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the dti Budget Vote Address: Dr Rob Davies, Minister of Trade and Industry, 22 July 2014
It is indeed a privilege to participate in this dti budget vote, the first of the fifth administration of our democratic order.
At the outset I wish to welcome the new Minister. The new Ministry will give dedicated focus to small business and co-operative development; areas which are fundamental in bringing about economic transformation. As soon as the new Ministry was announced, we have worked very closely and have already transferred some parts of the dti and institutions in the dti family. We want to assure the Minister and Deputy Minister that this close co-operation between our sister departments will continue and undoubtedly, together we will do more.
Chairperson, in my first budget speech at the beginning of the last administration in 2009, I reflected on the unfolding great recession and our concern that the crisis posed a real and direct challenge to our plans for growing and transforming the economy.
At the time we characterised the challenge facing us as being structural in nature, meaning that the existing structural characteristics of our economy rendered us vulnerable to the effects of external shocks. The structural weaknesses derived from the reality of an economy that remained insufficiently diversified and too largely dependent on primary mineral exports.
We noted that growth in the pre-crisis period had largely been driven by consumption orientated, rather than productive sectors and that manufacturing output had remained below potential, with the result that imports were filling gaps in the domestic market that ought to have been occupied by domestic products. The combination of these elements contributed to the skewed pattern of the economy’s development, including in spatial and racial terms, resulting in the entrenchment of extreme levels of inequality and poverty.
One of the conclusions we drew was that we needed to implement a higher impact industrial policy that would respond to the imminent threat of de-industrialisation and lay a basis for the creation of a stronger industrial base.
More concretely, we introduced in 2009 the first of our annual Industrial Policy Action Plans covering actions to be undertaken in the financial year in question as well as the outer two financial years.
By 2014, the end of the term, we could report that the Industrial Policy Action Plan had become the centrepiece of the dti’s work with all our actions being coordinated or aligned to it. We could show that through our direct efforts we had stemmed the inexorable decline of the clothing and textile sector and witnessed significant investment and growth in the automotives industry. We could also show, amongst others, that our interventions transformed the Business Processing and Off-shoring sector and that the film industry was yielding significant investment and jobs, particularly for the youth.
Honourable Members, I have talked about achievements both past and present to illustrate that despite whatever the doomsayers say about industrialisation in our economy, the dti’s role in facilitating industrial growth in South Africa, industrial policy , properly resourced and well planned, works. We also remain convinced that efforts to grow manufacturing in South Africa remain fundamental to placing our economy on a new path of sustainable growth.
Honourable Members will be aware; the President has indicated that the central task of the present administration will be to bring about radical economic transformation. This has a number of dimensions but requires, among other things, that our industrial policy impact is increased to the point that industrial development becomes a key driver of higher levels of growth along a qualitatively different new growth path.
I have shared with the Portfolio Committee some of our thinking on the elements of “Higher Impact Industrial Policy”. They include building on and expanding the infrastructure development programme, implementation of a number of mineral beneficiation projects, pursuing active development integration on the African continent and re-positioning South African manufacturing in a continent that is itself seeking to industrialise, and creating a platform for more granular engagements with dynamic and leading companies based on a higher level of support against greater conditionalities.
Honourable Members, allow me now to be more specific regarding some of our plans for the coming financial year.
Firstly, we see acceleration in the automotive sector where the Automotive Production Development Programme (APDP) has already supported significant new investment in the sector. Projected capital expenditure for 2014 is anticipated to reach a record level of R7, 9bn. As the National Association of Automobile Manufacturers of South Africa (NAAMSA) puts it “the relatively high levels of capital expenditure in recent years may be attributed in large part to Investment Projects by manufacturers as part of the Automotive Production and Development Programme (APDP).” Moreover, adjustments to the APDP and the designation of buses in terms of the PPPFA have resulted in Mercedes-Benz, Volvo and MAN winning tenders to provide locally assembled buses for Metros commuter bus expansions and for the production of the uniquely South African S’esfikile taxi.
In the coming year, the APDP will undergo an early review which will allow us to take stock of efforts and determine what more could be achieved in growing the industry in South Africa. In addition, The Automotive Supply Chain Competitiveness Initiative (ASCCI) launched in 2013 to enhance localisation, production and supplier capabilities is proving to be successful and we will continue to expand the programme.
Since introduction of the AIS in 2010/11 public sector approved incentives amounted to R6.3bn and supported R23bn investment by OEM’s in our automotive sector. Given that automotives comprises 30% of our industrial sector with strong linkages to other manufacturing sub-sectors, the impact of such investment on our domestic economy is significant.
Also, the Automotive Export Manual Report 2014, shows that vehicle and component exports increased by 8.2% from R 94.9 billion in 2012 to R 102.7 billion in 2013. This is the first time the industry exceeded the R 100 billion mark. Honourable Members this is a sector that employs in excess of 100 000 people in our country. It is an important sector and we will continue to support it. Secondly, the Clothing, Textiles, Leather and Footwear sector is also an important labour absorbing sector and after having been written off, has been successfully stabilised through the introduction of a number of inter-related measures. These include:
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improved monitoring of imports to ensure compliance with customs and excise regulations and to reduce unfair and illegal imports,
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the designation of the sector under the PPPFA, collaboration with key retailers to encourage local procurement,
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the introduction of the Clothing & Textile Competitiveness Programme,
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and the creation of two new regional footwear clusters. These clusters have revitalised SA’s moribund footwear sector in KwaZulu-Natal and the Southern Cape leading to new production of more than 150,000 pairs of shoes per month and the creation of 700 new and sustainable jobs.
In the coming year, the department will continue to roll out the CTCP to reach more companies within the sector and I will announce in the near future details of a significant programme to increase value addition in the exotic leather and animal hide industries through the National Exotic Leather Cluster.
Mr Speaker, the Metal Fabrication, Capital and Rail Transport Equipment sectors are the bedrock of a modern industrial economy. the dti has been active and instrumental in unlocking the sectors potential and we can now expect significant expansion to take place.
For example,
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the combination of the designation of locomotives in terms of the PPPFA, and
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the work of the National Tooling Initiative and the Gauteng Foundry Training Centre have been pivotal in securing substantial local content commitments in Transnet and PRASA’s rail rolling stock investment plans.
Indeed, the localisation successes in renewable energy and buses and rail rolling stock will become the yardstick against which localisation of Government procurement is measured. To unlock the value of localisation for South Africa, further refinement of procurement legislation will be required – including a focus on compliance across all tiers of Government – and improving the transversal procurement processes. Utilisation of the multi-billion infrastructure build programme to support local manufacturing especially in the rail, electricity and construction sectors.
the dti will be playing its part in ensuring Government procures 75% of its goods and services from local companies. Goods and services that have already been designated include:
- railing rolling stock;
- power pylons;
- buses;
- canned and processed vegetables;
- textiles, clothing, leather and footwear sector;
- solar water heaters;
- set top boxes;
- pharmaceuticals;
- furniture products; and
- power and telecoms cables and valve products and actuators.
I would like to take this opportunity to announce that the next designation of products for Government procurement includes,
- steel;
- conveyance pipes;
- transformers;
- building and construction materials; and
- and rail signalling and components.
To add to this momentum, the private sector needs to buy more from local companies and indeed made such an undertaking in the Local Procurement Accord signed a few years ago. It is therefore pleasing that within the President’s Business/Government Working Group on Inclusive Growth, discussions are underway to secure the concrete commitment of the top 80 JSE-listed firms to purchase increasing proportions of their inputs from local companies.
Mr Speaker, the President assented to the Special Economic Zones Bill earlier this year. Simultaneously with processing the legislation we embarked on a process, together with the provinces, of conducting feasibility studies on potential SEZ’s – some IDZs and the other forms provided in the Act. Honourable Members will recall that in 2013 we proclaimed Saldanha Bay as an IDZ. Now, subject to his schedule, President Zuma will in the very near future hand over the operator permit that will allow the Dube TradePort to become another IDZ. Public consultations are underway for the Harrismith trade port in the Free State to also become an IDZ. Work is also well advanced on industrial sector SEZs, including two potential platinum value chain based SEZs, one in the North West and another in Limpompo. We have no doubt that the combination of support available through the SEZ programme will lead to an increase in productive investment by the private sector.
We will also continue in the year ahead and in the course of this term to support investments in a number of ways;
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The Manufacturing Competitiveness Enhancement Programme (MCEP),
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the Automotive Incentive Scheme (AIS),
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the 12i Tax Allowance,
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the Clothing and Textile Competitiveness Improvement Programme, and
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the Incubation Support Programme (ISP),
are all incentives designed to support the competitiveness of labour ?intensive and value-adding productive sectors. In addition and as the President noted in the SONA, SA’s Development Finance Institutions (DFIs) have an asset base of R230bn. Over the coming year, we will work closely with the IDC and the EDD to scale-up IDC support for industrialisation to achieve a greater cohesion with the deployment of the dti incentives. Our aim, as I already indicated, is to seek stronger developmental conditionalities and reciprocal obligations from beneficiaries of state support in areas such as competitiveness upgrading; employment retention and creation, investment and so forth. In other words what we are looking at is a much more focussed, strengthened and integrated industrial financing and incentive system to support additionality and conditionality.
As we stated in the IPAP 2014, ‘To achieve and consolidate the objectives we have been discussing, new platforms will need to be continuously built to strengthen existing stakeholder engagement and deepen trust and cooperation between government, the private sector and organised labour. We therefore warmly invite all stakeholders to join us in this project, in the spirit of active and open-minded collaboration that we are strongly advocating as the guiding thread for all our joint actions in 2014 and beyond.’
Honourable Members, Government has spoken about the beneficiation of SAs mineral resources for a number of years but regrettably, this has remained elusive for many years. The effects on the SA economy are clear to see if we look at economic growth post the global economic crisis. The commodity super-cycle at least for the medium-term is over, the extraordinary resource rents profits that were earned by companies during this period have not been adequately shared with society including workers, and the terms of trade for SA exports have declined substantially as weak international commodity prices have reduced the price of our key exports. Moreover, as the platinum strike so clearly demonstrated, our current account deficit and the exchange rate are directly impacted by volatile global commodity prices.
Mr Speaker, I am not suggesting that beneficiation is easy; however, if we fail to decisively pursue beneficiation we will relegate the SA economy to a place at the bottom end of the globalisation of labour with serious consequences for our ability to generate income and employment. Our economy will remain undiversified and will be beholden to international commodity markets. We do not have the luxury of debating whether to beneficiate our mineral wealth, we must harness the collective industrial capabilities of SA firms to map how to beneficiate and what enabling policies or support measures are required to ensure this happens successfully and for the benefit of all South Africans. We will therefore this year, be developing a Minerals Beneficiation Action Plan as a component of the IPAP.
Honourable members, Government is committed to facilitate broad-based economic participation through targeted interventions to achieve more inclusive growth. In order to facilitate broader economic participation, the department will begin implementing the B-BBEE Amendment Act (Act No.46 of 2013), which was signed into law in January 2014. The B-BBEE Act and its accompanying Codes of Good Practice seek to increase alignment between B-BBEE activities and Government’s objectives of, industrialisation, localisation, skills development and job creation.
Speaker, South Africa recognises the importance of foreign direct investment. We are – and will remain – open to FDI. Openness is reflected in the stock of FDI in South Africa that now accounts for around 42% of our GDP. Inward flows also continue to grow, and over the last five years South Africa accounted for the bulk of new investment projects in Africa with investment arriving from the USA, some Member States of the EU and, increasingly, from China, India and other Asian countries. The reasons are not hard to find: South Africa offers many opportunities not only for access to a growing domestic market but also as a platform to the dynamically growing markets of the African continent. Investors enjoy robust protection in South Africa, comparable to the highest international standards, and the OECD rates South Africa as among the least restrictive jurisdictions for investment.
Allow me to state some of the recent facts on investment in South Africa;
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Firstly; notwithstanding the very challenging global economic conditions, in August 2013, Global Financial Times Magazine of UK voted South Africa overall winner for best investment destination in Africa for 2013 and 2014.
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Secondly, the 2014 AT Kearney Foreign Direct Confidence Index ranks South Africa in position 13 amongst 25 leading economies moving up two places from 2013. South Africa ranks better than countries such as Switzerland, Sweden and Netherlands.
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Thirdly, International Investment Initiative director at the University of Bern’s World Trade Institute Dr Stephen Gelb says if one looks at the number of firms investing in South Africa, and not just the number of US dollars flowing in, his research has shown over 130 foreign firms either entered South Africa or expanded their investments during 2013 – that is about 2.5 foreign firms per week announced an investment in South Africa.
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Finally, TISA our investment team has developed an investment pipeline of R 60.5 billion of potential investment projects for 2013/14.
Certainly, the draft Promotion and Protection of Investment Bill has generated some negative comment. The reality however is that this Bill will ensure that all investors domestic and foreign will be treated equally on the basis of the principle of non-discrimination and substantial protection of investor rights, based on the Constitution.
These are factors recognised by leading investors and as an example this year we welcome Samsung Electronics who will establish a manufacturing hub for Africa at the newly designated IDZ Dube Trade-Port for the production of televisions and monitors as part of phase 1 of their investment. Notably, Samsung is amongst the largest 3 companies in the world.
Honourable Members it is worth repeating that South Africa’s economic development success is inextricably linked to that of the African continent. As Africa takes centre stage as the next growth frontier, the dti will continue to play a prominent role in advancing developmental integration in Africa. South Africa will continue to champion broader regional integration through SACU, SADC and the envisaged Tripartite Free Trade Area (T-FTA) that spans Eastern and Southern Africa.
We have taken the view that the priority for Africa’s regional integration programme at this point should be to broaden integration at FTA level across existing regional economic communities within a developmental paradigm that gives priority to infrastructure development and cooperation to promote industrialisation. We believe that such a programme will enable us to diversify our export base, promote greater intra-African trade and investment, and support regional industrialisation. The conclusion of the T-FTA is critical for Africa’s integration and development as well as providing the basis for the envisaged Continental (C-FTA).
The Department will also work with other SADC member states to ensure full implementation of the SADC Trade Protocol. The National Regulator for Compulsory Specifications (NRCS) will continue to participate in the SADC structures to encourage and fast track harmonisation of technical regulations to allow for easy access of South African goods and easy regulation of products destined for Southern African markets. The NRCS will promote sustainable local manufacturing industry by locking out non-compliant imported products, increased visibility at the Ports of Entry, greater cohesion and cooperation with SARS, border police, and other government departments and agencies.
We are confident that these measures will have an impact. As a matter of fact, since we started stepping up our efforts, close to R500 million worth of non-compliant goods have been destroyed.
Speaker, in 2013, South Africa hosted the 5th BRICS summit under the theme: “BRICS and Africa: Partnership for Development, Integration and Industrialisation.” We have just returned from the 6th BRICS Summit in Fortaleza, Brazil where we reported on the work undertaken our term of leadership of BRICS. The BRICS Trade Ministers approved a new BRICS Trade and Investment Cooperation Framework to place the work programme on trade and investment cooperation in a longer-term strategic perspective. This included the adoption of a work programme that will aim to promote more value-added exports among the BRICS Members.
South Africa will also ensure that it continues to deepen economic development, trade, and investment partnerships with the BRICS through the work of the BRICS Contact Group for Economic and Trade Issues.
Let me also acknowledge the important work undertaken by the BRICS Business Council, through the former inaugural chair, Mr. Patrice Motsepe. The Heads of State of BRICS accepted the Business Council’s report which identifies a number of opportunities for cooperation among the BRICS business communities.
Government is committed to creating an enabling environment that will facilitate investment, job creation and growth. Appropriately calibrated and enforced regulations provide business with certainty and a stable business environment. Regulations are also essential to reducing the harmful effects of illicit trade in many forms that is not only harmful to workers and consumers but also constitutes unfair competition to South African companies that are law abiding.
The dti is part of the Presidential Business/Government Working Group on Regulations, and will continue to advocate through this structure the need to improve the speed with which Government administers regulations and the reduction of unnecessary and bureaucratic requirements which do not add value.
For this financial year, the following legislative changes are planned:
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Companies Amendment Bill: One of the key interventions in the Companies Act is the business rescue provisions which reduced the figures relating to liquidations when introduced in 2011. The assessment of the practical application of the Companies Act by the Specialist Committee on Company Law, headed by Dr Michael Katz, highlighted the need to amend certain provisions in the regard for more certainty. Minor amendments will be proposed to Parliament to enhance the effectiveness of the Act.
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Gambling Amendment Bill: Following the recommendations of the Gambling Review Commission and the deliberations by Parliament, we will propose amendments to the Gambling Act to address the proliferation of gambling that has arisen due to piece meal treatment of new gambling activities, including online gambling, improve measures to curb addiction and to eradicate illegal gambling; and to improve the mandate and structure of the regulatory bodies. The Bill will also look at setting norms and standards to promote a sustainable and responsible gambling industry.
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Copyright Act: The existing intellectual property (IP) law regime requires a shift in order to take into account the trends and developments in the copyrights environment and address key challenges that have been raised by artists. The Copyright Review Commission which was headed by Judge Ian Farlam made important recommendations, which will improve access to education, regulate collecting societies effectively, and facilitate fair and speedy payment of royalties to rightful owners. We will propose amendments to the Copyright Act to bring an end to the plight of artists who continue to die as paupers. In this Bill, we will also propose measures to regulate fair use, and fair contract terms, given the challenges with contract negotiations within this industry.
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Liquor Act: The scourge of alcohol abuse, with WHO statistics showing South Africa as one of the highest in alcohol consumption, necessitates a review of liquor trade and regulation throughout the value chain. We will propose improvements which will include a review of trading hours, age restrictions and issues of location. Amendments will also include improvement of the institutional framework for better enforcement and compliance, as well as alternative measures to curb liquor abuse and eradicate illegal trading.
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Business Act: the dti seeks to ensure that all businesses, especially small and emerging ones, receive appropriate government support to enhance their growth, profitability and efficiencies. This requires that appropriate governance rules are adhered to by businesses at minimal costs, and that they conduct legal and legitimate operations. We will introduce propose amendments to the Business Act to set norms and standards and provide for a simplified registration processes. This will assist government to provide support to businesses, including informal ones, to stimulate sustainable inclusive growth and combat illegal business operations. Extensive consultation has taken place in this regard and a revised Bill will be published.
In order to ensure that legislation is in line with globally competitive practices and does not impose unnecessary barriers or raise costs of doing business, we will subject each proposal made to Parliament to a regulatory impact assessment (RIA). This process includes a cost benefit analysis which assists us in choosing the appropriate legislative tools to employ.
We will publish the regulations for the Lotteries Amendment Act, and introduce full time distributing agencies to improve disbursement of funds.
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The National Credit Amendment Act will see introduction of affordability assessment regulations.
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With regards to the Intellectual Property Laws Amendment for protection of indigenous knowledge, we will publish regulations and establish the trust fund, as well as the Council which will comprise of experts in indigenous knowledge. We continue to monitor other laws that are being implemented to assess if the objectives are being achieved.
Finally, a special word to all staff of the dti, whose efforts have contributed to the success of the department. I do not believe that we could have made these advances without the support of the people in the dti and its family of institutions. As I said at the end of the last term and I think it is worth repeating at the beginning of this term: I am proud that what we have achieved, we have achieved with a staff that has a much more diverse profile than the dti of 1994. This new profile, so much more reflective of the demographics of South Africa is emerging as a strength that will lead us into the future.
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African Women Business Linkages Forum
“Building Linkages to Break Barriers”
11th to 15th August 2014
Nairobi, Kenya
The Bureau of the Chairperson of the African Union Commission in partnership with the UNDP Regional Service Centre for Africa has designed a new regional Programme focusing on “Building an Enabling Environment for Women’s Economic Empowerment and Political Participation in Africa.”
The programme seeks to respond to Africa’s development priorities and challenges in line with the African Union Women’s Decade (2010-2020) and UNDP Strategic Plan and Gender Equality Strategy. The African Union’s Agenda for the African Women’s Decade (2010-2020) is based on ten priority themes and the first and main theme focuses on “Fighting Poverty and Promoting Economic Empowerment of Women and Entrepreneurship.”
This Initiative by the African Union Commission Chairperson seeks not only to enhance leadership participation of women in public and private institutions both at national and regional levels as one of the major outputs, but also to train women on needed skills and resources to compete in markets, as well as fair and equal access to economic institutions. To have the power and agency to benefit from economic activities, women need to have the ability to make and act on decisions and control resources and profits. During the implementation of this project, it will be of central importance to address the underlying factors that contribute to women’s economic disempowerment. That is identifying resources needed to provide the building blocks for women to draw from, to succeed economically or exercise their power and agency. These will include: human capital (e.g. education, skills, training); financial capital (e.g. loans, saving); social capital (e.g. networks, mentors) and physical capital (e.g. land, machinery).
It is in this regard that the Program in Partnership with the Department of Trade and Industry at the African Union is organizing an African Women Business Linkages Forum to further highlight and provide networking opportunities for African women in business. The theme of the Business Linkages Forum is “Building Linkages to Break Barriers.”
Background
Women in the business sector face many challenges. Female owned enterprises are less likely to register their businesses, and they perceive tax rates and customs as greater constraints to business growth compared to men. Discriminative practices in the inheritance and ownership of land and other properties pose fundamental constraints to women entrepreneurs, especially as they restrict their access to formal financing mechanism.
Access to finance is rated as the single-biggest constraint that is preventing women from growing their businesses. Even though, microfinance is a great poverty reduction tool, it offers only limited support for women who wish to grow their enterprises beyond the micro level. Women business owners who have grown the maximum from micro-finance institutions have great difficulties obtaining loans from commercial banks. Gender-based discriminatory barriers associated with, financial resources, and business-related services pose serious problems for women entrepreneurs. For instance, because women rarely have fixed assets, which are important for use as collateral in accessing financial services in the formal banking sector, their main recourse has been micro-credit institutions as well as private informal sources such as, money lenders and family members, most of which tend to be unsustainable and detrimental to their economic advancement. Such considerations point to the need for women to organize themselves in business and trade associations for collective action to circumvent or challenge the discriminatory barriers they currently face. At present, many entrepreneurs are isolated in micro-businesses and do not belong to the larger networks, such as chambers of commerce, which themselves tend to be male dominated and discriminatory.
Women entrepreneurs often have less experience than men dealing with complicated procedures, including financial arrangements, and little information about sources of help. Surveys of financial literacy find that women have less understanding and confidence in making financial decisions than do men (OECD, 2005a). Yet women are disadvantaged in accessing financial information and resources because they are less likely to be able to afford these services and are not linked to mainstream business networks. Women also have more problems obtaining business credit in all countries. This is despite evidence that women demonstrate high loan repayment rates as well as default rates significantly lower than those of men. Banks and financial institutions traditionally have little experience in lending to women and may have a bias against them as poor credit risks.
The female credit crunch is particularly severe in poorer countries due to the disadvantaged position of women and their lack of legal rights; most banks require that borrowers be wage earners or property owners who can provide acceptable collateral.This forum will be a timely opportunity for women to network, discover sources of funding, share experiences and build new partnerships to enhance their entrepreneurial capacities. These experiences will focus on addressing some of the challenges faced by women in business and providing a platform for peer learning from successful businesswomen that have overcome these challenges.
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How Tanzanians banked last year
Tanzanians transferred more cash more via their mobile phones than the entire banking system in 2013, with official data showing that mobile transactions reached almost Sh29 trillion – equivalent to 54 per cent of the country’s Gross Domestic Product.
Transactions through mobile phones totalled Sh28.852 trillion last year to consolidate the position of mobile transfer as an increasingly important player in the country’s financial system, Bank of Tanzania (BoT) figures show.
That was a 65 per cent growth from transactions worth Sh17.4 trillion conducted in 2012, according to the BoT’s Directorate of Banking Supervision Annual Report, 2013.
To put this into perspective, the value of mobile transactions in 2013 was equivalent to 54 per cent of the total market value of all goods and services produced in Tanzania last year’s GDP of Sh53 trillion.
The money, transacted via Vodacom’s M-Pesa, MIC Tanzania’s Tigo Pesa, as well as Airtel Money and EzyPesa for Airtel and Zantel, respectively, was 45.7 per cent more than the current national budget of Sh19.8 trillion.
The increase, according to the report, stems largely from a rise in the number of registered users of mobile payment services.
“The number of registered users of mobile payment services increased by 18.46 per cent from 26,871,176 recorded in 2012 to 31,830,289 in December 2013,” says the report.
The BoT figures show that mobile transfer is fast becoming the most widely used medium of cash transactions, overtaking traditional systems such as automated teller machines (ATMs) and points of sale (PoS).
Cash, transacted via PoS – a computerized network operated by a main computer and linked to several checkout terminals – reached Sh1.149 trillion in 2009.
It has, however, been dropping to reach Sh198 billion in 2012 before picking up to Sh347 billion in 2013. Similarly, some Sh9.642 trillion was transacted via ATMs in 2011 but the figures dropped to Sh7.637 billion in 2013.
To put these figures into a simple perspective, the total amount of cash transacted through mobile phone financial service in the country was four times what banking customers conducted via ATMs last year.
The new figures put Tanzania closer to Kenya, where mobile cash transactions reached $20 billion (about Sh33.3 trillion) last year, or 31 per cent of that country’s GDP in 2013.
In Uganda, some 14 million people transacted a total of Ush18.6 trillion (about Sh11.7 trillion) through trading, sending and receiving money in 2013.
According to BoT governor Benno Ndulu, plans are now underway to expand the use of mobile phone money platform so it can cover other mainstream banking services.
So far, he says in his message published in the report, the mobile financial services operated by banking institutions and mobile network operators have enabled 90 per cent of the adult population in Tanzania to have access to mobile money accounts with 43 per cent (9.8 million) adults being active users.
“However, most of these are still unbanked.
Although mobile financial service has its limitations as it is still widely used for payment based services only, initiatives are being deployed to expand its use as a platform to deliver other financial products from mainstream banking services,” Prof Ndulu says.
Analysts say the integration of mobile phone money transactions into the country’s financial system is something worth celebrating for it means less headache for both financial institutions and their clients.
“This is something we must be proud of….it simply means that gone are the days when someone who lives in Kigoma was required to wait for 21 days before his/her cheque – deposited in Dar es Salaam – matures,” said financial analyst Lawrence Mafuru.
To commercial banks, he said, the integration with mobile phone platforms gives them a chance to make more profits while serving a ballooned population.
According to Mr Mafuru – who currently works in the President’s Delivery Bureau under the Big Results Now (BRN) initiative as the Director of Resource Mobilisation and Economic Sectors Division – the integration means commercial banks now do not need to save on operation costs.
“Basically, it takes between $400,000 and $500,000 to open one branch….you also need to maintain it including paying members of staff, electricity, water and other costs….in short, you need at least four years to recoup that money but with mobile phones, you can easily transact even without all these costs,” he told The Citizen over the phone yesterday.
He played down assumptions that the dominance of the mobile phone money transfer platform will lead to an extinct of traditional means, saying it all depends on the type of transaction to be made.
“If for example you want to buy a book, you will need internet banking to pay Amazon. This way, all platforms will continue to be there depending on new innovations,” he said.
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Money payment system registers success in EAC
Eight months after its launch, the East African Payments System (EAPS) has registered modest success, lowering the cost of money transfer and elevating the East African Community to the league of competitive regions to send cash across borders.
The EAPS enables traders to either make or receive cross-border payments seamlessly in real time and in their respective local currency.
The platform, launched in November 2013, is supported by Real Time Gross Settlement systems (RTGS) operated by Bank of Uganda (BoU), Central Bank of Kenya (CBK) and Bank of Tanzania (BoT) and was launched in November 2013. The EAPS was intended to slash costs and time spent on execution of money transfers within the region’s banking sector and in turn, boost trade and financial flows considered critical for economic growth.
Chief economist for BoT, Alli Liyau said that under the system they charge a flat rate of Tsh10,000 ($6.25) to transfer bulk funds within the three countries.
“This system offers more effective funds transfer operations because of shorter turnaround times compared with ordinary electronic funds transfers that rely on foreign processing locations. However, transactions registered on this platform are still relatively few and dominated by payments for goods and services procured in the region,” said Sam Ntulume, executive director at NIC Bank Uganda, a subsidiary of NIC Bank of Kenya.
A report by the Overseas Development Institute had shown that before the EAPS, it used to cost three times more to transfer money within the EAC than to send a similar amount from Europe into the region.
The report indicates that to send $200 from one country to another within the EAC used to cost up to $50; whereas sending the same amount from the UK into the region costs $15 while the global average cost is $8. Most of the cost of sending money is attributed to conversion of currencies.
The EAPS supports all currencies and has cross-border functionality, simplifying transactions and reducing the cash that is currently lost by senders in the form of commissions and other charges.
“Previously you needed to change Kenya shillings into dollars then send the money. The recipient on the other side received the dollars and changed it into local currency. These are the costs EAPS now circumvents,” said Prof Njuguna Ndung’u, Governor of the Central Bank of Kenya.
Service fees charged on the platform amount to around Ush10,000 ($3.8) per transaction executed between Uganda, Kenya and Tanzania compared with telegraphic transfers that cost between Ush15,000 ($5.7), and Ush20,000 ($7.6) per transaction.
Turnaround times for EAPS transactions are estimated at less than an hour while telegraphic transfers have a settlement time of two days, according to banking industry sources.
Preliminary data from BoU shows total transaction volumes recorded on the system between November 2013 and June 2014 stood at 1,200 while total transaction value grossed Ush474.4 billion ($181 million), with transactions in Kenya shillings accounting for more than 50 per cent of all transactions.
Forex transactions driven by infrastructure projects that commenced last year have dominated large transactions recorded on the platform, followed by welfare items like school fees and medical bills.
However, not all banks have embraced the system, with some favouring more established global channels like Society for Worldwide Interbank Financial Telecommunication (Swift).
“Big banks prefer Swift which covers many more countries and larger volumes of transactions in short intervals. For instance, we have recorded only two transactions on the EAPS platform since the beginning of this year in spite of its advantages,” noted a senior executive at Barclays Bank Uganda.
There are plans to incorporate Burundi into the system. Rwanda already joined last week. It is expected that once the two join the EAPS, the business community will save the costs incurred in cross-border payment for the EAC’s $5.5 billion intra-regional trade as of 2012.
A system similar to the EAPS, the Regional Payment and Settlement System, which started in October 2012 for instance, could have saved Comesa $600 million in costs of cross-border payment for its intra-regional trade of $17.4 billion in 2010 alone.
Additional reporting by Benard Busuulwa.
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Unleashing the potential of Ethiopia’s export industry
Addressing key obstacles in its export sector would help Ethiopia to tap into its significant export potential and further facilitate its economic transformation, according to a new World Bank Group report released today.
In its latest Ethiopia Economic Update, ‘Strengthening Export Performance through Improved Competitiveness,’ the World Bank Group identified bottlenecks and offers recommenda-tions on how Ethiopia can maximize its earnings from its existing, largely agriculture, export base.
The country also has many economic success stories it can learn from, according to Lars Christian Moller, lead economist and co-author of the update.
It helps flower exports to be located near a regional hub, Moller said, as all flowers are transported via Ethiopian Airlines.
“The growth of horticulture, which is a time-sensitive export product, is closely associated with the rise of Ethiopian Airlines,” he added. “The airline has become the country’s biggest export, earning nearly $2 billion per year.”
ADDING QUALITY TO COMMODITY EXPORTS
Over the past decade, Ethiopia has been one of the world’s fastest growing economies. While positive external conditions and increased exports contributed to this growth, the country also successfully leveraged agriculture exports to developed countries. To sustain growth, the report recommends Ethiopia build on its agricultural foundation by adding quality and value to its exports.
For example, Ethiopia is among the top producers and exporters of the best Arabica coffee in the world, but it is not taking advantage of the commodity’s full potential in the export market, according to the report. Ethiopia exports mainly raw, unprocessed green coffee beans for around $2 per kilo. However, a kilo of roasted Ethiopian coffee retails for as much as $40 per kilo in international markets.
OVERCOMING UNDERLYING VULNERABILITY
While upward price trends helped boost Ethiopia’s export growth between 2003 and 2012,the recent drop in prices of key commodities has led to the worst export performance since 2013. It has also exposed underlying vulnerabilities in Ethiopia’s export structure and highlighted the importance of strengthening competitiveness.
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More than ‘what’ is being exported, it is the ‘how’ that is hindering potential, the update notes. As such, the update outlines seven areas of policy focus that could help unleash Ethiopia’s export potential:
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Coffee: If Ethiopia exported more wet-processed green beans instead of sundried, it could earn a significant mark-up. Roasting coffee would also considerably increase its value.
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Cut Flowers: Using higher quality packaging dramatically increases prices. Further value could be added with better management of the freight and cold chain.
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Live Animals: Processed meat is more lucrative (while retaining hides and skins for the leather industry). However, more needs to be done to meet international standards.
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Branding quality products would better enable Ethiopia to earn premium income. Examples include coffee from Yirgachefe, Harar and Sidamo, or Humera sesame seeds.
In addition, the update recommends that the country address key constraints in its export business such as reliable access to electricity, credit and foreign exchange.
Improving trade logistics and trading times: It currently takes 44 days to import/export a container. Ethiopia can significantly improve trading times by extending operating hours and improving border cooperation; reducing the number of trading documents required and enhancing border management procedures including establishing a single window system.
Establishing Industrial Zones: Based on best practices such as those under the World Bank Group-supported Competitiveness and Job Creation Project, Industrial Zones would enable Ethiopia to attract more export oriented foreign direct investment.
Ease of doing business: Reducing start-up capital for enterprises may also have an immediate impact on facilitating greater firm entry into the formal sector.
Improving the competitive environment: Intensifying local competition and reducing market domination by individual companies could help improve the business environment.
A more competitive real exchange rate: Since Ethiopia’s exports compete mainly on price rather than quality, having a more competitive real exchange rate could lead to substantial increases in exports. To prevent higher inflation associated with a weaker currency, any adjustment to the exchange rate needs to be complemented by other macro-policy adjustments.
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Zim to host SADC Sugar Producers’ conference
The Zimbabwe Sugar Association is to host the Annual Conference of the Federation of SADC Sugar Producers on July 23 2014 in Victoria Falls.
This is the first time that Zimbabwe hosts this meeting. The conference will be held back to back with the SADC Technical Committee on Sugar meetings on July 24 and July 25.
The theme of this year’s conference is “Developing the SADC Sugar Industries through empowerment programmes and sustainable private farming.”
The programme for the conference includes regional speakers in the sugar industry. The FSSP was launched in November 2000 and includes sugar associations and other bodies representing the sugar industry in each of the SADC member states.
The objectives of the Federation are to promote the common interests of the sugar industries within SADC in close cooperation with the Technical Committee on Sugar.
It was established in accordance with the Sugar Cooperation Agreement (Annex VII of the SADC Protocol on Trade) and also to provide a forum for discussion and to foster specific programmes of common interest among members.
The FSSP conference is an annual event organised in turn by each of the SADC sugar producing countries and offers an interesting platform for members and other stakeholders to engage proactively through dialogue on important issues for the development and consolidation of the SADC sugar industries thereby increasing their preparedness to meet future challenges.
This year’s conference will be officiated by the Minister of Industry and Commerce Michael Bimha.
In a statement, the Chairman of Zimbabwe Sugar Association, Mr Muchadeyi Masunda said, “currently SADC countries produce approximately 5 million tonnes of sugar per annum.
This is about 3 percent of the world’s total production. SADC Sugar Industries export 2 million tonnes equivalent of 40 percent of total production in SADC.
Many SADC Industries have potential to increase production.”
Mr Masunda said this would be the first time that Zimbabwe hosts this conference and debate would certainly identify solutions to challenges such as the recent threat to SADC industries of dumping of cheap imported sugar onto local markets.
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Southern African region and the EU complete negotiations for an Economic Partnership Agreement
In a move welcomed by European Commissioner for Trade, Karel De Gucht, and by European Commissioner for Agriculture, Dacian Cioloş, the chief negotiators of the European Union and the Southern African Development Community (SADC) EPA Group (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland) concluded last week negotiations for an Economic Partnership Agreement (EPA).
The agreement takes into account the differences in the level of development between the EU and its African partners. It will open a long-term perspective of duty- and, quota-free access to the EU market for products from Botswana, Lesotho, Mozambique, Namibia and Swaziland, while South Africa will trade with the EU on the basis of improved conditions that build on the existing EU-South Africa Trade, Development and Cooperation Agreement (TDCA). The EU, in turn, will gain improved access to the SADC EPA market, particularly in the field of agriculture. Also, when SADC EPA countries will be ready to grant more far-reaching concessions to the Europe’s main competitors, the EU will be able to claim those same improvements.
“I warmly welcome this achievement,” said President José Manuel Barroso, “the second Economic Partnership Agreement to be initialled with an African region this month. This is a clear demonstration of the EU’s commitment to use trade agreements with its friends in Africa as an instrument for development, jobs and growth in the long-term. I am convinced that the Economic Partnership Agreement with the EU will be an important driver for further trade diversification and regional integration in Southern Africa.”
“The EU has been strongly committed to ensure that the countries of the SADC EPA group can continue to enjoy free, or in the case of South Africa, preferential access to the EU market, within a stable framework”, said EU Commissioner for Trade Karel De Gucht. “While enhancing the development prospects of the region, we are laying the foundation for an economic partnership that is lasting and mutually beneficial. It will be very important to consolidate this achievement by signing and ratifying the EPA as swiftly as possible, and no later than October 2016.”
European Commission for Agriculture and Rural Development, Dacian Cioloş said: “This agreement secures mutually beneficial preferential economic relations between the European Union and the South African Development Community. The elimination of all EU agricultural export refunds as part of this agreement demonstrates Europe’s clear commitment to full coherence between our agricultural and development policies. I also welcome our agreement on Geographical Indications as these are a key tool to protect the know-how of farmers and develop added value in quality agricultural products”.
The members of the SADC EPA group will continue being able to shield sensitive sectors from European competitors in their domestic market. In addition, they can invoke a number of safeguards incorporated in the agreement. This will offer them all the necessary flexibility, so that trade can work for and not against development. Following the same logic, the EU has also taken a commitment to refrain from subsidising its agricultural exports to the region.
In their mutual interest, the EU and South Africa have also reached an agreement to protect a short list of 251 EU geographical indications (GIs) in South Africa and 105 South Africa GIs in the EU. Each side’s GIs will benefit from high-level protection while allowing coexistence for already registered trademarks. The EU is also committed to cooperate in the development of geographical indications with the other partners in the EPA.
The finalised text of agreement, confirmed already by the chief negotiators, is now going to be presented for signature and ratification according to the domestic procedures of each partner.
Background
The SADC EPA Group consists of 6 out of 15 members of the Southern African Development Community (Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa) plus Angola, which may join the agreement in future. The other eight SADC Member States (Democratic Republic of Congo, Madagascar, Malawi, Mauritius, Seychelles, Tanzania, Zambia and Zimbabwe) are negotiating in other regional EPA configurations.
Botswana, Lesotho, Namibia, Swaziland and Mozambique today enjoy duty-free quota-free access to the EU on a temporary basis provided for in the EU’s “Market Access Regulation”. This free access was set to expire on 1 October 2014 because these countries have not ratified the interim agreement they negotiated with the EU in 2007. However, the regional agreement now concluded will replace the existing interim agreement and free access to the EU is based on this new agreement. It will be important to proceed swiftly to signature and ratification to allow the EPA to be provisionally applied as soon as possible.
The EU is the largest trading partner of the SADC EPA group. In 2013 the value of total EU imports was about €31 billion (9.3% agriculture; 1.5% fish; and 89.3% industry). The EU imports mainly diamonds (mostly Botswana), precious stones and metals, fish (Namibia), sugar (Swaziland), as well as fruit and nuts. In 2013, total EU exports to the region represented €33 billion.
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Cosatu attends BRICS trade union forum
Trade union federation, Cosatu, has attended the third BRICS trade union forum, held on the sidelines of the BRICS Summit in Brazil. The delegation, led by General Secretary Zwelinzima Vavi, 2nd Deputy President Zingiswa Losi and ten affiliated union leaders, joined representatives of Brazil, Russia, India and China.
The forum was expected to adopt a comprehensive programme to take forward the Moscow and Durban Declarations. Vavi says the forum aims to unite the biggest trade unions to ensure economic growth in all the countries.
Vavi said, “It is holding a potential to effect the world balance forces in economic terms by ensuring that emerging economies in the world can counter the over increasing dominance of an economy by the developed nations by ensuring that there is development in the south. We of course take into consideration the workers situation in all these economies.”
Meanwhile, on Friday, the Chinese Consul General in Shanghai, China says it welcomes the decision to have the BRICS Development Bank located in Shanghai, though South Africa had high hopes of getting the bank situated locally.
Consul General of South Africa in Shanghai, Thabo Thage, says South Africa welcomes the decision and doesn’t see it as a loss for the country.
BRICS (Brazil, Russia, India, China, South Africa) announced this week that its New Developmental Bank, aimed at addressing developmental gaps and infrastructural gaps, will be located in Shanghai China and the Regional Centre of the Bank in Johannesburg, South Africa.
“We regard the location of the bank as one part of a bigger role includes the focus that BRICS leadership collective has so coherently, so clearly stated in terms of Africa as one of their focal point for development. So that for us is an important outcome and not just the location of the bank,” says Thage.
Thage was speaking to the SABC in China shortly after the announcement. “You will recall that one of the outcomes of this summit that is concluding now in Brazil is affording South Africa an opportunity to host in Johannesburg a regional bank whose focus is going to be in Africa.”
“So there is no loss at all because we consider ourselves as South Africans to be part of the BRICS collective,” continues Thage.
He South Africa continues to deepen and expand bilateral relations with China and it stand to benefit regardless of where the bank is located. “There’s no better moment than now… to see the birth of this historic moment- to see the birth of a development bank that is going to based here in Shanghai,” says Thage.
The bank is expected to have an “initial authorized capital of US$100 Billion with an initial subscribed capital of US$50 Billion “equally shared among funding members,” according to the statement released by BRICS.
“The arrangement will have a positive precautionary effect, help countries forestall short term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing bank governers,” notes BRICS.
Background
The Congress of South African Trade Unions is attending the 3rd BRICS Trade Union Forum which is held on the sidelines of the BRICS Summit on 15th and 16th July, in the Island of Fortaleza, Brazil.
Led by General Secretary Zwelinzima Vavi, 2nd Deputy President Zingiswa Losi and 10 affiliated union leaders and staff members, the delegation joins representatives from unions in Brazil, Russia, India, China and South Africa. Hosted by trade union federations, CUT, CGTB, CTB and UGT, the forum is expected to adopt a comprehensive programme to take forward the Moscow and Durban Declarations.
BRICS is an acronym for an association of Brazil, Russia, India, China and South Africa. It was originally known as BRIC, before South Africa became a member in 2010.
The first full-scale diplomatic meeting was held in Yekaterinburg, Russia on the 16th May, 2008 after an initial meeting of the Foreign Ministers of the four BRIC states in New York City, September 2006, which laid the basis of an on-going coordination and holding of a series of high-level meetings.
In 2013, it is estimated that the five BRICS Countries represent almost 3 billion people with a combined nominal GDP of US$16.039 trillion and an estimated US$4 trillion in combined foreign reserves. Currently, the Chairperson of BRICS is South Africa, having hosted the fifth summit in 2013, eThekwini.
The following are the economic rankings of the individual BRICS countries;
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China – is the second biggest economy in the world
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India – is the fourth largest economy in terms of GDP at Purchasing Power Parity (PPP) and is the 10th largest economy in GDP in nominal terms
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Brazil – is the world’s sixth largest economy
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Russia – is the ninth biggest economy in the world
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South Africa – is the 26th largest economy in the world
The BRICS trade Union Forum was initiated by trade unions from the BRICS countries after several consultative meetings, including a meeting held on the sidelines of the ILO Conference in Geneva in 2012.
This was then followed by the first meeting of the Forum held in Moscow, Russia, in December 2013 where the Moscow Declaration was adopted.
It was followed by the 2nd BRICS Trade Union Forum which was held in Durban, South Africa in March, 2013 and adopted the 2nd BRICS Trade Union Forum Declaration, entitled, Towards a Progressive BRICS Trade Union Forum.
The 3rd leg of the BRICS Trade Union Forum, now called the BRICS Labour Forum is being held in Brazil in the island of Fortaleza (Portuguese for Fortress) on 14-17th July, 2014.
The biggest issues for COSATU in the BRICS Labour Forum are;
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The inclusion of Labour in the BRICS Official processes to ensure we advance workers interests and contribute in shaping the future BRICS political economy landscape favourably towards equitable, sustainable and just development
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To advance the interests of South African workers in the context of the broad working class struggle, particularly to ensure that BRICS take into regard the interests of African workers and the issues facing the continent as a whole for decent work, job creation, industrialisation and sustainable development
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To safeguard the interests of the South African economy, particularly as regards trade, industrial and manufacturing capacity and job creation issues are concerned
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To safeguard a general working class or progressive component in all institutions, structures and processes of BRICS to ensure that it doesn’t become an exclusive forum for the rich and powerful in the broader international sphere
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To ensure that BRICS plays a critical role in changing the unjust global political economy and world order towards serving the needs of humanity as a whole
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Laying the foundation and building blocks for better coordination and cooperation amongst trade unions in the BRICS community, for consistent and sustainable engagement on issues of common interest.
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To identify issues of immediate and practical interest to the BRICS Trade Union Community to pick up the momentum and create sustainable basis for on-going engagement.
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Africa well on its way to being an FDI hotspot
Africa has moved from third-last to become the second-most attractive investment destination in just four years from 2011 to this year, according to EY’s Africa Attractiveness Survey for 2014.
The continent’s share of global foreign direct investment (FDI) projects has reached a record high of 5.7 percent and the total value of FDI projects in Africa increased by 12.9 percent last year. The focus has been on sub-Saharan Africa, which now claims 83 percent of all FDI coming into the continent.
South Africa attracts the lion’s share of FDI, accounting for 24 percent of all FDI projects in Africa between 2007 and last year. Nigeria, Angola and Kenya were next best, attracting 9 percent, 8 percent and 7 percent, respectively.
The study shows that investors are moving away from the traditional extractive industries, such as oil and gas, and towards consumer-facing industries.
The industries that showed the highest growth in attracting FDI for last year were technology, media and telecoms; retail and consumer products; financial services; and business services.
The impact of this trend is more than simply a shift in investor attention. FDI in extractive-based industries, including mining, has traditionally created a situation where foreign companies invest money into African economies in order to build the infrastructure necessary to extract primary resources and export them in their raw form.
The best outcome is that jobs are created, adequate taxes are charged and appropriately distributed throughout the economy, and the new infrastructure has spin-off benefits for other industries.
The best-case scenario is rarely seen but even where it is, the lack of value added from such a process gives the host nation poor returns on the investment money coming into the country.
Adding value
In consumer-facing industries such as retail and banking, the foreign investor needs to add value to its investment within the host nation before it is able to take profits out. In the case of FDI into consumer-facing industries, foreign investors are attracted to Africa’s growing consumer base rather than its resources.
The impact of such investment is more positive for Africa as the bulk of the investor’s money remains within and is circulated around the host nation’s economy. The value chain is extended, resulting in greater consumer choice, increased skills development, and higher opportunity for subsidiary services to be provided by local or foreign firms.
The study also shows that there has been a significant increase in intra-African FDI, primarily driven by South African, Kenyan and Nigerian multinational corporations expanding into other African economies.
The compound annual growth rate of intra-African FDI projects between 2007 and 2013 was 31.5 percent – almost double the rate of the next highest FDI source, the Asia-Pacific region at 16.6 percent.
The two trends are very much related. African companies have better knowledge of African markets, more resources deployed locally, and more years of experience operating in African economies.
They are better able to mitigate risk than investors from outside of Africa and generally perceive there to be less political and economic risk in Africa than non-African investors do.
They are more willing to expand into non-traditional and non-extractive industries where local economic conditions will have a significant impact on the returns on investment.
In extractive industries where resources are exported in their raw form, local economic growth has little impact on the foreign investor’s returns.
The infrastructure, value chains and regional integration developed by intra-African FDI will lay the groundwork for the rest of the world to see the potential in African growth.
As investment hubs are expanded in Lagos and Nairobi, smaller, more marginalised African economies will be brought into the continental economy and trade within Africa will increase significantly.
Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision Making course.
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Azevêdo launches new WTO Facility to deliver support to LDCs and developing countries
International organizations pledge their support for implementing Trade Facilitation Agreement
A new initiative unveiled at the WTO on 22 July 2014 will help developing countries and least-developed countries reap the benefits of the WTO’s new Trade Facilitation Agreement, which was agreed at the Bali Ministerial Conference in December 2013.
The Trade Facilitation Agreement broke new ground for developing and least-developed countries in the way it will be implemented. For the first time in WTO history, the requirement to implement the Agreement was directly linked to the capacity of the country to do so. In addition, the Agreement stated that assistance and support should be provided to help them achieve that capacity.
The aim of this new initiative, entitled the WTO Trade Facilitation Agreement Facility (TFAF), is to help ensure that this assistance is provided to all those that require it.
WTO Director-General Roberto Azevêdo joined the coordinators of the African, LDC and African, Caribbean and Pacific Groups to announce the creation of the TFAF at the WTO’s headquarters in Geneva.
Director-General Roberto Azevêdo said:
“I am delighted to launch the WTO Trade Facilitation Agreement Facility. With this new Facility, developing and least-developed countries can be sure that they will receive the support they need to make the reforms enshrined in the Trade Facilitation Agreement and share in the substantial economic gains that it will deliver. I am encouraged by the way this initiative has been received, including by donors, some of whom have already indicated their support or will soon be in a position to do so.
“This is an important day at the WTO. With this initiative we are sending the message again that development is at the heart of our work. It is important now that Members implement the Trade Facilitation Agreement so that developing countries can receive this technical assistance and so that we can move ahead with the other elements of the Bali package and negotiations on the Doha Development Agenda.”
The new Facility will complement existing efforts by regional and multilateral agencies, bilateral donors, and other stakeholders to provide Trade Facilitation-related technical assistance and capacity-building support. It will act as a focal point for implementation efforts. It will become operational when the protocol to insert the Trade Facilitation Agreement into the existing regulatory framework is adopted by WTO Members. The functions of the Facility will include:
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supporting LDCs and developing countries to assess their specific needs and identify possible development partners to help them meet those needs
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ensuring the best possible conditions for the flow of information between donors and recipients through the creation of an information sharing platform for demand and supply of Trade Facilitation-related technical assistance
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disseminating best practice in implementation of Trade Facilitation measures
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providing support to find sources of implementation assistance, including formally requesting the Director-General to act as a facilitator in securing funds for specific project implementation
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providing grants for the preparation of projects in circumstances where a Member has identified a potential donor but has been unable to develop a project for that donor’s consideration, and is unable to find funding from other sources to support the preparation of a project proposal
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providing project implementation grants related to the implementation of Trade Facilitation Agreement provisions in circumstances where attempts to attract funding from other sources have failed. These grants will be limited to “soft infrastructure” projects, such as modernization of customs laws through consulting services, in-country workshops, or training of officials.
Separately, a group of major international organizations came together on 22 July to recognize the development potential of the Trade Facilitation Agreement and to offer their assistance to WTO members in implementing their commitments under the Agreement.
In a joint statement the organizations declared their intention to work together to assist developing and least-developed Members through a range of technical assistance and capacity-building initiatives.
The organizations declared:
“(T)his coordinated and integrated approach will greatly assist developing, transition and least-developed countries to reap real and sustainable benefits from the Agreement and will result in stronger economic development for their citizens.”
The statement is signed by the following organizations:
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International Trade Centre
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Organization for Economic Cooperation and Development
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United Nations Conference on Trade and Development
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United Nations Economic Commission for Europe on behalf of the UN Regional Commissions for Latin America and the Caribbean (ECLAC), Asia and the Pacific (ESCAP), and Western Asia (ESCWA)
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World Bank Group
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World Customs Organization
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Be open in natural gas income, advises IMF
Tanzania will start benefiting from potential natural gas revenues in the next few years but the International Monetary Fund (IMF) wants the country to spend the money transparently.
The international lender reiterated – in a statement to announce a new three-year Policy Support Instrument (PSI) for Tanzania yesterday – its position to see the country creating a framework to manage its natural resource worth.
“Tanzania stands to benefit from potential revenues from offshore extraction of natural gas, likely to start in the early 2020s. The IMF Executive Board stressed the need for a comprehensive framework to manage natural resource wealth. Such a framework should ensure full integration of resource revenues in the budget, and institutionalise the transparency and accountability of spending decisions,” reads a statement in the statement.
The PSI is IMF’s programme offered to low-income countries that do not want – or need – the Fund’s financial assistance. It is a flexible tool that enables countries to secure IMF’s advice and support without a borrowing arrangement thereby helping countries to design effective economic programmes that deliver clear signals to donors, multilateral development banks, and markets of the Fund’s endorsement of the strength of a member’s policies. This comes at a time when latest figures put Tanzania’s natural gas finds at 51 trillion cubic feet. It also comes at a time when some quarters within the community are questioning the level at which Tanzania’s interests have been protected under the Production Sharing Agreements (PSAs) signed between the state-owned Tanzania Petroleum Development Corporation and some multinational firms.
In a January 2014 interview with The Citizen in Dar es Salaam, the deputy director for the IMF’s African Department, Dr Rodger Nord, said poorly managed, natural resources could be a curse rather than a blessing. Overall, the IMF said Tanzania is expected to sustain its recent positive macroeconomic performance over the medium term.
This, the IMF says, will lead to a gradual reduction relative to the country’s Gross Domestic Product (GDP) which is currently characterised by a large current account deficit.
The position outlook will however depend on authorities’ intention to undertake further reforms to improve the investment climate and diversify the economic base.
“The current budget appropriately targets a smaller deficit than in the previous fiscal year. Going forward, the authorities will need to continue the fiscal adjustment underway while opening up room for badly needed spending on infrastructure and social services,” reads the statement.
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Budget Vote speech by the Minister of International Relations and Cooperation, H.E. Ms Maite Nkoana-Mashabane
Our membership of BRICS is stronger than before! We were there at the Summit in Sanya, China, when the vision document of BRICS was crafted and adopted. We were in New Delhi, India, when the idea of a development bank was mooted. The decision to establish the Bank was taken in Durban. From Durban to the recent 6th BRICS Summit in Brazil, this idea has now been given life. In Brazil, our leaders reaffirmed our core vision to bring about a more democratic, multipolar world order. This is the world we want. This is the world we yearn for.
South Africa, as the previous Chair, successfully brought to fruition all the key outcomes adopted at the 5th BRICS Summit in Durban last year. As such, in Brazil, the Agreement establishing the New Development Bank and the Treaty for the creation of the BRICS Contingent Reserve Arrangement were signed. These agreements signal a historic and seminal moment since the creation of the Bretton Woods international financial architecture. The headquarters of the New Development Bank will be located in Shanghai, China and its Africa Regional Centre will be established in South Africa concurrently. Further significant initiatives in respect of strengthening intra-BRICS economic cooperation, included the signing of the Memorandum of Understanding on Cooperation among BRICS Export Credit and Guarantees Agencies that will improve the support environment for increasing trade opportunities among the BRICS countries. In BRICS, the member states are equal in access, shareholding, and representation in leadership positions.
Indeed, in his State of the Nation Address, President Jacob Zuma was unequivocal about what needs to be done to move South Africa forward in the next five years. In his own words, he said, and I quote: “As we enter the second phase of our transition from apartheid to a national democratic society, 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” (close quote).
What needs to be done in the next five years must find resonance with this undertaking.
South Africa’s foreign policy is driven by the vision to achieve an African continent that is prosperous, peaceful, democratic, united and assertive in defence of its interests in world affairs. Today, as we enter the third decade of our freedom, it is therefore appropriate that we focus on the foreign policy task and challenges that lie ahead of us in the next five years.
Our foreign policy has a crucial role to play in the interventions required to realize the intended goals of the second transition. The task ahead may be daunting but our experience of the last two decades has schooled us in how to master the balance between our domestic and international priorities, and between the values we cherish and the pursuit of our national interests abroad. We move forward into the next five years conscious that we have a solid National Development Plan that seeks to guide our actions, and set priorities for our international relations mandate.
Honourable Speaker,
The continent is currently engaged in extensive consultations on its vision for the next fifty years, known as Agenda 2063, under the theme “The Africa We Want”. This vision, which is expected to be adopted by the January 2015 Summit of the African Union, spells out the aspirations of African people across all sectors and the pledges of our leaders which are translated into a “Call to Action” comprised of a ten-year action plan that will contain flagship projects.
Each AU Member State, including South Africa, is expected to contribute to this vision through inclusive national consultations by October this year. When the vision is adopted, Member States will have to align their national policies with it through a process of domestication which, in our case, will entail harmonising Agenda 2063 with our National Development Plan. DIRCO has already begun our national consultations with different sectors. We will be approaching Parliament in due course with a proposal to consider holding a special debate on Agenda 2063. This vision has the potential to become a game-changer on the continent, and South Africa can help ensure that this happens.
Agenda 2063 will impact SADC, especially the pace and direction of the integration of our region. Our approach to the SADC region in the next five years will aim at consolidating bilateral relations with our neighbours, and strengthening SADC as an institution. In particular, we will:
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Strengthen regional integration in our SADC neighbourhood by discharging our responsibilities towards the full implementation of our Free Trade Area and concluding the current review of the SADC Regional Indicative Strategic Development Plan. The SADC-EAC-COMESA tripartite trade negotiations must reach finality as they are an important step towards the realization of the African Free Trade Area by 2017.
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Peace and political stability in our region will remain a priority. We are encouraged by the proactive and stabilizing effect that resulted from the deployment of the SADC Intervention Brigade in the Democratic Republic of Congo where the negative forces there are either on retreat or have been defeated. On behalf of the people and government of South Africa, let me take this opportunity to pay a special tribute to our soldiers who are involved in peace missions abroad. Their selfless sacrifice continues to inspire us. In this regard, we will operationalise the Tripartite Agreement between South Africa, Angola and the DRC in support of the Peace and Security Framework Agreement for the Great Lakes Region.
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We will galvanize political support for major infrastructure projects in our region, notably the Lesotho Highlands Water project Phase II, and the Grand INGA in the Democratic Republic of Congo.
For the rest of Africa, in the context of Agenda 2063, in the next five years DIRCO will:
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Continue to strengthen bilateral relations with African countries through structured bilateral engagements to advance South Africa’s interests throughout the continent;
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Intensify our work in supporting the African Union, including the AU institutions we host; namely, the NEPAD Secretariat, Pan-African Parliament and the African Peer Review Mechanism headquarters.
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Strengthen Economic Diplomacy to increase trade and investment opportunities for South Africa;
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Give dedicated attention to the North-South Corridor, and other NEPAD-driven Infrastructure Projects on the Continent championed by President Zuma;
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Ensure speedy provision of Humanitarian assistance where needed to alleviate human suffering on the continent;
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Implement the African Diaspora programme adopted at the AU Summit we hosted in 2012;
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Continue peace-building and conflict prevention efforts in conflict situations in support of multilateral institutions; and
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Re-invigorate our Post-Conflict and Reconstruction and Development strategy in African countries emerging from conflict.
It is indeed within our ongoing strategy to continue supporting Africa's peace efforts through mediation, troop contribution for peace keeping, and by providing material and financial assistance. The sterling work of Deputy President Cyril Ramaphosa in South Sudan, is one example.
The African Union Peace and Security Council has just celebrated its tenth anniversary, and we look back with pride at what it has achieved. South Africa has recently assumed its two-year membership of this organ which will be used to focus on the restoration of constitutional order in the Central African Republic, and stability in the DRC, Libya, Somalia and South Sudan.
The operationalization of the African Peace and Security Architecture remains a critical element in providing the African Union with the necessary capacity to respond to our challenges of peace and security. The establishment of the African Capacity for Immediate Response to Crises (ACIRC), championed by South Africa, is an interim mechanism to enable the African Union to respond to emerging security situations while the African Stand-By Force is being operationalised.
The increasing scourge of terrorism on our continent, especially in parts of East, West and North Africa, is a menace that must be fought and defeated.
Ladies and Gentlemen,
South-South Cooperation is important in South Africa’s foreign policy architecture. Our approach to South-South Cooperation in the next five years must be anchored on South-South fora like the BRICS, IBSA and FOCAC and multilateral bodies such as the NAM and the G77 plus China, as well as the network of bilateral relations we have established with countries of Asia and Middle East, and Latin America and the Caribbean. The key elements of this cooperation are the promotion of political and diplomatic relations, enhancing trade, investment and other economic relations, and collaboration on global issues for a better world.
Latin America and the Caribbean remain critically important in our quest to reconnect and reignite our relations with people of the regions. South Africa shares a long history of cordial relations with the Americas and the Caribbean.
South Africa will continue to utilise the strong political relationship with the countries of Asia and the Middle East, built on the long-standing relationships and solidarity, to further solidify relations and leverage economic, trade, investment and tourism opportunities in the region.
The restoration of lasting peace in the Middle East is in our interest. In this respect, President Zuma will be dispatching a team, led by our former Deputy Minister Mr. Aziz Pahad, to Israel and Palestine to convey our growing concern with the escalation of violence there, including the endless wanton killing of Palestinian civilians and the destruction of homes in Gaza. President Zuma will be inviting Palestinian President Mahomood Abbas for a Working Visit.
The Ocean Economy, or Blue Economy, is indeed the next frontier of global economic growth, especially in the Indian Ocean Rim Association (IORA) zone.
Building on the comprehensive strategic nature of our relations, the Joint Working Group on South Africa-China Cooperation, established in March 2013, will be an instrument to help further improve trade relations between the two countries. We will be hosting the 6th FOCAC Ministerial in 2015, which is China’s partnership forum with Africa.
Honourable Members,
Our partnership with the countries of the North is another pillar of our foreign policy that we will continue to expand in the next five years, through our relations with Europe, North America, and Japan.
We look forward to the US-Africa Leaders’ Summit, and our Strategic Ministerial Dialogue with the United States of America.
Over the next five years, we undertake to strengthen our existing political and economic relations with Europe, including with the strategic formations of the North such as the European Union. In this regard, we welcome the conclusion of the EPAS negotiations between our region and the EU.
Ladies and Gentlemen,
International solidarity will continue to inspire our approach to world affairs. As such, we support the struggle for the right to self-determination of the people of Palestine and the Western Sahara. The economic embargo on Cuba has to be lifted.
South Africa’s multilateral activities are inextricably linked to South Africa’s own domestic priorities and those of the African continent. In this regard, the following are the key priorities for the next five years:
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Reform of the structures of global governance, including the United Nations Security Council, will remain a key focus, including on how to ensure that the African Common Position, known as the Ezulwini Consensus, advances the reform of the UN. President Zuma has challenged the UN membership not to celebrate the 70th anniversary of the UN in 2015 without a reformed UN Security Council.
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Two critical negotiations will reach their conclusion in 2015; and these are the United Nations Framework Convention on Climate Change (UNFCCC) on the basis of the Durban Plan for Enhanced Action; and the Post-2015 Development Agenda. We will continue to call for the acceleration of efforts and resources to ensure the achievement of the Millennium Development Goals (MDGs) up to 2015 and beyond.
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On sustainable development, a key process emanating from Rio+20 was to recommend to the General Assembly a set of possible Sustainable Development Goals (SDGs). The process to develop these goals has just concluded in New York with South Africa’s robust participation.
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On the Post-2015 Development Agenda, which emanates from the MDGs, South Africa and the Republic of Ireland facilitated a High-Level Event of the United Nations General Assembly which managed to anchor the negotiations on the Post-2015 Development Agenda firmly within the United Nations intergovernmental process, where all nations will participate on an equal basis to craft the successor goals to the MDGs, and informed by Rio Principles, in particular the principle of Common But Differentiated Responsibilities.
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Continue to fight for the Durban Legacy that came out of the 2001 World Conference Against Racism that we hosted in Durban.
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In the G20, South Africa - also a Co-chair of the G20 Development Working Group (DWG) – will continue to address development bottlenecks and help developing countries achieve growth.
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South Africa will continue to insist that as much as work is being done on non-proliferation, the issue of disarmament also requires progress and movement in the context of the alienable right of states to the peaceful uses of the atom.
Mrs Navi Pillay will soon complete her tenure (after six years) as the United Nations High Commissioner for Human Rights. We pay her our solemn tribute and express our pride in the fact that after our transformation 20 years ago, our nationals are able to serve the international community with such distinction.
Honourable Members,
In the context of the second transition that President Zuma spoke about in his State of the Nation Address, our foreign policy work in the next five years must have four perspectives in mind.
Firstly, we must leverage the potential that foreign policy has to enable and support second transition interventions on the domestic front by creating a clearly defined relationship between our foreign policy, domestic priorities and, broadly, our national interests. Our bilateral relations with other countries, multilateral cooperation, and economic diplomacy are tools to be utilized in this regard.
Secondly, our country’s foreign policy cannot be static. It must constantly change and adapt with time so that it remains relevant to the ever changing global socio-economic and political environment. As reflected in the National Development Plan, we must therefore take a medium to long term view of where our foreign policy must be in the future if our country is to remain relevant in global affairs.
It cannot be business as usual if our foreign policy is to undergo its own second transition. This change must happen at three levels – in policy development, policy implementation, and cadreship development.
Our draft White Paper calls for a foreign policy based on the philosophy of Ubuntu. It was submitted to the 4th Parliament and we trust it will be finalised by Honourable Members.
The launch of the South African Council on International Relations (SACOIR), which will be our civil society sounding board on foreign policy, will be expedited.
The National Development Plan enjoins us to strengthen our policy research capacity. This will be done, building on our existing policy research unit (PRAU).
We must continue to reposition our Foreign Service for its alignment with the future we envisage for our foreign policy through capacity development and constant renewal of personnel. The Department’s Branch: Diplomatic Training, Research and Development (DTRD), that is responsible for training our diplomats, will be turned into a fully-fledged diplomatic academy in the next five years.
Our existing internship and cadet programme will be consolidated into a Johnny Mkhathini Ubuntu Diplomatic Corps to improve its outcomes and impact.
We will be tabling a Foreign Service Bill to create a single foreign service for the country in order to end the current fragmented Foreign Service system, leading to improved efficiency, cost-effectiveness and enhanced service delivery.
DIRCO has obtained the required legal authority for the establishment of the South African Development Partnership Agency (SADPA). We will be tabling to this house a Bill to repeal the African Renaissance Fund (ARF). The creation of SADPA will ensure more efficiency in the deployment and disbursement of South Africa’s development and humanitarian assistance.
Thirdly, as South Africa undergoes its second transition, Africa must also continue to rise. Africa’s renaissance will in years ahead be defined by Africa Agenda 2063. Africa must truly rise and consummate its 50-year transition from the days of colonialism.
Fourthly, on the global front, ahead of us lies a great challenge of making sure that South Africa cements its voice and actions among the progressive forces working for an equitable, democratic world order. The transformation of the international system is long overdue. The world needs its own second transition, both politically and economically.
Honourable Speaker,
Our comprehensive public diplomacy strategy has, over the years, ensured that our foreign policy is known across all sectors of our society. The establishment of government’s first online internet based radio station, Ubuntu Radio, by DIRCO has taken our public diplomacy to a higher level. In the next five years, we will work harder and utilize this platform as a source of Afro-centric foreign policy briefs. The public outreach that took us across many corners of our country during the previous administration will continue. It is important that our foreign policy is rooted among our people, enjoying the bipartisan support of all of us in Parliament.
In conclusion, Honourable Members, we hope that this 2014 budget proposal, which is aligned with the 5th Administration’s Medium Term Strategic Framework (MTEF), will receive your support and approval. Due to currency fluctuations, the Department will require an additional R1.6 billion over the MTEF period in order to maintain the current level of operation.
South Africa is at the crossroad en route to the second phase of our transition to a national democratic society. Africa’s Agenda 2063 is also a call to action for a continent on the rise. Our foreign policy must therefore move South Africa forward and make our vision of a better South Africa in a better Africa and a better world, a reality.
I thank you.
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Zambia plans five new railway lines to boost trade and cut costs
Zambia is planning to build five new railway lines to link its mining provinces to all regional trade corridors, in the landlocked nation’s latest drive to boost its inadequate infrastructure facilities, the Zambian presidency said on Wednesday.
The new lines, to be built by the state-owned Zambia Railways, are intended to provide reliable and cost-effective bulk transportation for the mining, agriculture, and energy sectors, the presidency said in a statement.
The railway projects, to be built over the next five years, are expected to help the copper-producing nation end over-reliance on the ailing Tazara railway line through Tanzania, which is the sole railway link to a seaport.
“The development of our railway transport sector will ensure that the country becomes the hub for regional business transactions and thereby accelerate economic development,” the presidency quoted President Michael Sata as saying.
In April, Zambia raised $1 billion from a sovereign bond to fund various infrastructure projects. In 2012, Zambia raised $750 million from its debut bond.
The new lines earmarked for development include a link which will connect the copper-mining town of Chingola to Angola, giving the country’s mining heartlands an alternative and shorter export route through ports that dot Angola’s coastline. The cost of the planned projects isn’t known.
In 2012, the Zambian government restored the management of its railway network to Zambia Railways. The company has since been implementing a $1.5 billion rehabilitation and expansion project on the 2,000 kilometer stretch of railway line.
Zambia has for decades relied on Tazara to export is copper and cobalt through the Tanzanian port city of Dar Es Salaam. But years of under-investment have left the Chinese-built railway line unreliable, forcing miners to opt for the costly road transport to ship minerals through South African ports.
In recent years, the 1,860-kilometer Tazara line has been hit by a spate of work stoppages due to sporadic workers’ strikes over unpaid wages.
Last week, Tanzania and Zambia, which jointly own the cash-strapped Tazara, announced that they would inject up to $80 million to bail it out. Zambia is Africa’s second largest copper producer after Congo. Last year, the country exported around 900,000 metric tons of copper.
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BRICS Trade and Investment Facilitation Plan
1. Introduction
1.1. Trade and investment are two priority areas of cooperation emphasized in the BRICS Trade and Investment Cooperation Framework. Trade Ministers endorsed this Framework and instructed the CGETI to implement the Framework and build on it in future.
1.2. To implement the Framework, BRICS' joint efforts on trade and investment facilitation will benefit our business communities, strengthen and enhance trade and investment linkages among BRICS members, help boost the economic development and create jobs. So far, a number of concrete actions have been carried out such as the joint research on intra-BRICS high-value exports, the BRICS Information Sharing & Exchanging Platform and a seminar on international investment agreements.
1.3. BRICS members are encouraged to implement, on a voluntary basis, all or some of the suggested actions in the menu.
2. Objective
2.1. Taking fully into account the economic diversities among BRICS members, especially the work done in trade and investment facilitation in respective economies, this Action Plan is to provide a menu of suggested actions for the BRICS members, with the aim of further advancing the work in the area of trade and investment facilitation.
3. Principles
3.1. Increasing transparency and awareness
3.2. Promoting simplification and efficiency
3.3. Ensuring consistency and predictability
3.4. Enhancing communication and consultation
3.5. Encouraging cooperation and harmonization
4. A Menu of suggested Actions
4.1. Transparency and Awareness
4.1.1. Policy transparency
- Enhancing transparency of trade and investment environment in line with domestic laws and regulations.4.1.2. Business information sharing
- Strengthening information exchange on business opportunities by taking full use of the BRICS Information Sharing & Exchange Platform.
4.2. Simplification and efficiency
4.2.1. Simplification of customs documents
4.2.2. Enhancing the efficiency of examination and approval procedures for foreign investment
4.2.3. Simplification of Commercial registration procedures.
4.3. Consistency and predictability
4.3.1. Implementing customs and other trade-related laws/regulations in a consistent and uniform manner across the economy and avoid any inappropriate exercise of discretion by customs and other trade-related administration officers.
4.3.2. Ensuring consistency and predictability of foreign investment policies and maintaining a sound foreign investment environment.
4.4. Communication and Consultation
4.4.1. Enhancing communication and dialogue among agencies of BRICS members in the areas of trade and investment.
4.4.2. Enhancing bilateral communication and dialogue between agencies responsible for trade remedies.
4.4.3. Enhancing communication and dialogue among BRICS in the area of investment.
4.5. Cooperation and harmonization
4.5.1. Enhancing cooperation and coordination in the areas of standardization, technical regulations and conformity assessment procedures.
4.5.2. Encouraging the use of international standards as a basis for national standards.
4.5.3. Encouraging cooperation in the promotion of technical and institutional capacity building.
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EU-US trade – latest round of talks on transatlantic trade pact ends in Brussels
EU and US officials today [18 July 2014] ended a sixth round of week-long negotiations in Brussels on the Transatlantic Trade and Investment Partnership (TTIP), a new trade and investment agreement.
Below is a statement made by the EU’s Chief TTIP Negotiator, Ignacio Garcia Bercero, at the end of the round.
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Good afternoon.
The fact that TTIP was one of the first political debates in the new Parliament illustrates the political importance attached to these negotiations.
The Commission welcomes the public debate on TTIP and we will continue engaging intensively in this public debate in every phase of the negotiations.
Coming back to this week’s negotiating round, we have had intense discussions in most of the areas we intend to cover in this agreement. The work this week has again been highly technical. This work is essential to prepare the ground for the political decisions that would need to be taken at a later stage of the negotiations.
Classic market access issues
To give you a brief overview of the nature of our discussions this week, let me first start with what we refer to as the classic market access issues. As you know this encompasses the areas of tariffs, services and public procurement. For these three areas the EU has high ambitions.
On services, for example, we have had detailed discussions this week on the basis of the offers that both sides have put on the table and that reflect the highest levels of commitments that we have both reached in existing agreements, in our case for example with Korea. The objective is therefore to build from that and identify additional elements in TTIP which would go beyond our respective bilateral, plurilateral or multilateral commitments.
As you know, for the EU, procurement is one of the most fundamental elements of these negotiations and both sides set as objective to substantially improve access to government procurement opportunities at all levels of government on the basis of national treatment.
On this basis, we have discussed during the week how to achieve ambition on all the items which need to be addressed in order to fulfill such objective including procurement by federal entities, the conditions attached to the use of federal funds for procurement by non-Federal entities, and the measures applied at the sub-federal level.
Regulatory agenda
As in previous rounds, a lot of the time has been devoted to the regulatory agenda. Again, this is considered to be the most economically significant part of TTIP and what makes TTIP different from the other trade agreements. That said, this is an area where a lot of the technical groundwork needs to be done with the full involvement of regulators.
This week we have again had thorough discussions, with the participation of regulators from both sides, on both the horizontal and sectoral elements of the regulatory agenda of TTIP.
For those issues that cut across sectors, we have continued to discuss how to ensure close regulatory cooperation between our respective regulators on different areas of regulations including standards and conformity assessment and, of course, on everything that has to do with sanitary and phytosanitary matters.
Much of the time this week has also been dedicated to discuss what can concretely be achieved on a number of specific sectors. There are nine sectors we are currently discussing, with an intense engagement of the relevant regulators from both sides. Pharmaceuticals, cars, chemicals or engineering are examples of those sectors.
While there is technical work still to be done in these areas, the EU expects that over the next few months a clear understanding in reached on what are the concrete objectives we want to achieve in TTIP and what are the steps that the regulators on both sides will need to take to fulfill these objectives within the time frame of the TTIP negotiations.
Before closing this overview of the work on the regulatory agenda of TTIP, let me underline three important considerations:
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There is an unequivocal and firm commitment to the main guiding principle in these negotiations: nothing will be done which could lower or endanger the protection of the environment, health, safety, consumers or any other public policy goals pursued by the EU and US regulators
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Enhanced regulatory cooperation is essential if the EU and the US wish to play a leading role in the development of international regulations and standards based on the highest levels of protection.
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TTIP should deliver concrete results in terms of enhanced regulatory compatibility in sectors.
Other negotiating areas
During this week we also held discussions in other negotiating areas such as sustainable development/labour and environment, energy, and SMEs. The nature of the discussions varies from area to area.
As regards, for instance, state-to-state dispute settlement, we have continued our work on the basis of a consolidated text and made progress in bringing our positions closer.
We are also finalising consolidated texts in areas such as SMEs or trade facilitation. For other areas, such as SPS for example, we expect to have textual proposals from each side before our next round.
I should also note that in certain areas, such as sustainable development for example, we are engaged in thorough discussions on the different elements that we want to address in these negotiations so as to ensure that when we move to textual proposals this reflect the high ambition we want to achieve in TTIP and respond to the legitimate expectations for such a 21st century agreement.
Engaging with stakeholders
As chief negotiators one of the highlights of this week was again the opportunity we had, together with our teams, to engage intensively with over 400 representatives of civil society, from consumers to environmental NGOs, from trade unions to public health representatives as well as with businesses. I would like to highlight not only the large number of presentations made but also the many interesting ideas that were put forward on how to ensure TTIP brings concrete benefits to our citizens and businesses. Let me highlight a couple of those interventions, which I believe us negotiators should further consider:
For example, I was particularly interested to hear from the European Social and Economic Committee that transparency vis-à-vis stakeholders is not only important during the negotiating process but that negotiators should also reflect on how to ensure that civil society is engaged in the monitoring of the implementation of TTIP once the agreement is up and running.
We also listened with great attention the presentations made by representatives from SMEs such as the UK Federation of Small Businesses, Chamber of Commerce of Rhône-Alpes or the Association of German Chambers of Commerce and Industry. These presentations illustrated how TTIP could bring concrete benefits to SMEs, not only through the specific SME chapter, but also how other chapters of TTIP could be of relevance. Some of the points highlighted include the following:
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Rules of origin should be trade facilitating
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Unnecessary duplication of requirements can prevent SMEs from doing business across the Atlantic. Examples mentioned include the complexity of customs procedures, duplication of inspections of manufacturing facilities, duplication of certification requirements, need to present similar data to different regulatory agencies etc
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Easy access to information on regulatory requirements and other conditions for export, through a web portal, is of crucial importance for SMEs
I note there were also interesting suggestions from other participants in all areas covered by these negotiations. Of course not all new ideas can be delivered, but all of them deserve our serious consideration. All in all, this confirms how important it is for our negotiators to continue our engagement with all stakeholders throughout the negotiating process. This is the only way we can ensure the final agreement responds to the high ambitions our leaders set for us last year and reflects the expectations of our citizens.
Let me conclude by highlighting again the strong political support that exists for TTIP, our commitment to engage in the essential public debate that is taking place, and how significant it is for us to make as much progress as possible in all the technical work that will be needed to ensure political decisions can be taken at the later phase of the negotiation.
Download the State of Play of TTIP Negotiations, published by the European Commission ahead of 6th round of talks, below.
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Africa is balking at a chance to let trade go viral
If only African borders were as porous to trade as they are to Ebola. The latest epidemic of the deadly virus is out of control. It spread from its origins in Guinea, killing at least 518 people there, in Sierra Leone and Liberia since February according to the World Health Organisation, which has warned other West African countries to prepare for its arrival.
Meanwhile, African governments seem to be doing much better at resisting trade than Ebola.
Representatives of African nations at the World Trade Organisation (WTO) proposed in April that the continent should not agree to the WTO’s recently negotiated Trade Facilitation Agreement (TFA) – which would considerably accelerate the movement of traded goods across national borders – until all other elements of the stalled 2001 Doha Development Agenda were implemented.
This decision has dismayed and annoyed the European Union (EU), the United States (US), some other Western countries, the WTO itself and even China, reportedly. A few US legislators have hinted that they might not renew the African Growth and Opportunity Act (AGOA), which is due to expire next year, unless the African countries drop this condition for the acceptance of the TFA.
The AGOA, of course, gives duty-free and non-reciprocal access to most African exports into the lucrative US market. Losing it would be yet another big blow to African trade, which is already pretty dismal – representing only 3% of total global imports and exports.
Orrin Hatch, the influential senior Republican in the Senate’s Finance Committee, wrote to South Africa’s US Ambassador Ebrahim Rasool in June, criticising the African group's proposal ‘to stop the agreement's entry into force until conclusion of the Doha round.’
The chairperson of the House Ways and Means committee – the Republican, Dave Camp – has also indicated that he is taking Africa’s conditional stance on the trade facilitation agreement into account as Congress considers the renewal of the AGOA, Inside US Trade reported.
South Africa itself is already facing the possibility of being ‘graduated’ from the AGOA, even if it is renewed – in part because some Congress members regard it as too wealthy to need non-reciprocal market access. Many are also annoyed by South Africa’s recent increase of import tariffs on imported US foodstuffs, which was severely complicating the renewal of AGOA – as Hatch also reported in his letter to Rasool.
Trade and Industry Minister Rob Davies recently suggested that South Africa was willing to increase US access to the South African market if that was what it took to stay in the AGOA. South Africa’s AGOA status has hugely boosted exports to the US, including many industrialised products, like automobiles.
The US has been reviewing the AGOA since last year. President Barack Obama is expected to unveil the administration’s proposals on how to reform the programme at the first US-Africa summit, which he will host for African leaders – including President Jacob Zuma – in Washington early next month.
There have been some hints that the Africans are succumbing to the pressure from the US, EU and others, and might be backing off their conditional stance on the TFA. This stance was evidently discussed at the African Union (AU) summit in Malabo, Equatorial Guinea, last month.
However, there was no reference to this in the published decisions of the summit, and it remains unclear exactly what happened – despite a statement approved by AU trade ministers at the summit, read by Lesotho’s WTO representative at a meeting on the TFA in Geneva earlier this month.
According to Inside US Trade, the statement said the TFA ‘should be implemented in line with the decision trade ministers took in Bali’ in December 2013, at the WTO ministerial conference. The Bali decision endorsed the creation of a WTO preparatory committee to ensure the ‘expeditious entry into force’ of the TFA and its efficient operation after that, as Inside US Trade noted.
But the journal also reported that the Lesotho WTO representative was equivocal about what the AU trade ministers had decided in Malabo, saying AU member states were still discussing the issue among themselves, and so did not want to disclose the content of the discussions.
Evidently there are disagreements between African capitals that mostly want to move ahead with the TFA; and their Geneva-based trade representatives, who would prefer to use the TFA implementation as a bargaining chip in exchange for agreement on the more explicitly development-related aspects of the Doha agreement.
If that is so, this would represent yet another example of the propensity of African governments to shoot themselves in the foot – to withhold something that is actually in Africa’s own best interests, even if others also want it, unless they get something else which they perceive to be in their own interest.
As WTO Director-General Roberto Azevêdo told AU member government representatives in Geneva this month, the TFA would considerably help the AU to actually implement its own ambitious plans for industrialisation and regional economic integration – including the proposed Tripartite Free Trade Area encompassing the Southern African Development Community, the Common Market for Eastern and Southern Africa and the Economic Commission for Africa – which so far largely remain at the rhetorical stage of development.
‘Costly and cumbersome border procedures, inadequate infrastructure and administrative burdens often raise trade-related transaction costs within Africa to unsustainable levels, creating a further barrier to intra-African trade,’ Azevêdo said. The TFA would help to address those bottlenecks. ‘It will support regional integration, and therefore complement the African Union's efforts to create a continental free trade area. And it will begin to remove some of the barriers that prevent full integration into global value chains.
‘As such, it will create an added impetus for industrialisation and inclusive sustainable development. ’Azevêdo also reminded the African governments that as a result of representations by themselves and other developing world countries, several advantageous elements had been included in the TFA. Among these are a unique clause that would enable developing countries to begin implementing it only when they felt they were ready to do so, and the establishment of a fund that would help them to do so.
Michael Spicer, former CEO of Business Leadership South Africa, was more explicit in a recent speech to the SA Institute of International Affairs. He noted that behind the ambitious plans for ever-larger free trade areas in Africa, ‘just too little attention is paid to the nuts and bolts of regional integration, common visas, open skies and trade facilitation’ (download the speech below).
Why this is so is something of a mystery. Is it because too many customs officials derive too much benefit from border red tape, that African governments seem reluctant to improve trade facilitation?
Or is the problem that the TFA actually demands that they do something themselves rather that others doing something? Or do they have an inherent zero-sum suspicion that if something like the TFA is good for the US, EU and others, it must necessarily be bad for Africa?
The TFA offers the chance for Africa to really start moving regional integration out of the echo chambers of the AU into the real world. It should grasp this rare opportunity with both hands.
Peter Fabricius, Foreign Editor, Independent Newspapers, South Africa
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Davies to fight citrus ban
South Africa near a European citrus imports ban.
Trade and Industry Minister Rob Davies on Monday vowed to fight tooth and nail to avert a possible European ban on citrus imports from South Africa.
This came after oranges contaminated with black spot fungus were found in a shipment to the Netherlands.
“If decisions are taken that keep us out of an important market and have implications for jobs, we will not hesitate to use whatever tools are available in our tool box to defend our interests in this regard,” Davies told a media briefing in Cape Town.
He said he suspected Europe’s stance was motivated more by protectionist tendencies than true concerns over the fungus spreading to continental orchards. The fungus is harmless to humans “even if you eat the peel”, said Davies.
“The question arises – is this a measure to protect plant health in Europe or is this a measure to protect the interests of certain parts of the European industry against competition, and is part of the competition coming from the largest exporter of citrus fruit into Europe?”
He said Europe’s reluctance to compromise on the issue of citrus black spot could prove devastating for the R8 billion local citrus industry, but this argument was finding little sympathy on the other side.
“The fact that there are 60 000 to 80 000 jobs at stake in South Africa, I find this to be the least compelling argument for my interlocuters in Europe.
“They don’t really care about that, it’s other issues. We care greatly about that and we will fight this thing.”
Davies was speaking at a briefing called to announce the initialling of an economic partnership agreement between a sub-group of Southern African Development Community members and the European Union after more than 10 years of stop-start negotiations.
On citrus, deputy director-general for international trade Xavier Carim said the off-season period for which South African growers had duty-free access to the European market had been extended by six weeks.
He termed this a “not insignificant” concession but added that increasingly foreign agricultural produce was kept out of Europe by stricter phyto-sanitary standards.
Davies said: “We will fight it because I’m going to have to be personally convinced, somebody is going to have to sit me down and personally convince me, that this is not driven by protectionist desires, and that this is all about plant health.
“I think there is a very strong presumption the other way.”
Dutch authorities for plant health issued a notification of phyto-sanitary non-compliance on Sunday after intercepting the consignment of local oranges carrying the virus.
The notification means that citrus imports from South Africa are placed on a trade watch list at EU borders.
If spotty fruit is found, the consignments are impounded.
In November last year, the EU stopped importing citrus from South Africa over concerns that citrus black spot could infect local crops.
But in May South Africa’s largest trading partner ruled that it would not implement a ban but follow stricter requirements for South African citrus being exported to Europe, which forced local growers to use more chemical fungicides.
The threat of a ban still hovered, Davies explained, because Europe had decided that if more than a certain amount of contaminated imports were found they would lock out all South African citrus.
“If they intercept a certain quantity of this, then they reserve the right to stop further. Why is this significant and why are we being targeted?
“We are the biggest importers of citrus into the EU, simple as that.”
Last year, South Africa was the world’s largest exporter of oranges, and about 70 percent of the citrus fruit sold in Eope came from South Africa.
Download the response from the Department of Agriculture, Forestry and Fisheries (DAFF) below
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Tanzania’s trade deficit widens 24 per cent
Tanzania’s current account deficit – meaning that the country’s economy is functioning on borrowed means – widened by 24 per cent in the year ending June 2014 as the country experienced an increase in imports of goods and services, Bank of Tanzania (BoT) has said.
According to its June Monthly Economic Review, the deficit increased from $3.983 billion at the end of May 2013 to $4.939 billion this May.
The value of imports of goods and services was $14.050 billion, an increase of 10.7 per cent compared to the amount recorded in the year ending May 2013.
With the exception of machinery goods and food and foodstuffs, all other items increased but much of it was registered in oil imports.
On the other hand, the value of exports increased by 4.4 per cent to $8.833 billion compared with the amount recorded in the previous year.
With the exception of travel and manufactured goods, all other major exports recorded declines.
Gold exports that used to be the leading foreign exchange earner declined from $1.975 billion to $1.745 billion in the same period.
Its position is now replaced by travel or tourism which climbed from $1.767 billion to $1.956 billion.
“The widening of the current account deficit was mainly on account of an increase in imports of goods and services, coupled with a decrease in current transfers,” says the central bank in the report.
Traditional exports which include cashews, coffee, cotton and tea also slowed from $852.4 million to $843.2 million as both their volumes and prices tumbled in the world market.
However, the overall balance of payments recorded a surplus of $197.4 million, lower than a surplus of $648.6 million recorded in the year ending May 2013.
Gross official reserves amounted to $4.486 billion as at end of May 2014, sufficient to cover 4.4 months of projected imports of goods and services excluding those financed by foreign direct investments.
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Ocean can contribute R177bn to GDP – Zuma
President Jacob Zuma on Saturday announced plans to explore parts of the ocean to find economic potential that could contribute to the country’s gross domestic product.
“Four priority sectors have been selected as new growth areas in the ocean economy, with the objective of growing them and deriving value for the country,” he said in Durban on Saturday at the launch of “Operation Pakisa”.
“These are marine transport and 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.”
Aquaculture is the farming of fish, crustaceans and aquatic plants. It involves cultivating freshwater and saltwater populations under controlled conditions.
Ocean economy
Zuma said the vast ocean space remained relatively unexplored.
“We chose the ocean economy with good reason. South Africa is uniquely bordered by the ocean on three sides - east, south and west.
“With the inclusion of Prince Edward and Marion Islands in the southern ocean, the coastline is approximately 3 924km long.”
Zuma said it would explore maritime transport and manufacturing to secure the benefits of the growing volumes of cargo handling, sea and coastal shipping and support transport activities such as storage and warehousing.
“In addition, South Africa can utilise its location and expertise to increase its share of the global marine manufacturing market, including ship-building and repair, rig repair and refurbishment or boat-building,” he said.
“Against this backdrop, the aspiration of this workstream is to grow the marine transport and manufacturing sector over the next five years, to increase the contribution to GDP and multiply the number of jobs in South Africa.” Zuma said offshore oil and gas exploration would deal with issues that government had previously tackled.
“The aspiration of this workstream is to further enhance the enabling environment for exploration of oil and gas wells, resulting in an increased number of exploration wells drilled, while simultaneously maximising the value captured for South Africa,” he said.
Aquaculture
Aquaculture, meanwhile, remained an underdeveloped sector.
“South Africa’s aquaculture sector has an increasingly important contribution to make globally in food security. Despite its relatively small size, aquaculture in South Africa has shown strong growth of 6.5% per annum.
“By generating jobs, especially in fish processing and marketing, employment in aquaculture can enhance the economic and social status of individuals in multiple coastal communities.”
Zuma said the objective of marine protection services and governance was to balance economic opportunities while maintaining environmental integrity.
“The aspiration of this workstream is to develop an incremental and integrated approach to planning, monitoring and execution of ocean governance and enforcement in the next few years,” he said.
Zuma said the ocean could contribute up to R177bn to the GDP.
Teams of experts had already begun preparing its ocean plan.
“Our teams began working here in Durban on 8 July and will continue working until 15 August 2014, preparing the action plan for unlocking the potential of the country’s oceans,” he said.
“We are pleased that over 180 delegates from national government departments, provincial departments, civil society, the private sector, labour and academia are participating in the oceans component of Operation Phakisa.”
Related News
COSATU calls on the Department of Trade and Industry to be firm on export taxes
The Congress of South African Trade Unions (COSATU) has noted that the Department of Trade and Industry is reported to have refused to include the prohibition of export taxes in the economic partnership agreement (EPA) between the European Union (EU) and Southern African countries.
COSATU has been consistent in calling for a change in the structure of the economy from a colonial based economy which serves the interests of Western countries to an economy which benefits SA’s working class and the poor. Export taxes are necessary in order to ensure that minerals are processed and jobs are created in SA. The EU’s position to force developing countries to give up this right is a colonial trick to force SA to forever be a raw material supplier to the EU and a guaranteed market for EU manufactured goods.
COSATU urges government not to conclude any trade agreement with the EU unless her right to use export taxes and other trade measures is safeguarded. The trade relations between the EU and SA would not be mutually beneficial as long as SA does not process the minerals mined locally into value-added goods and does not determine the price of the minerals.
COSATU calls on the Treasury to come to the party and to impose export taxes on all strategic minerals such as platinum, chrome and gold and to determine the correct prices for these minerals. The use of export taxes is allowed under international law and the disinclination of the Treasury to the use of export taxes is entrenching SA’s economy as supplier of raw materials.
Whilst the dti may win the negotiations in excluding export taxes from the EPA, the elephant in the room is the Treasury’s conservative stance that if the market is not willing to beneficiate it should not be forced to so by export taxes.
COSATU calls on government to be true to its promise that this is the second phase of radical transition and this should be reflected in policies that seek to change the structure of the economy by among others imposing these taxes with immediate effect and regulating prices of minerals.