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Speech delivered by Daryl Swanepoel, Convenor of the ANC Progressive Business Forum, at the Madhya Pradesh Global Investors` Summit Roadshow

9 June 2014, Sandton International Convention Centre

Programme Director, Your Excellencies, Hon. Chief Minister of Madhya Predesh, Shivraj Singh Chouhan and your State Minister for Commerce, Industry and Employment, Ms Yashodhara Raje Scindia, the High Commissioner and Consul General of India, other dignitaries, visiting business leaders from India and business leaders from South Africa, ladies and gentlemen.

Firstly allow me from the side of the ANC Progressive Business Forum to extend a warm word of welcome to you Hon. Chief Minister and your delegation to South Africa. We look forward to further expanding our working relationship with your government, a relationship which has already been embarked upon during our trade delegation to your part of the world in November last year.

The Progressive Business Forum has a well-established, warm and growing relationship with the Confederation of Indian Industry, who have been most helpful to us over the last three years that we have in the spirit of our partnership in BRICS been promoting trade and industry between our two countries.

I would also like to acknowledge the specific role played by Kaushlendra Sinha of CII, first from his position at CII Head Office in New Delhi and later from Mumbai. Mr Chief Minister CII is doing a sterling job in building and promoting the business to business relationships between our two regions; and as we deepen our cooperation I am sure we will get better in producing trade and investment outcomes that are mutually beneficial and help us to address poverty and unemployment will still haunts both our countries.

Your visit Chief Minister comes in the year that South Africa celebrates 20 years of democracy; thus a good moment in time to assess the status of trade between us and our longstanding friends, India being such an important one to us.

Democratic South Africa prioritised developing bilateral political and economic relations. Since 1994, it has signed 624 agreements and established 40 bilateral mechanisms - nearly half of the total number of bilateral mechanisms in place - with countries on the continent. However, there have been challenges with the implementation of some of these agreements. South Africa`s export markets have changed considerably over the past 20 years. New markets have emerged, while the share of exports to some traditional markets, such as United Kingdom, Japan and Europe, has declined. India is now South Africa`s fifth-largest export destination, having overtaken both the United Kingdom and Switzerland.

  • Bilateral trade between India and South Africa has increased by 31% to $7.6 billion in the just ended financial year, against $5.8 billion in the same period last fiscal.
  • Since establishing bilateral relations in November 1993, trade between India and South Africa has grown steadily and consistently.
  • The emergence of Africa as a strategic trading partner for India has been rapid and dramatic.
  • In 2005, Africa accounted for 3.5% of India`s total imports-a share which more than doubled to 8.6% by 2011.
  • A handful of African countries dominate Africa`s exports to India, South Africa is among the top six African exporters which account for 89% of total African exports to India.
  • India is the largest importer of gold and South Africa supplies over 11% of India`s overall gold imports.
  • Exports from South Africa to India are predominantly of gold, coal, iron and steel, inorganic chemicals and mineral ores.

There has been growth in two-way investment between the two countries. Foreign direct investment (FDI) from India includes investments by companies such as:

  • Tata Group, UB Group vehicle company Mahindra and Mahindra, cellphone company Reliance Communications and pharmaceutical companies, including Ranbaxy and Cipla.
  • South Africa is one of the largest investors in India with investments worth $112 million; investment by South Africans in India has been led by brewers SABMiller, the Airports Company South Africa, Sanlam and Old Mutual in the insurance arena, as well as pharmaceutical company Adcock Ingram and Rand Merchant Bank.

Although the small share of high-technology exports has fallen in the past decade, the share of pharmaceuticals has seen an increase from negligible levels to 0.2% of total exports. This is largely due to the emergence of South Africa as a generic drug manufacturer. India continues to make key investments in South Africa, there are potential sectors such as business services, software services and banking services which are growing markets India can explore.

Clearly therefore our partnership in BRICS and our bilateral agreements, and our histories that bind us, are starting to deliver dividends.

But, that being said, we must recognise that we have only started to scratch the surface of the potential that exists. It is therefore good that you promote the upcoming Global Investors` Summit later this year in Madhya Pradesh so that it too can create further impetus. We ourselves will assess our participation.

The focus now moves from embarking on trade flow to how can we improve trade flow between the two countries.

  • We need to improve market access conditions
  • We need trade reforms that make doing business between the two countries easier and more efficient.
  • We need to expand the India-SACU PTA towards a comprehensive economic co-operation agreement incorporating services and investments
  • We need to look at how to strengthen strategic partnerships across core industries (Healthcare, Energy & Infrastructure)
  • Invest in sectors that facilitate knowledge and skills transfer
  • Further promote our political goodwill and initiatives, such as the annual Investment and trade Initiative to promote bilateral trade in targeted sectors

Whilst your mission is to promote the investment summit and thus investment into India, I would also like to use this opportunity to encourage Indian enterprises to look seriously into the huge investment potential in South Africa, thus expanding your international investment profile.

Looking at South Africa as an investment destination, whilst the strongest economy in Africa based on a per capita measurement, and whilst still classified as an emerging economy, it has a stable economic environment and ranks in the top half of most indexes; even taking the lead in some cases e.g. it holds the number one spot when it comes to auditing standards.

  • It has good economic infrastructure such as roads, rail, ports, electricity, and communication and so on. Yes, right now we face some energy and rail infrastructure challenges, but with new power stations coming on stream later this year and with a an infrastructure spend which will exceed R3,5 trillion over the next 5 years, the bulk of this spend will go on power generation and extending the rail and port network we are on track to resolving these issues and to provide world-class and affordable services in this regard.
  • It has a legal system that functions well and which is widely respected. There is the rule of law, without a doubt. Its government processes also function pretty well. Customs processes work, setting up a business is quick and efficient, the tax system is world class, etc. And its financial institutions and systems are not only world class, they are in many respects world`s leaders. The regulation regime is advanced, to the point where it managed to withstand the worst effects of the global financial crisis.
  • South Africa has a population of just over 50 million, it has a GDP of approximately R3,5 trillion and its economy is fully diversified. It is blessed with vast amounts of mineral resources which industry still takes up a fair portion of the economic output and jobs. It has vast reserves of coal, iron ore, chrome, platinum, gold, and much more. It is however pretty well developed in most other sectors as well, although we have lost some manufacturing capacity for which plans have been developed to regain - e.g. the Industrial Policy Action Plan (IPAP)
  • South Africa is a member of the G20 and BRICS, amongst others. In participating in these groupings its approach goes beyond the 50 million South African consumers. When trading with South Africa, the wider Southern Africa region (SADC) becomes accessible through for example the Southern African Customs Union and other economic integration initiatives which is already functioning at a number of levels; and is being further developed and integrated. This opens up a potential consumer market in excess of 500 million in which double-duty, double-taxation is eliminated and the free movement of goods and services across borders takes place.

The South African Government has identified a number of sectors for development

  • Energy,
  • Transport,
  • Communication,
  • Green economy,
  • Agriculture,
  • Mining,
  • Manufacturing,
  • Tourism and other services

Why South Africa:

  • Well South Africa is the gateway to Africa, large sections thereof being developed into a Free Trade Area.
  • South Africa has preferential agreements with for example the United Stated and Europe.
  • Our participation under the Africa Growth and Opportunities Act (AGOA) of the United States for example means that South African manufactured goods enter the US duty free or at substantially reduced rates; and quota free. This means that enterprises facing such hurdles can move their manufacturing processes to South Africa and overcome such hurdles. The same holds true for the EU.
  • The massive infrastructure spend I mention in itself creates vast economic downstream opportunities in many sectors, including the construction and rail sectors.
  • Foreigners can own up to 100% of SA companies, and they can repatriate their capital and dividends (profits) unhindered.

So Hon. Chief Minister I conclude by making one last point, and that is that we are duty bound by history to ensure the rapid and sustainable growth of trade and investment between our two nations.

Both our nations have huge poverty and unemployment challenges which need to be overcome. I am of the view that politically we have concluded the need for us to work together; we now need to see that friendship manifest itself in real trade and investment.

A good foundation has been laid; much more needs to be done. And it is at this practical level of businesses finding each other that the economic objectives will be met.

We wish you well on your visit to South Africa and on your Global Investors` Summit later this year.

I thank you.

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