Speech by Minister of International Relations and Cooperation, Ms Maite Nkoana Mashabane, on the occasion of the New Age Business Briefing on “South Africa’s  role in BRICS, and its benefits to job creation and the infrastructure drive in South Africa”, 11 September 2012, Sandton Sun, Johannesburg

Programme Director,
Your Excellencies Ambassadors and High Commissioners,
Chairman of the New Age,
Representatives of the SABC Board & Management,
Captains of Industry and Business Leaders,
Distinguished guests,
Ladies and Gentlemen

When the leaders of the five BRICS countries met this year in March at their Fourth Summit in Delhi, India, they declared that:

BRICS is a platform for dialogue and cooperation amongst countries that represent 43% of the world’s population, for the promotion of peace, security and development in a multi-polar, inter-dependent and increasingly complex, globalizing world. Coming, as we do, from Asia, Africa, Europe and Latin America, the transcontinental dimension of our interaction adds to its value and significance”.

It is in this context that we should understand the global socio-political and economic framework of BRICS.  Since coming into being as a formal entity in June 2009, the BRICS have introduced new dynamics in global geopolitics.

This morning I have been requested to focus on “South Africa’s Role in the BRICS, and its Benefits to Job Creation and the Infrastructure Drive in South Africa”.

Let me firstly say that I have been following with interest a vibrant public discourse on South Africa’s membership of BRICS, linked specifically to Goldman Sachs and the writings of its Asset Management Global Chairman, Mr Jim O'Neill. Mr O’Neill recently publicised an article entitled “South Africa’s BRICS Score: Not All Doom and Gloom”. He concluded this debate by saying "South Africa could more than justify its presence (in BRICS) if it helped Africa to fulfill its remarkable potential.”

He further said, "South Africa scored well for the cost of setting up business and for most of macroeconomic stability variables and also does reasonably well in some areas of governance and schooling. If South Africa could also help to lead the rest of the continent to reach its own standards where these are high, Africa would be on an accelerated path to greater economic might. By exploring cross-border expansion in trade and infrastructure, as well as improvements in domestic productivity, South Africa will have more than justified its role as a member of BRICS”.

I can assure Mr O’Neill that the objective to fulfill Africa’s remarkable potential is at the forefront of our political and economic diplomacy.

Programme Director,

South Africa’s membership of BRICS is premised on our global and regional/continental role as well as our domestic achievements in the “proudly South African manner”.

We joined BRICS with three objectives in mind, namely:

  • to advance our national interests as outlined in the President’s recent State of the Nation Address;
  • to promote our regional integration programme and related continental infrastructure programmes;
  • and to partner with key players of the South on issues related to global governance and its reform. 

Our membership of this body has indeed expanded BRICS’ geographic and inter-continental reach, including its global representivity and inclusiveness.

Programme Director,

According to Zambian economist, Ms Dambisa Moyo as quoted by Jocelyn Newmarch in her article on the City Press of 2 September 2012, titled: “Global Slowdown ‘Africa’s Chance to Stand Up and Shine”:

“The current state of the global economy is bad for the rest of the world, but good for Africa - 64% of Africa’s population is under age of 24. The continent’s population is expected to hit 2 billion in the next 40 years. 60% of economic growth is accounted for and some African states have higher productivity than developed nations. Sub-Saharan Africa’s economy is expected to grow by 5.4% this year and by 5.3% next year.”

When South Africa joined BRICS in 2010, it was once again an affirmation of what this country has achieved in the quest to create a better Africa in a better world. South Africa’s BRICS membership is a strong brick for building Africa’s growth and its regeneration. 

In his address during the 4th BRICS Summit in India, President Jacob Zuma said; (I quote):

Our participation in BRICS is designed to help us achieve inclusive growth, sustainable development and a prosperous South Africa”.

It will be recalled that, President Zuma’s State of the Nation Address in February this year (2012), identified the triple challenges of poverty, unemployment and inequality as critical areas that require the most attention from all of us as a collective. 

It is for this reason that, amongst others, our country launched the New Growth Path framework in 2012, to help us achieve inclusive growth and create jobs. This is our strategic response the triple challenges we face in our country. In this regard, we identified six jobs drivers to help us achieve the much needed growth leading to jobs. These are:

  • infrastructure development,
  • agriculture,
  • mining and beneficiation,
  • manufacturing,
  • the green economy;
  • and tourism. 

We have singled out infrastructure development as a key vehicle for improving the quality of life and of providing a more focused access to basic services, competitiveness and jobs.

The reason we singled out infrastructure development is precisely because we know that the bedrock of new growth on the African Continent will come from economic integration and Intra-African trade which is impossible without the necessary infrastructure. Our BRICS partners have an important role to play in this regard.

Ladies and Gentlemen,

The BRICS grouping has emerged as a powerful formation with 43% of the global population. Our combined nominal gross domestic product (GDP) is estimated at US$13,7 trillion and between 20% and 25% of global GDP, as well as combined foreign reserves estimated at US$4 trillion. BRICS accounted for approximately 11% of global annual foreign direct investment (FDI) flows in 2012 (US$465 billion) and 17% of world trade.

South Africa and BRIC(S) countries share a common vision. Like South Africa, our fellow BRIC(S) nations are striving to enhance inclusive economic growth that will lead to an increase in the creation of decent and sustainable jobs, advance the fight against poverty and accelerate the economic transformation of our countries. We also dream and work to realise a more equitable global political and economic system. This is the right platform for such growth prospects!

Ladies and Gentlemen,

South Africa has a population of over 50 million and an economy worth approximately US$527 billion. Our per capita income level at purchasing power parity compares favourably with BRICS partners estimated at US$11 000 (after the Russian Federation at US$16700 and Brazil at US$11845).

The comparative advantage within BRICS pertains to our considerable non-energy in situ mineral wealth. In a recent report commissioned by the United States (US) based Citigroup bank, South Africa was ranked as the world’s richest country in terms of its mineral reserves, worth an estimated $2,5 trillion. We must be proud that we are the world’s largest producer of platinum, chrome, vanadium and manganese, the third-largest gold miner and offers highly sophisticated mining-related professional services, contributing significantly to the BRICS resource pool.

Our country is investing R300 billion ($35, 6 billion) into expanding and improving its railways, ports and fuel pipelines, as a catalyst to help unlock the world’s greatest mineral wealth.

The continent will also continue to be buoyed by the exploding global demand for oil, metals, minerals, food, and other natural resources. Likewise, the African continent, which is arguably one of the world’s largest unexplored resource basins, has abundance of riches; including 10% of the world’s oil reserves, 40% of its gold ore and 95% of platinum.

Accordingly, demand from BRICS countries for these commodities has been a critical source to support growth on the continent. Our financial market development and sophistication, also as a source of exceptionally sophisticated professional services and financial expertise, is globally recognised.

Distinguished Guests,

The 2011/12 World Economic Forum’s Global Competitiveness Index displayed a high level of confidence in our financial market development, ranking us in fourth place globally on this measure.

The regulation of the Johannesburg Stock Exchange (JSE) was ranked number one in the world, as was the strength of South Africa’s auditing and reporting standards. Additionally, South Africa is ranked second for both the soundness of banks and the efficacy of corporate boards.

Our continued excellence in science, technology and innovation is also recognised by many of our partners, e.g.  being awarded the majority stake in hosting the Square Kilometre Array. BRICS countries supported South Africa in obtaining the majority stake.

South Africa’s export structure to BRICS member countries shows significant diversification and the negative trade balance has also narrowed over the last four years, i.e. from R57 billion in 2008 to R22,8 billion in 2011.

Our export trade with the BRIC partners has grown from 6,2% of the total in 2005 to 16,8% in 2011; whereas its imports from the BRIC countries represented 13,6% of total imports in 2005 and 20% in 2011. The Minister of Trade and Industry, Dr Rob Davies, has emphasised that last year alone, trade between South Africa and BRICS countries grew by 29%, which is considerable.

Furthermore, South Africa enjoys recognition as a dedicated and committed global and regional player within the ranks of BRIC. Our constructive role in global governance structures as well as our position within organisations of the South, notably the African Union (AU), the Group of G77 (G77) plus China and NAM are appreciated by our BRIC and other like-minded partners.

Programme Director,

Please allow me to remind our honourable audience here this morning that South Africa is the only African country represented in the G20. The G20 has become an important institution on the reform of the financial and economic global governance architecture. We have always been at the forefront of promoting more inclusive formations and more equitable participation of notably emerging markets and developing economies in the world system and its decision-making structures. This belief stems from our core conviction that Africa has to be repositioned in the global system to assume its rightful place.

Programme Director,

South Africa’s invitation to join BRICS takes cognisance of our country’s contribution to shaping the socio-economic regeneration of Africa, as well as our active involvement in peace, security and reconstruction efforts on the continent.

It also recognises South Africa’s own unique historic political transformation process to become a constitutional democracy. This constitutional model linked to our reconciliation and nation-building processes and peaceful political transition, is perceived as a unique contribution to the world.

Ladies and Gentlemen,

The BRICS countries now constitute the largest trading partners of Africa and the largest new (not total) investors.

The BRICS investment portfolio in Africa is very encouraging and promising. Over the past decade, we have seen a seismic acceleration of commercial and strategic engagements between the BRICS and Africa. BRICS has nourished Africa’s economic emergence and elevated the continent’s contemporary global relevance. The recession and recovery period has enhanced this shift. In 2010, Standard Bank economists predicted BRICS-Africa trade will “see an additional increase in the velocity of BRIC-Africa engagements, with trade and investment spearheading the commercial charge”.

According to Standard Bank, BRICS Africa trade will increase threefold, from US$150 billion in 2010 to US$530 billion in 2015.

Distinguished Guests,

BRICS leaders have expressed support for infrastructure development in Africa and its industrialisation within the framework of NEPAD, first at the Sanya Summit in 2011. At the New Delhi Summit, the leaders reiterated the highest importance attached to economic growth that supports development and stability in Africa, as many of these countries have not yet realised their full economic potential.

In terms of strategic consideration for South African business, is the fact that regionally, South Africa provides direct access to the rest of the continent and is situated between the East, the Americas, Europe and the Middle East. South Africa has many geostrategic and related structural advantages which make it an excellent investment destination and ideal “gateway” partner in the African growth story.

Complementary to this existing and strong consumer market, are the exciting regional integration initiatives taking place on the continent. Negotiations are underway to establish a 26-country, US$1-trillion African Tripartite Free Trade Area (T-FTA) for East, Southern and Central Africa within three years, which will expand this market to 600 million people.

Programme Director,

Without doubt, this regional integration initiative will put us in the same market size bracket as our BRIC counterparts. Another related and exciting new initiative, which has just been announced, is that of the Southern African Development Community (SADC) Regional Infrastructure Master Plan (RIMP), which could involve cross-border projects with a combined investment value of up to US$500 billion.

The RIMP has been finalised and was presented at the summit, scheduled for Maputo, Mozambique, last month (in August 2012). The plan proposes the development of regional power, transport, water, communications, and tourism and metrology infrastructure over the 15-year period, from 2012 to 2027. The intention is to align the implementation of the plan with the establishment of a SADC development fund, or bank, with an initial capitalisation of between US$600 million and US$1 billion.

At present, intraregional trade comprises less than 20% of total trade and the bulk of that trade takes place between South Africa and the other 14 SADC member states. Once the plan has been officially endorsed, the SADC Secretariat will conduct road shows in BRICS and other countries, targeting Brazil, China, Europe, India, Japan, the United Kingdom and the United States to expose potential investors to the opportunities available within the RIMP.

The Project Preparation Development Facility has already been established at the Development Bank of Southern Africa.

Programme Director,

At this stage, please allow me to turn to Africa’s promising growth and demographic dividends, as also encapsulated in the National Planning Commission’s Vision 2030. The growth rate for sub-Saharan Africa is estimated around 5, 5% for 2012; and The Economist of 6 January 2011 predicts that between 2010 and 2015, seven out of the top 10 fastest-growing economies in the world will be African. This is good news!

There are many reasons for this sustained growth. These reasons include:

  • greater stability;
  • increasing prevalence of democracies;
  • global demand for Africa’s commodities; and
  • improved economic regulatory and governance regimes.

South Africa is also cognisant that the African “demographic dividend” is already recognized by economists as the future locus for growth. According to Standard Bank’s research, the five enduring factors driving this are:

  • a growing, younger and more affluent population;
  • urbanization;
  • improved information and communications technology (ICT);
  • sustained demand for Africa’s natural resources; and
  • a deepening financial sector as Africans take up financial services personally and for business.

Ladies and Gentlemen,

South Africa hosted its first ICT Indaba recently, where we had a discussion on our interaction with BRICS. During that discussion, we indicated that in 2010, BRICS accounted for 13% of global demand in the ICT sector, with spending of about €328 billion. As South Africa is one of the leading investors among developing countries on the continent, South African companies can take advantage of this unique position, through partnering with BRICS companies to explore commercial opportunities in Africa.

For example, the Brazilian company Vale has partnered with South Africa’s Rainbow Minerals in an agreement worth more than US$1, 2 billion to build a copper mine in Zambia. Tata Power has formed an equal joint venture with South Africa’s Exxaro Resources, named Cennergi (Pty) Ltd, to develop and operate power-generation projects in South Africa initially and will have later projects in Botswana and Namibia.

With all this background, the question is: “What should business be doing to take advantage of South Africa’s BRICS membership?” There certainly is a wide scope for cooperation in various projects within the existing BRICS structures.

President Zuma addressed BRICS’ captains of industry prior to the last BRICS summit in India, and emphasized that South Africa’s participation in BRICS was designed to help us achieve inclusive growth, sustainable development and a prosperous South Africa. The BRICS Business Forum’s joint statement called on the respective governments to deepen economic engagement of which trade and investment were identified as the pillars of such an engagement. The target for intra-BRICS trade was set to be enhanced from the present level of US$230 billion to at least US$500 billion by 2015. The business leaders called for improvement of the quality of trade by focusing on more value-added trade in the three sectors of manufacturing, services and agriculture.

Distinguished Guests,

I wish to focus our business leaders on the fact that South Africa’s service sector comprises two thirds of our economy (65, 9%), which compares favourably with our BRICS partners and provides niche opportunities. The BRICS Business Forum further cited opportunities in sectors such as, but not limited to, agriculture, energy, infrastructure, mining beneficiation and healthcare. As you can see, South Africa already enjoys comparative advantages in these cited sectors. Domestic economic priorities, such as increased beneficiation at source, could be pursued through joint partnerships and ventures.

At the Delhi Summit, other possible areas of cooperation, ranging from energy to construction and water provision were also discussed.

Ladies and Gentlemen, Captains of Industry,

To facilitate the success of these drivers, business should focus on enhancing the intra-BRICS business cooperation and coordination by promoting opportunities in the area of availing economic opportunities in infrastructure development. We have begun working intensively on the infrastructure strategy through the Presidential Infrastructure Coordinating Commission (PICC).

I have no doubt that we are on course to spend in excess of R860 billion on infrastructures by March 2014. Infrastructure is therefore at the heart of how we will change the lives of our people in the next decade.

Today I want to place a challenge, and also make a clarion call to business – please invest in skills development in your respective companies. In this way, you will be promoting youth training and empowerment through their engagement with BRICS countries.

Finally, cooperation on another crucial infrastructure project is underway, requiring our collective involvement – the proposed high-capacity marine cable system linking the BRICS countries. This will address the connectivity challenges which have featured as impediments to intra-BRICS trade. The end of apartheid has put our country on a firm footing to play its part in global affairs for a better South Africa, Africa and the world. Our national agenda is aimed at achieving inclusive economic growth for our people as well as the people of our continent.

Ladies and Gentlemen,

BRICS leaders are considering the possibility of setting up a new development bank for mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development. They directed the BRICS finance ministers to examine the feasibility and viability of such an initiative, set up a joint working group for further study and report back at the next summit. Such a new development bank could complement existing institutions and address gaps and challenges in critical sectors.

Ladies and Gentlemen,

President Zuma has already articulated South Africa’s strong support for this initiative and other African leaders have also indicated their keen interest.

In conclusion, there can be little doubt that through South Africa, the rest of Africa will benefit from this membership of the BRICS formation.

South Africa will host the 5th BRICS Summit in early 2013, which will also complete the first cycle of BRICS summits. The opportunities presented in hosting this prestigious summit are considerable.

The South African Government pledges its commitment to continuously engage and support business in South Africa and also work tirelessly in tandem with our BRIC counterparts to forge stronger partnerships to deliver prosperity and progress to our peoples.

Our vision of a prosperous BRICS is a reflection of South Africa’s rising influence in the world.

When the global economic sun is setting down in many parts of the world, in Africa, it will be shining for continental regeneration, and South Africa will be there when it happens!

I thank you.

 

 

 

 

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