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Speech by Daryl Swanepoel: Convenor of the ANC Progressive Business Forum: PBF Business Interaction with a visiting business delegation from Sri Lanka

25 June 2014, Taj Hotel, Cape Town

Welcome:

To be advised in ranking order

South Africa and Sri Lanka have had formal relations since 1994, with High Commissions in the respective capitals of Pretoria and Colombo.

From a PBF perspective, former Deputy Minister for Economic Development, Prof Hlengiwe Mkhize led a delegation of South African business representatives to Sri Lanka under the umbrella of the ANC’s Progressive Business Forum (ANC-PBF) in September 2012 in a highly successful visit.

South Africa has become the most important trading partner for Sri Lanka in the Southern African region.

The value of Sri Lanka’s total imports from South Africa to Sri Lanka in 2012/13 was US $ 35.80 million, while an amount of US $ 22.53 million was recorded in 2011/2012.

However, over the last five years total trade have recorded an increase of over 21%.

TRADE BETWEEN SRI LANKA AND SOUTH AFRICA
(US $ Million)

YEAR EXPORTS FROM SRI LANKA IMPORTS TO SRI LANKA BALANCE OF TRADE
2008 16.182 23.580 -7.398
2009 15.612 17.633 -2.021
2010 20.859 17.926 2.933
2011 29.655 35.874 -6.219
2012 25.770 22.530 3.240
2013 30.93 35.80 -5.13

South Africa`s main exports to Sri Lanka include fresh produce, processed foods, chemicals, asbestos, paper, iron ore, copper, aluminium, and containers (for transport of goods, etc). Sri Lanka`s main exports to South Africa include agricultural produce like coconuts, cashew nuts, tea, spices, activated carbon, rubber, synthetic fabrics, textiles, footwear, and kitchen/table ware.

I am aware that our respective High Commissions in Colombo and Pretoria are exploring opportunities for South African Property Development companies to explore the Hotels/shopping mall developments projects in Sri Lanka.

We are happy to note that the two countries have successfully participated in exchanging delegations. Nearly 40 companies from Sri Lanka have visited South Africa and nearly 40 companies have visited Sri Lanka for trade promotion activities during the last year.

Among these joint efforts are:

The Sri Lankan High Commission in Pretoria together with the EDB successfully organise the participation of Sri Lankan Exporters at SAITEX international Trade fair in July annually.

During 2013 we have noted that for the first time a trade delegation comprising exclusively the ICT-sector companies visited South Africa to explore market opportunities and some of them have initiated business with South Africa.

Further, it is encouraging to note that South African companies participated at the Sri Lankan Trade Fairs such as EXPO, Ayurvedic Expo, Facets & Jewels 2012 in order to strengthen the bilateral trade between two countries.

I would like to thank the High Commission of Sri Lanka for its hard work aimed at expanding our relations. Ambassador Ratnavale, who has returned to Sri Lanka and the Trade Counsellor, Ms Nalika Kodikara, are the driving forces of the significant activities of the SRI LANKAN Government in South Africa. We extend to them special thanks. Witness to the activities of the High Commission of Sri Lanka in Pretoria is the strides that have been taken in relations with the ANC’s Progressive Business Forum, and also with various Chambers of Commerce and Industry in South Africa.

You would have noted that South Africa has established the Small Business Enterprise Ministry, under the leadership of Minister Lindiwe Zulu and her Deputy, Deputy Minister Elizabeth Thabethe. We encourage both sides to take advantage of the stimulus and impetus of small business to seek out cooperation with similar companies in our respective countries.

I am aware that the Sri Lanka handicraft sector is falling under the Ministry of Traditional Industries and Small Enterprise Development and government is giving more emphasis on SME promotion in this sector.

The markets in our two countries are not only the preserve of huge multinational companies – our joined interest in SMME’s opens the door for both our countries to promote and expand business at the SMME level – it is the challenge and opportunity we ought all to grab with both hands.

It is a challenge indeed which the PBF will also seek to meet.

Clearly therefore our partnership and our bilateral agreements 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.

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 look at how to strengthen strategic partnerships across core industries.

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 investment into and export from Sri Lanka, I would also like to use this opportunity to encourage Sri Lankan 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 even despite the recent Standards & Poor’s downgrade by one notch, which I believe will soon recover given the resolution in the Platinum sector and other measures being taken to improve the economic management of the country, SA 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

So 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.

The sort of cooperation which we as the PBF support and promote is where trade and investment is of a mutually beneficial nature. Both side of the equation must benefit from the relationship. As we export to our partner countries, we should import as well. As we invest, we should seek investment from them. It is about balanced trade. So we should seek out synergies and complimentary sectors to achieve this.

When we play matchmaker with international investors we emphasise this mutually-beneficial departure point and for us it is important to link them with local South African entrepreneurs, so that locals are involved, remain co-owners of the economy, and are empowered to grow.

I conclude by making one last point, and that is that we are duty bound by our shared endeavours to lift our people out of poverty 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.

I thank you.

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