion with you. We
are celebrating a ground-breaking partnership on many levels. We have been
called to witness a marriage of diversity, a blend of the long established
skills and global expertise of Macquarie, combined with the knowledge, insight
and energy of Macquarieâs local, somewhat-younger bride.
Together I am sure they are likely to be a potent combination, ready to
breathe fresh vigour into the local financial markets.
The combination of First Southâs talented stock-broking and research
business with Macquarieâs corporate and infrastructure advisory and debt
markets business will surely create a powerful South African investment
bank.
Macquarie has built for itself a fierce, global reputation for
entrepreneurship and seizing opportunities. This is a trait which, I am sure,
must have a fair amount to do with Macquarieâs Australian origins. Whilst a
southern hemisphere trait has not always been appreciated by South Africans on
the sports field, Iâm sure that it bodes well for Macquarie First Southâs
endeavours in the financial markets.
It is not only our resource-based economies and southern hemisphere ties
that bind us. For I am sure that Macquarieâs reputation for tenacity,
innovation, and hunger to bring about change is a characteristic that you will
already have found echoed in the South African culture. As a global player; the
number one broker in Australia by market share and a growing force in Asia it
would seem logical that South Africa will offer great potential for
expansion.
There can be few economic opportunities as exciting as South Africa. South
Africa has achieved many things in its dozen years of democracy, but one of the
most remarkable has been the way we have embraced a shared future, the way we
have had to reverse a history of division, and the way that we are conscious of
the fact that we are all, collectively, the joint custodians of our nationâs
future well-being.
We have learnt to encourage marriages and partnerships across all sorts of
former-boundaries. We have embraced the integration of South African business
across international borders; we have learnt the value of public-private
partnership in achieving our shared objectives; and we have been galvanized to
extract the full wealth of the skills, innovation and energy of all of South
Africaâs people.
Much of this is encoded in the Financial Sector Charter. The charter is
indeed a remarkable achievement. It goes to the core of how the financial
sector will address the urgent need to make business sense of a more
sustainable, inclusive and equitable future.
The charter represents a powerful model of collective partnership, it
demonstrates how co-operation and collective effort can overcome the barriers
of information asymmetry and economies of scale that are so often the major
causes of market failure in the provision of targeted, developmental
investment.
Secondly, it demonstrates how industry participants can, with the right
vision and leadership, take control of their own destinies by realising that,
ultimately those destinies are inseparable from the long-term prosperity and
development of all of our people.
South Africa has achieved the political freedom which many commentators saw
as being beyond our reach, but which other country on the planet shares quite
the same economic and social challenges that we do? Fortunately, we are a
country that is blessed with many riches not only of the mineral kind, but also
more importantly, a wealth of vision and leadership. The world has marvelled at
the examples we have set of political leadership. But the same can be said of
the leadership that has been demonstrated in finding homegrown solutions to our
socio-economic challenges.
Some invaluable lessons have been gathered from the Financial Sector Charter
process. Firstly, through being a voluntary initiative, in many ways driven by
the private sector, the Financial Sector Charter has created an incredible
sense of ownership and accountability. Secondly, the architects of the
Financial Sector Charter have been vigilant in terms of crafting a framework
that is as broad based as possible. The Financial Sector Charter has also been
unlike any other charter in that it carves out an explicit development role in
the economy for the financial sector. Not only does it commit tens of billions
of rands to targeted investment in support of small micro enterprises (SMEs),
low-income housing, resource-poor farmers and developmental infrastructure, but
it also sets out explicit targets for ensuring that the financial sector
broadens its reach in terms of providing affordable and appropriate access to
banking, insurance and savings products.
The Mzansi bank account has been a front-runner in this regard. With over
3,3 million accounts opened since its inception in October 2004, the Mzansi
account has silenced the sceptics who thought it not possible to sustainably
service the low-income sector of the population. The Charter constituencies are
busy putting the finishing touches to an agreement on Generic Access Standards,
which will see the introduction of the likes of low cost household insurance
and funeral and life insurance products.
Distinguished guests here tonight will also doubtlessly be aware of the
commitments made in the Financial Sector Charter to the financing of
Transformational Infrastructure. Financial institutions have collectively
committed themselves to provide R25 billion worth of funding for
transformational infrastructure by the end of 2008.
The Financial Sector Charter recognises the need for the financial sector to
dedicate funding to infrastructure projects in underdeveloped areas where
communities have historically been denied equitable access to economic
resources. The definition of Transformational Infrastructure is intended to
focus financing efforts on entities that provide infrastructure that will
contribute towards reducing infrastructure backlogs and increase the potential
for economic growth and development in South Africa. Such infrastructure
projects include safe water and sanitation, road, rail, port and communications
infrastructure that will stimulate growth, community facilities that build
pride and social infrastructure such as quality health care and education
facilities for all.
Historically, the participation of private sector financial institutions in
funding infrastructure has been limited; some of it has to do with legal
restrictions but mostly due to scepticism about commercial viability. The
charter has brought about recognition of the need for innovative thinking and
collaboration between the affected financial institutions, government and other
stakeholders to address some of these real or perceived constraints.
Fortunately, I am certain that infrastructure finance will be just as high
on Macquarie First Southâs list of priorities as it is on South Africaâs. We
know that Macquarie cut its teeth in Australia on private sector involvement in
developing and running infrastructure tools which has become well known around
the world and we look forward to you applying in South Africa.
South Africa has committed very significant budgets to infrastructure
spending over the medium term. Estimates for infrastructure spending over the
next three years exceed R370 billion. The funding of this infrastructure spend
will be from a variety of sources. State Owned Enterprises (SOEs) have their
own balance sheets and will raise capital through both the capital and debt
markets. National and provincial departments have budgets that show steadily
increasing allocations for infrastructure. At the same time, we are very
mindful of the need to ensure the quality of infrastructure investment. We are
thus perhaps more insistent than other developing countries in requiring that
investment decisions be backed by sound feasibility studies so that we can make
rational investment decisions. You may find this frustrating at times, but you
should understand the importance of getting the investment in infrastructure
right.
When we are confronted with the practical matters of âhow toâ deliver on
governmentâs transformational agenda, we must look, increasingly, to such
collective partnerships. Through Public Private Partnerships (PPPs) we strive
for better, more cost-effective services for all South Africans and new
business opportunities for the private sector. Both are in the interests of the
nation. doubtlessly, it is a fine balance to strike in each deal. Doubtless,
this is why PPPs are tricky and require high levels of expertise. But it is
also why we have worked so hard to get them right.
Our policy is to use diverse sources of funding for meeting our identified
infrastructure and service delivery needs and in a manner that is
cost-effective and appropriately adapted to the circumstances of each
particular project. To make the appropriate choice in each case requires
careful assessment of options and computation of costs and benefits. But we
have the benefit of established, standardised systems for these assessments.
Our PPP Manual is world class, providing step-by-step details of the PPP
project cycle and standardised PPP provisions create certainty about the terms
under which our deals will roll.
Every project takes us several steps further in finding competitive
solutions, in fine-tuning margins, in building trust and certainty around
contractual pre-commitment. Thirteen PPPs have been implemented to date under
the auspices of the National Treasuryâs PPP Unit. There are currently a further
forty-eight PPP projects registered with the PPP Unit as being in either
feasibility study or procurement stage. The projected private investment in PPP
projects over the next three years is R13,8 billion.
We will continue to drive empowerment in every facet of PPPs because we know
that these projects hold huge potential to grow new black businesses, both big
and small and to develop black management and skills.
These are the exciting opportunities that await Macquarie First South as you
embark on this new journey. Making the most of the opportunities will require a
diversity of skills and talents but I feel sure that your collective experience
of building a shared vision and true partnerships will fare you well for the
challenges ahead.
Thank you
Issued by: National Treasury
14 August 2006
