Speaking notes by Hon Ebrahim Patel during the debate on the State of the Nation Address

20 February 2013


International consultancy firm, Ernst and Young’s latest, 2012 African investment Survey makes some interesting points:

One, the number of foreign direct investment projects in Africa grew 27% from 2010 to 2011, and have grown at a compound rate of close to 20% since 2007.

Two, despite this growth, there remain lingering negative perceptions of the continent – but only among those who are not yet doing business in Africa.

Three, the story of Africa’s progress, not just in economic but also in socio-political terms, needs to be told more confidently and consistently.

Four, this broad-based progress is underscored by a substantial shift in mindset and activities among Africans themselves, with increasing self-confidence and strong growth in intra-African investment, which expanded by 42% since 2007.

Five, regional integration is critical to accelerated and sustainable growth with the larger markets creating the critical mass to enhance the African investment proposition. They pointed to the example of the Free Trade Area talks launched by President Zuma in June 2011 in Joburg as the most positive development.

Six, bridging the infrastructure gap will be a key enabler of integration, growth and development. They pointed with approval to the South Africa investment programme launched by President Zuma in last year’s SONA.

The Survey addresses what is to be done. Top of their list is addressing the gap between perceptions and reality. Having noted the pessimism of many outsiders, it says:

"The facts tell a different story – one of reform, progress and growth. These trends are repositioning the continent and individual African countries as viable alternatives to other emerging market investment destinations that are often viewed in a far more favourable light. It is a positive story that demands telling and retelling. We have been subjected to negative stories about Africa for far too long."

Its updated Survey ranks South Africa first on the continent in attractiveness for business. This survey of more than 500 business leaders and investors in 38 countries was done in January 2013 – after Marikana and after the farmworkers strike.

I quote this Survey, honourable members, because it points to a challenge we have seen in this house yesterday from sections of the opposition – the gap between perception and reality. Listening to some members of the Opposition, we have not been able to get anything right. Pessimism and negativity dominated their speeches.

Yes, we have gone through a challenging year in 2012, marked by recessions in major export markets and a spate of industrial action. But we ended the year with 80 000 more jobs than when we started the year.

That means the economy has created 600 000 jobs since October two years ago.

That means there are 13,6 million South Africans working.

Governments govern, but not always in conditions of their choosing. Last year demand for key minerals declined sharply months before the mining strikes.

Sales of platinum which is our single largest export product, to Japan, which is our largest platinum market, fell by 40% in the period before the strike, as the Japanese car industry slumped. By year end, total platinum sales were down by 18,5%. This impacted on jobs, on growth and on investment.

It is precisely to address these cyclical challenges that government fast-tracked infrastructure investment. What the President indicated in SONA was how we were moving from plan to action. We saw examples of a nation that is working, that is building, that is laying the foundation for sustainable growth.

The President reported on the 675kms of electricity transmission lines that were laid last year. It is the largest level in more than 20 years.

The President referred to the Majuba rail line where we will be turning the sod within weeks – it is the first large new rail line laid by the state since 1986.

The President spoke of the De Hoop Dam. Taken together with the Mooi Mgeni Dam, we have created a new water yield of 126 million cubic meters – significantly more than the water consumption of the city of Mangaung and Msunduzi (Pietermaritzburg) combined.

The infrastructure programme provides jobs to more than 150 000 people across the country, direct jobs, with 43 500 of these jobs in energy-related projects.

The Infrastructure Programme that the President spoke about is driving a wave of new industrialisation.

EXAMPLE: in six cities we are connecting bus, train and taxi transport to provide urban workers with a cheaper and quicker means of travel. Until a few years ago, we imported the buses used from Brazil. Last year, we introduced new tender conditions that require local manufacturing.

Joburg and Cape Town have put these as conditions into their tender documents, requiring that 80% of the bus bodies be made locally. Close to 250 buses will be made in South Africa, creating jobs, empowering our nation.

The Joburg buses will be made at Marco Polo’s plant in Gauteng. The chassis will be made at Mercedes Benz in East London. Busmark is setting up a new factory in Cape Town, with IDC support, to manufacture this city’s buses here.

EXAMPLE: last year the IDC partnered with a local company to complete a contract for the supply, manufacturing and erection of an air-cooled condenser system for Eskom’s Kusile power station. The contract value is R2,4 billion. It will use 53 000 tons of steel and create about 750 jobs.

EXAMPLE: the rail programme is helping to stimulate a local train and locomotive industry. The investment of R160 billion in rolling stock will result in significant localisation of coaches, wagons and locomotive manufacturing. Already, a local company has landed a contract to supply South African manufactured wagons and locomotives to Mozambique.

One of the key themes pursued by the President is African economic integration.

South Africa has expanded trade links with the rest of the continent. Last year, we sold R20 billion more goods to neighbours than the year before, with exports to African countries totalling R123 billion. Trade with Africa created 16 400 new direct jobs in South Africa last year alone. In all, 111 000 direct jobs and more than 320 000 indirect jobs are supported in SA from trade with other African countries.

Last year, Ford sold 11 000 Ranger bakkies to the rest of the continent which is one of every five vehicles it produces in South Africa. The Pretoria-based factory was supported by the IDC to tool up for a major export drive. It has created 550 new jobs, of which 100 are with smaller suppliers in its incubation hub. That is African regional integration in practice. That is why Africa is the big story for the next decade.

There is one more jobs number I wish to share with members today. That the dependency ratio, or the total number of non-working people for each employed person. The South African Institute of Race Relations, not generally very friendly towards government, recently released a report which showed an interesting trend. In 1994, there were 3.8 people for every employed person. In 2012, this was reduced to 2.8 persons per employed person, or a reduction of 26%. in the ratio. For Africans, this was even more significant: the ratio moved from 4.9 to 3.2 over the same period, or a 35% reduction.

Yes, we still have significant employment challenges, but we are also beginning to see real progress.

Last year saw both the Marikana tragedy and the strikes in the Western Cape farming sector.

The picture the Opposition painted yesterday is of a government simply doing the bidding of an over-paid and unproductive labour elite. The reality of course is very different to this suburban dinner-table impression.

Those who travel through this beautiful country, its factories, its farms, its mines, will see the face of the working poor. They are also South Africans, about who we must care. A quarter of workers earned under R1 500 a month in 2011, the latest year for which data are available.

In contrast, the CEOs of large listed companies in mining, finance and services earned between R6 and R9 million a year or 135 times as much as workers in their own enterprises and 250 times as much as farmworkers under the new dispensation.

We point to these vast disparities not to score points but to recognise that they limit our country and our people from developing the social cohesion that successful economies need and benefit from.

Of course we need to improve productivity and lift the levels of investment as part of the strategy to address the need to improve both industrial performance and working conditions. But I wish to note also that productivity has grown in recent years. In the year to mid-2012, according to the latest Reserve Bank data, productivity outside of agriculture climbed by 1,2%, and by 2,3% in manufacturing.

Let me use the example of agriculture to show how we are attempting to address the challenges of promoting employment. The Stats SA figures show that farm employment is growing, with 55 000 new jobs in the past 12 months.

There are success stories we can celebrate.

  • Two new soya beans crushing plants are being built currently, in Mpumalanga and Gauteng, which will sustain about 6 000 jobs in farming and agro-processing.
  • A new chicken business in the Free State which has created 560 jobs in the abattoir and chicken feed factory, and resulted in the country’s fifth largest chicken broiler producer. The company intends to up their employment to 1 000 people.
  • In the tomato-paste supply chain, about 700 jobs were created last year when companies invested in new capacity following a trade tariff increases by ITAC and they expect this number to double during the course of this year.
  • In Keiskammahoek, an upgraded dairy with a new milking parlour, fencing and upgrading of access roads is leading to the employment of 80 people. Coega Dairy has created 200 new jobs and will increase Eastern Cape milk production by 20%.

In January this year I met with a senior executive of global consumer goods company Unilever in Davos. He was very positive about South Africa and said they are expanding their operations and making eThekwini the hub of all their African operations. They are targeting South Africa as the key supplier of a sunflower seed project.

Following the investigation of price-fixing by Pioneer Foods, the company had to pay stiff penalties. Some R250 million was used to form an Agro Processing Fund that has supported investments worth more than R300m, ranging from honey production in Gauteng, to oil seeds in Free State and dairy production in KZN.

These examples all show jobs coming from investment-led projects in the agro-processing sector, sometimes combined with either trade or competition measures, as part of an integrated governance plan.

But we recognise the challenges of working conditions too.

In 2011, median wages on farms were R1 300 a month.

Yesterday we had comments made by one Hon Member of the Opposition about farm workers that lacked humanity and compassion.

While we recognise that not all farmers mistreat their workers and there are examples of good practice, there are also real problems. Last year, City Press visited a well-known wine and olive oil farm in the Western Cape, where it found 46 women workers living in conditions they describe as a "living hell".

Journalist Jacques Pauw said the women live packed like sardines in two metal containers and two dilapidated bungalows, they did not have working toilets and had to use nearby bushes instead. They live in bunk beds with their children and cook metres away from where they sleep.

Following the strikes in agriculture in the Western Cape, the Employment Conditions Commission conducted public hearings and recommended a new minimum wage for the sector to R105 a day or R2275 a month.

Many farmers have complained, citing the impact on their operations and viability. We call on them to recognise that their answer lies in accepting collective bargaining as the preferred system for wage setting, which will then make wage determinations redundant. Collective bargaining is a system of self-regulation. It is flexible enough to take account of different economic circumstances in the sector. But it requires acceptance of the voice and organisation of farmworkers.

Freedom of association, collective bargaining and fair labour practices are constitutionally protected rights, as important as freedom of speech. Our democratic freedoms are not less simply because they are freedoms used by the poor.

Youth employment featured prominently in yesterday’s debate, regrettably the comments were often more marked by narrow politicking than a serious attempt to work together to address the challenge.

In May last year, Hon Mazibuko issued a press release to invite people "to come and see the Youth Subsidy Programme in action in the Western Cape since 2009".

What is the reality?

According to the Quarterly Labour Force Survey of Statistics South Africa, there were 526 000 employed young people under 30 in the W Cape at the start of 2012,. By the end of the year, there were 500 000. In other words, about 26 000 fewer jobs for young people in the W Cape. In the same year, Gauteng created 44 000 new jobs for young people and Mpumalanga 13 000 new jobs.

What this shows is that getting a youth employment strategy right requires more than rhetoric and a subsidy – it needs a comprehensive approach which begins by improving education and training, provide work exposure to young people, using public and private sector programmes to draw young people into employment with well-structured incentives where necessary, and utilising special measures such as youth targets and set-asides to mandate the employment of young people.
We must work together to bring more young people in the Western Cape and elsewhere in SA into productive jobs.

Buti Manamela gave a number of examples yesterday. It also requires a strong effort to create the conditions for accelerated employment across the economy, for all workers. It is about the vision and integrated approach of the National Development Plan and the economic strategy in the New Growth Path.

Above all, it is about working in partnership – with business, yes, but also with organised labour and above all with youth organisations themselves, who say very clearly: nothing about us without us. That is what the Youth Employment Accord is about – consensus, cooperation, jointly tackling the stubborn challenge of youth unemployment.