Building capacity to help Africa trade better

Minister Ebrahim Patel: Debate on State of the Nation Address 2018


Minister Ebrahim Patel: Debate on State of the Nation Address 2018

Minister Ebrahim Patel: Debate on State of the Nation Address 2018
Photo credit: GCIS

SONA Debate 2018: Speech by Minister of Economic Development, Ebrahim Patel, at the Joint Sitting of Parliament

On Friday night, President Ramaphosa set out a broad and inspiring vision for the economy that prioritises jobs, young people and economic inclusion.

There is a new mood of optimism and buoyancy in the country. In the weeks and months ahead, we must build on that optimism and translate it into more employment, a stronger economy and deeper transformation.

There are positive signs of a confidence boost in the run-up to SONA:

  • Five weeks ago, the competition authorities approved a transaction that will see Old Mutual reversing its decision of twenty years ago to make London its global headquarters and, subject to final shareholder approval, the company will ‘come back home’, use the JSE for its primary stock exchange listing, make Joburg the global headquarters for its biggest businesses, bring high-level finance jobs from London to SA, commit to a new fund of R500 million for developing small businesses, ensure no jobs are lost as a result of this homecoming and take its BEE shareholding levels to the best- in-class in the industry.

  • One month ago, a foreign investor committed to government and the regulators to invest at least R6 billion to modernise the local Caltex refinery and increase the ownership stake of South Africans in the business if its bid to buy the Chevron/Caltex local business is approved.

  • A few weeks ago in Davos, the CEO of Coca-Cola briefed us on steps they are taking to implement their commitment to localise more of their shareholding by selling 30% of equity in the local operations to black South Africans, including workers and to maintain current employment levels for a five-year period; and the CEO of ABInBev, another large investor, committed to speed up opportunities for black farmers in the company’s barley and hops supply-chain

  • On the morning of SONA, Japan’s Isuzu Motors announced their decision to take 100% ownership of an assembly plant in the Eastern Cape while Chinese car maker BAIC reached the halfway-mark in construction of the first new light-manufacturing assembly plant built in more than 40 years, in Nelson Mandela Bay

These examples show the positive impact of improved business confidence and effective partnerships and the opportunities that smart investors see in the local market.

Jobs remain our number one priority. There are currently 16,2 million South Africans working. Last year the pace of job creation was particularly slow: while 100 000 new jobs were created, this lags behind the much larger number of young people who leave school and university and need to find economic opportunities. That is our challenge. Unemployment leaves enormous human resources out of the economy, millions of young, potentially productive South Africans who want to build this country. Rising inequality is damaging to the economy and toxic to social cohesion.

To address this, President Ramaphosa’s SONA speech sets a vision on inclusive growth, employment and bold transformation and also the ‘how to’: namely

  • by fixing institutions that are broken or have become sources of corruption;

  • building partnerships with the private sector, organised labour and communities; and

  • actually implementing our plans, the National Development Plan and the jobs drivers, getting things done.

To achieve this vision of SONA we must work differently. It requires renewal within the state.

In the year ahead, to drive job creation and radical economic transformation, we will focus on expanding our infrastructure, deepening industrialisation, greater economic inclusion, promotion of innovation and stepped-up African regional integration. Our macro-economic policy framework will promote faster, more inclusive growth and give priority to job creation.

We will implement sector-plans that unlocks the jobs drivers in the economy, namely sectors with the opportunity to expand GDP and create employment.

In the past year, government invested more than R1 billion each working day in new infrastructure such as schools, clinics, power-stations, roads and new universities.

The country moved from an electricity shortage just two years ago, to a surplus today, which provides an excellent base to bring energy to the homes of more South Africans and attract investors who need energy for their production processes.

In the next 14 months, the nation will invest more than R300 billion as we turn the country into a construction site, and

  • build between 100 and 150 new schools

  • increase the number of tertiary student accommodation beds by over 10 000

  • increase the supply of energy by more than 1 000 megawatts, which includes green energy, and connect close to a million more residents to electricity in their homes

  • lay 600 kms of new transmission lines to bring electricity to marginalised communities

  • build more than 100 000 new houses

  • complete 20 health facilities including a new hospital

  • accelerate water infrastructure

  • assemble 480 new locomotives and 15 000 new taxis here locally, using South African labour, and

  • expand fibre-optic cables and link more citizens to high-speed internet access.

Economic infrastructure, including tourism infrastructure, will be prioritised. The team that President Ramaphosa spoke of – to fast-track new projects – will also help finalise a longer-term project pipeline and Budget processes are being reviewed to address the multi-year cycles of spending in infrastructure.

To fund more economic infrastructure and industrialisation, we will engage the financial sector to help unlock fresh resources and the first meeting will take place within three weeks, part of the preparatory discussion on an investment pact.

While we need to raise more funding, we must also ensure that no rand of public money is diverted to corrupt purposes or fraudulent tenders. Corruption costs us in the form of lower growth, fewer jobs, less localisation (when we buy locomotives from Spain), fewer houses or classrooms that are built. State-owned corporations like Eskom, Prasa, Transnet and Denel have been the focus of a number of serious allegations.

To root out corruption, government will ensure that key infrastructure-linked projects are reviewed and Cabinet receives reports on actions by law-enforcement agencies to recover monies improperly paid out and implicated officials are charged. Last year the PICC and the IDC already started work on the economic cost of corruption and measures to address these and with the strong focus of the SONA on stamping out corruption and state capture, we will do more to combat this cancer in the economy.

The fraud in the accounts of Steinhoff resulted in damage to the savings of workers and reputations of corporations. It points to the serious deficiencies in the work of company auditors and comes hot on the heels of questionable conduct by KPMG, McKinsey and other private sector companies in the state-capture project; as well as widespread collusion and price-fixing in many industries. The Competition Act has been amended to make corporate collusion a criminal offense for which people may go to jail.

Our country needs a renewal in both the public and private sectors to address the corrosive effects of unethical business practices. Government will step up the review of appropriate guidelines and actions and we call on the private sector and professional standards bodies to do the same.

To transform the construction industry, five of the top 7 construction companies will complete partnership agreements to ensure entry of black South Africans in the sector and expand turnover of black-owned construction firms. Murray & Roberts has sold its construction operations to a black-owned company. New agreements between industry players, to expand the annual turnover of seven black-owned construction companies to roughly R7 billion a year within seven years, is currently being considered by the Competition Tribunal.

To support economic inclusion – people-centred, radical socio-economic transformation – government is taking steps to boost youth entrepreneurs and black industrialists, address high levels of economic concentration, establish a national minimum wage for workers together with strengthened collective bargaining and broad-based empowerment. These efforts are intended to build greater levels of social solidarity within the country, to address the deep levels of inequality and to provide an economic underpinning to the vision of a nation united. They are steps to achieve the Freedom Charter goal that the people shall share in the country’s wealth.

The Competition Amendment Bill was published on 1 December last year and will be brought to parliament this year. The Bill expands the mandate and the powers of the competition authorities to address high levels of economic concentration in South Africa – so that we build an economy for all in which young entrepreneurs and black South Africans are not locked out of opportunity. Provisions addressing abuse of dominance by large corporations have been drafted, so that small businesses are nurtured. Protections on employment have been enhanced, to support workers during mergers. Cabinet approved the Bill for public consultation and we are in discussion with key stakeholders.

The National Minimum Wage to be introduced on 1 May this year that Honourable Mthembu spoke about, will not only lift millions of working families out of poverty and promote economic inclusion, it will also be a wage and spending boost to the economy, stimulating aggregate demand. If we want to capture the economic benefits of that boost, we must encourage retailers to stock locally-made products and consumers to buy Proudly South African products. We have written to representatives of the largest retailers this morning to invite them to meet with us to discuss ways in which we can increase the range of locally-made goods on our shop shelves.

Mr President, youth enterprise and opportunity will be promoted through public and private-sector initiatives. Our focus will be on 4 main areas: skills, exposure to work, jobs and entrepreneurial opportunities.

In addition to new investment in higher education which will be announced on Wednesday, over the next 12 months

  • The IDC and sefa will commit R1,3 billion for youth-empowered enterprises so that we unlock the potential of young entrepreneurs

  • The Youth Employment Services – the YES programme – of the private sector will recruit the first intake of youth interns and we have been assured it will be scaled up actively over the next three years.

  • Government will publicise these financing and intern opportunities for young people through a roadshow through all nine provinces and following discussions at Nedlac, we will release information on the impact of the Youth Employment Accord and further actions to be taken, during Youth Month.

Black industrialists will be supported actively in productive enterprises, so that we move away from a model that relies simply on black South Africans owning 5% or 10% in an existing enterprise. This emphasis on building new productive capacity and linking this with our transformation vision, is critical. To support this, funding of R30 billion is available over the next three years through DFIs and government departments and we will integrate efforts of the public sector, SOCs and the private sector.

In the year ahead, government will open discussions with business and labour on measures to promote greater worker ownership of shares in enterprises and inclusion of workers on the boards of companies, so that we build our own inclusive South African economic model and deepen the partnership in the economy. Complementing this will be our efforts to promote township and rural enterprises and restructure the economy to promote its performance and competitiveness.

In the Mining sector, we will move away from the standoff between government and the industry and forge a new cooperation that focusses on greater local processing of minerals and deeper transformation of the sector, particularly aimed at giving workers a stake in the industry. We will work closely with communities, workers and companies as we finalise the Mining Charter. Proposals for a sovereign wealth fund will be worked on in the period ahead.

Industrial expansion is vital – government will launch a new auto sector scheme this year focusing on jobs and localisation of component manufacturing and greater efforts to expand labour-intensive industries such as clothing and textiles, agriculture and agro-processing. Trade with the rest of Africa already accounts for more than a quarter-million direct jobs in SA. We will use a combination of the proposed Free Trade Area (FTA), investment and cross-border infrastructure facilities to deepen our economic relations with neighbours.

To support innovation, government will finalise a country strategy on the 4th industrial revolution and expand partnerships with the private sector, universities and research institutions.

Technology is changing economies and societies in deep and fundamental ways. Retail processes are being automated that will impact on jobs in shops and banks, more distance learning may increasingly replace classroom teaching, medical technologies will change the way in which health problems are diagnosed and treatment is delivered, smart robots will change factories, driverless cars will impact on urban transport. At the base of this is the developments in artificial intelligence and the use of big data.

These technologies will be disruptive at the workplace and in society, yes they can create new digital divides in and between countries but they also provide enormous potential benefits and properly steered, we can harness technology to our developmental goals and in the service of our people. We should not focus on building a 20th century economy when competitors are building the economy of the future. The digital economy will be a key driver of the 4th Industrial Revolution and thus bringing data costs down will be a priority in the year ahead.

In the next 12 months, to get SA ready for the 4th Industrial revolution, we will

  • Develop a skills framework for the new jobs of the future and a social plan to address the disruptions to labour markets and workplaces that flow from new technologies

  • Invest in R&D to create the intellectual property base for our economy to benefit from the potential of these new technologies and provide funding for venture-capital projects involving the new technologies

  • Bring down the cost of data through the competition market inquiry into data services, expand infrastructure through finalising release of new spectrum, complete digital migration and conclude key policies, including for entry of cross-border e-commerce in SA.

To drive this process and promote the wider partnership we need in society, we will work through the Digital Industrial Revolution Commission and through the office of the Speaker, we are arranging a session to brief Parliament on work undertaken on the implications of the 4th Industrial revolution.

Honourable Members, I have outlined some of the steps that we will take to give effect to the vision of the SONA. These efforts will reignite confidence and growth and will boost investment. They are an essential part of our growth plan and will also help SA’s sovereign rating so that we move from sub-investment rating to a country that is ready to work, ready to do business, ready for investment.

Two key things will define the approach of government.

The first is synergy and integration. Our interventions will have limited impact if they are simply a series of separate actions. We therefore plan for the different actions, on youth, the 4th industrial revolution, infrastructure, industrial expansion, all to be combined and integrated.

The second is partnership. We will actively involve the private sector and workers through their unions in the economic renewal plans.

The Summit on Jobs and the Conference with investors are key forums for building that partnership. Some Opposition speakers have criticised this as too many Summits and Conferences, that we do not have any plans, that Summits are not enough to fix South Africa. I think the concrete plans we highlighted in this debate – on de-concentration of the economy, on infrastructure, on industrialisation, on the 4th industrial revolution, on implementing the NDP – is a powerful reply to that criticism. We will convene the Summits and hold the meetings with social partners because we want to do things differently – to draw people in to become part of the solution, to mobilise resources that those outside government can bring, because the challenges we face require that all South Africans are part of the solution, that Thuma Mina becomes widely subscribed as a call to national service by all those who love their country, black and white, young and old, urban and rural.

In this spirit, we will work closely with social partners on a broader accord to underpin the economic recovery. Successful social partnership requires trust-building. Trust between South Africans. Trust between business and labour. Trust between citizens and government.

Development is not about government doing everything: it is to give our people the freedom to bloom; to unleash and let the talents of South Africans shine, to equip the young with skills so they can shape the economy, to protect the vulnerable, to create conditions for decent work opportunities to be created on scale.

In this year that we celebrate 100 years since Madiba’s birth, I am reminded that in 2007, Madiba was given the International Labour Organisation’s inaugural Decent Work Prize. ILO Director General Juan Somavia, when handing over the prize, said:

If any person embodies the values of decent work, it is President Mandela. As a lawyer, an activist, a prisoner, a politician and a statesman, Nelson Mandela has lived the ideals of the ILO – through his lifelong pursuit of dialogue, understanding, fairness, social justice and above all, dignity.”

These ideals and values are what the ANC-led government will be giving effect to in the year ahead.

Thank you.


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