Business Update: Issue 15

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Speeches by Ebrahim Patel at the National General Council

This breakfast takes place at the conclusion of the National General Council of the African National Congress. It was a three-day event at which more than 2,000 delegates from all parts of the country assembled and reflected on the state of the nation; on the state of the economy; on the state of the ruling party. And the three-day session concluded last night with the adoption of a set of policies, a declaration and a way forward that will begin to shape the next few years of governance as we prepare to deal with the challenges we face. This breakfast session is also one of a number that has taken place over the last few days. My colleague, the Minister of Trade and Industry, set out in some detail the kind of government programmes particularly directed at the manufacturing sector. We have had the Minister of Small Business Development who have given an overall vision on the important role of small business, cooperatives and township enterprises in the economy, and what it is that government seeks to do to promote these important forms of productive enterprise. Minister Radebe, the Minister in the Presidency, set out what he regarded as some key challenges. How do we address the trust deficit that exists in this and many other societies? He gave some examples of successful partnerships between the business community and government. And the Treasurer General of the ruling party, Dr Zweli Mkhize, also had the opportunity to set out from the ruling party point of view some of the key issues and importance of a deeper dialogue between business and labour.

The concept of the National General Council is very significant for the challenges the economy has to respond to. We've had an economic plan that was developed during the height of the commodity cycle and since then there has been a significant change in the global economy. Global growth is slower. The International Monetary Fund, three months ago in its World Economic Outlook, revised prospects for growth in the number of key economies. Subsequently we have seen official data that indicates continued sluggish growth in the European Union. The EU is important because historically it was our most significant trading partner. It continues to be quite a key trading partner - both as an exporter of goods to South Africa and as an importer of South African products.

More significant in some way to us has been the slowdown in growth in the developing world, particularly in China. When I look at the macro trends of trade in the past seven years, what is most striking are two elements of the trend line. The first is the growth in exports to China, principally minerals that has helped to fuel the enormous expansion of Chinese infrastructure - iron ore, coal, a little bit of manganese and our industrial minerals. And the other one is the expansion of manufacturing exports to the rest of the African continent. These have been the two success stories in the last five years. China's slowdown has an impact on both of these. It has an impact, not only directly in the volume of trade between South Africa and China and the price at which the exchange of commodities take place - all of which are quite important to our economy - but also on the prospects of growth on the African continent. Because much of African growth has been on the base of the huge demand for minerals. So we are seeing here challenges we have to navigate.

Russia is currently in recession; Brazil is in recession; Canada is in recession. Australia has revised its growth sharply downwards. And what is striking about these four economies is that they are all mineral-led economies - either oil or hard minerals. And they represent the softening of global demand, so it is in this context that we need to navigate our way as South Africa.

Where are we on some of our key performance indicators? Let's start with the GDP. The current GDP figures shows that from the morning to the evening the economy would have generated approximately R10 million of wealth. That is the daily level of GDP that is generated in the economy. In the last number of years we have had a recovery from the global economic recession. Our economy, like many others, went into recession in circa 2009 and it recovered relatively quickly. We have had over this period more modest growth than in the period before the global economic recessions, but nonetheless positive growth. We are still in a positive growth phase; year-on-year the GDP grew by 1.2% in real terms. However, and this is quite critical, the leading indicator is what happens in a particular quarter compared to the previous quarter. And on a quarter-to-quarter basis we have had a decline in GDP of 1.3%. So you are seeing the impact of this global slowdown beginning to show itself in levels of output, and increasingly it may translate to levels of investment.

On the jobs front the picture is more complex. One the one hand, in the last quarter we have actually had quite substantial jobs growth. On a year-to-year basis - if you compare the three months up to the end of June with the three months of the preceding year, so that it will be April to June 2014 - there has been a very significant jobs gain, just over half a million new jobs were created. If you even take it quarter-to-quarter there was quite strong growth, around 200,000. On the other hand, the labour force grew faster than the number of jobs we were creating. The number of people who entered the labour market was about 640,000. So even though we were creating about half a million jobs, we still have the challenge of being able to absorb all the newcomers in the labour market.

We have an energy challenge that is not short-term in nature. Essentially we are producing less energy than what the economy needs. And careful and active management of that energy is what Eskom now does on a day-to-day basis, but the problem only gets resolved when we can ramp up the level of energy that we generate. We have a labour relations environment in which there is no sense of deep partnership between the parties, and we have had some fairly significant strike action in the last 18 months to two years. So these are some of the challenges.

On the other hand, we also have a compelling national vision, the National Development Plan - it sets a broad vision, Vision 2030 - and for me the most significant metric for purposes of our discussion is the number 11 million. That's the number of new jobs that we need to create by 2030. We have made some progress, but if you wanted to see practically what the NDP means, I can try to summarise it through six I's.

Fundamentally the economic strategy on which we are basing our response - not only to the more recent softening of global demand, but also fundamentally to lift the rate of growth in the economy - is Industrialisation; it's Infrastructure Development; it's Innovation in the Economy, by which we mean reinsuring the value add; it's Investment, lifting the rate of private and public investment; it's Inclusion, by which I refer to small business development, to the efforts by government to combat poverty and to address inequality; and finally it is about Integration, connecting the South African economy with the rest of the continent in a much deeper way than African economies have connected themselves in the past.

My topic is about partnership. Why partnership? There are a number of compelling reasons - I just want to refer to one or two of those. We have a mixed economy and in a mixed economy the relationship between the state and the private sector is pretty fundamental. If you think about economic theory in a purely collectivist model, the state is everything and the private sector, if it operates in such a model, is really on the margins. In a pure free-market economy, the private sector is everything - the state is effectively out of the economy, save as a regulator or a rule maker. In a mixed economy you have a symbiotic relationship, a quite closely connected relationship between the fortunes of the private sector and the state.

The National Development Plan's goals are ambitious - they are stretch targets, not things that we can just get by continuing to do things like we've always done them. In that context, partnership is absolutely critical. But there is another element to it, and that is when societies recover from deep traumas - think of Germany at the end of the Second World War and Japan; think of any number of societies that went through the major shift from being an agriculture-based economy to an industrial economy. So where there is war, where there are tectonic shifts in the economy, partnerships are absolutely critical. And South Africa had to recover from an economy that has been characterised for a number of years, until 1994, as an adjunct economy. Much of our economic development came during the period of colonial rule, so it was shaped by the needs of colonialism. And as we became a free nation, we had to find an economy that needed a different set of political imperatives.

So, if there are compelling reasons for partnership, what does it take to build partnership? Firstly, there are a number of implicit and sometimes quite explicit partnerships already in place. Many of the people sitting here are counterparties in partnerships with the state, or alternatively are intricately affected by those partnerships. It is often being said, and I think correctly, that getting the best of a partnership requires trust. But trust develops when people begin to do things together. Trust is not a product of sitting down and saying please trust me, and let's talk about trust, and at the end of the good old chat about trust we can now assert that we have trust. It doesn't work like that. It's doing things and doing them successfully, and building increasingly a sense that one can go somewhere. And I raise that because I am going to be putting out a few challenges that I think affect the state as well as the private sector.

Partnership is fundamentally when two or more parties - let's in this case talk of two parties, the private sector and the government, although clearly the private sector is not homogenous; there are many different interests in the private sector and they compete in product markets but they also have complex relationships in a supply chain -each bring specific contributions towards an agreed outcome. That's really what any partnership is about.

So let's start with the government's side. What is it that government is responsible for and what are they doing to deal with these areas? The first one is political stability - that is the most fundamental role of a government in such a partnership. And by political stability I refer to many things but I would single out orderly political processes. So in our case, given that we are a constitutional democracy, it needs periodic elections where the pulse of the nation is taken; where representatives that articulate that, are elected; where the political landscape is relatively predictable. Political stability also refers to protection of key rights. You are here from the business community so you would no doubt recognise how important it is for you to have protections of property - that your business is secured, it can't be taken over in a willy-nilly way by anybody; that contract is enforceable, so if one party says to the other party I commit to do the following, that that contract can be given effect to. And clearly property rights are not only protection by the constitution, but also by the institutions of society and of the state. And government in a sense macro manages that to ensure it is achieved.

But the other key protections - you are not only business people, you are also individuals, so your individual rights, the rights to be able to speak freely, to associate, to assemble, to do all the things that are the hallmarks of personal freedom - are protected by our constitution. There are collective rights, and let me raise the issue of worker rights as an example of that which are protected by our constitutions.

So political stability is critical as an element of that partnership. But stability in a democracy is not imposed by force. There are societies that are not democracies. Some of them are stable, but it is a different stability, it is a different instrument through which that stability is secured - fundamentally through the army, the police, to be quite frank. In our case stability is not imposed by force, but it is created through institutions and consent. By institutions I refer to parliament and the judiciary - they are key to create stability because when people are very troubled they know in a couple years' time there will be an opportunity to vote people into power or into parliament that gives effect to their needs. So a determined effort to try to overthrow a particular system is less compelling in a democracy because there is an alternative. That is the institutional part and people often focus on that - and rightly so.

But they forget the other element of it, which arguably is even stronger, and that is consent of the government. If you don't have high levels of consent in a society, then the institutional arrangements are not sufficient to produce stability. Consent itself requires a government to both articulate the aspirations of citizens and to deliver on those aspirations. And as basic as these things are to a democracy, I want to introduce them into a discussion about partnership. Because as we develop discussions in partnership, the underlying elements of a successful partnership are often assumed but not explicitly stated, or missing in the discussion.

So what are those aspirations of citizens? The aspirations are fundamentally about jobs, the ability to have an income, economic opportunity, the ability to have your moment to be able to contribute to wealth, to earn wealth and to enjoy wealth. And economic opportunity in a society with a particular history, like ours, gets caught in the word transformation. So that represents in a way the political debate about opportunity. And finally it is about social services - to have taps that you can open with clean running water and electricity you can connect to with the flick of a switch. So that is the comments about political stability and political governance.

There is a second thing that the state and government brings to a partnership and that is economic governance. In economic governance I will refer to a few elements - first a macro-economic environment that is sustainable. A partnership works when you have a government that ensures fiscal sustainability and monetary stability. If you live in a society with inflation rates of a 1,000% it doesn't matter whether you are getting anything else right. The ability to do business in a predictable way is eroded. If you live in a society in which the public finance has collapsed because the level of spending by far exceeds the economic capacity of a society to sustain, then nothing else in the partnership ultimately can compensate for that.

There is infrastructure - critical from an economic governance point of view. And economic infrastructure is more than simply the elements of energy, it's the entire range of economic infrastructure and social infrastructure. So I am talking here about transport logistics, energy, water, ICT and then of course the social infrastructure. It is skills development, helping to ensure there is a flow of skilled individuals into the economy. It's the micro-economic framework, so government sets the policy framework on competition, on small business development, on labour relations. And it is incentives. Government can encourage the private sector to invest in particular kind of activities with desired outcomes by tweaking how the resource of the fiscus is distributed in an economy, and that would be industrial funding as well as incentives.

So I have covered what I regard as quite fundamental things expected from government in a partnership. And I am going to talk about what we are doing to give effect to that. From the private sector there are a few key things that are important in a partnership. Investment is important. To develop the appetite to invest in an economy, to calibrate the risks, to try to decrease the level of risk through entrepreneurial interventions, and fundamentally to bring entrepreneurship to the investment equation. And what do I mean by entrepreneurship? I really mean two things: identifying opportunities to grow, and bringing the organising and problem-solving skills to seize those opportunities. Very often the assumption is that government must create opportunities. What is missing from that discussion is what a partnership is, what the other side brings.

So we have conceptualised it as one in which we have quite an important number of things we need to do as government, but private business, too, needs to bring key things. And on the investment horizon, the long view is critical to investment. When companies only take short-term decisions, when they look only at the next six or 12 months, then the boost that can come from investment - which is one thing the private sector brings to the partnership - is not going to be realised.

Competition is the second thing the private sector brings - the ability to fiercely compete with each other, to provide goods or services that are either better priced, or better quality, or more quickly available to consumers. So innovation is key. But the other side of it also is that in a market economy - and though we are a mixed economy, we clearly have key sectors of the economy that are market-driven - when companies collude with each other, when businesses sit down and fix the price or fix the area, the value that is brought to the society by competition is removed. So you get all the upside from a market economy, you get the return and you get none of the pressures and the risks that competition bring - and that is quite an unfair deal to the consumer. So competition and innovation is what a strong private sector brings to the partnership.

The third area I would like to talk about is transformation. The private sector in this partnership around the National Development Plan can and ought to bring transformation to it. By transformation I mean the changes in the way in which the economy is structured, both at the level of the demographics and in the output.

So let's start with the demographics first. The private sector as a company have potential three key levers: the shareholders, so equity; the management; and the suppliers. The larger you are, the lower down in the value chain you are, the greater obviously your supply base. But those are the instruments by which one can talk about transformation of the demographics of a society and an economy. The other side in transformation of an economy is that we don't stay an economy that is essentially a producer of minerals and unprocessed agricultural goods. Because the price you take, other than at the height of a commodity cycle, is quite insignificant - value addition takes place after the products leave the farm and after the products leave the mine. But to get that right is quite a challenge. It means assembling the factors of production that can transform raw material output into finished goods. When you do that successfully, you create jobs and economic value.

And finally partnerships from the private sector require workplace partnership. Think about it - the private sector is the key player in workplace relationships. When we have deep relationships at the workplace, you have a strong basis for growth in an economy. Have a look at successful models of development - very often at the core of that model is a deep partnership in the workplace.

I have identified here a few key things that I think the state brings to the equation and that the private sector brings to the equation. So what is our national narrative on partnership? It can be one of demands to each other or complaints about each other, or it can be a rolling up of sleeves and a positive attitude about the tasks we have at hand.

I want to identify a few opportunities - I want to make a few remarks about what a partnership conceptually means to practical issues. The first element is African integration - where do we restructure the economy and how do we find opportunity? Thirty years ago South Africa's markets were principally in Europe and to some extend its domestic market. Increasingly we have shifted that trajectory. Today, the single biggest market for South African-made televisions - and by the way we are recovering our TV industry, which we lost some years ago, as we have had new expansion in TV manufacturing in South Africa - is not Germany, it is Zambia. Companies in plastic products' single biggest market today is not India, it's Zimbabwe. And for companies in the manufacture of clothing, the single biggest market is not the United States, it is Mozambique.

We simply looked at trade data that demonstrate how important the African continent has become for South African development, as a market for manufactured goods. And today, more than a quarter million jobs in South Africa are directly dependent on the exports to the rest of the continent. One of the iconic vehicles that Ford makes is the Ranger bakkie, and one out of five Ranger bakkies is sold on the rest of the continent. Had African trade not been an element of Ford's operations, they would have had to release at least 20% of their workforce. They would have not been able to get the economies of scale to bring a price into a range that allow them to export to other markets outside of the continent.

So Africa matters to us greatly and the question is whether we have a coherent and coordinated effort by the private sector, particularly manufacturing and service businesses, to get into the rest of the continent. It is not virgin uncontested area - there are other big players there. China is very active on the continent, the United States and Europe had historically been very active, so South Africa is not going to get in there purely as an act of solidarity - it is producing goods at a quality and at a price, getting the logistics right and developing the local relationship that is important. Here is a great success story for the South African economy in spite of these enormous global headwinds, and yes, a softening of global demand - there is still an enormous opportunity on the continent.

Government, from our side of the partnership, will attempt to do two things: The first is we will attempt to conclude an agreement on a free-trade area that will involve 26 countries, 600 million consumers, an enormously large consumer market and growing consumer urgent market, that will stretch from Egypt right along the East Coast of the African continent to South Africa. And Stage One of that will eventually include West Africa into a continent-wide free-trade area. We are way down the line in these discussions - two months ago we initialled an agreement and we are now looking at the annexures where we need to do a little bit of legal scrubbing to get the trade regimes coordinated. And this will create an enormous platform.

When we developed the strategy of working with the People's Republic of China there were many sceptics - today, when you look at the trade figures you can see how important that relationship has been to grow the South African economy.

In the same way, and perhaps more significantly for the long term, is the Africa Strategy. So that is the one area where a partnership between business and government can yield a lot more.

The second one is in the domestic market, the South African market. It is a small market by global standards - 55 million people - but it is a market that's got potential in part because it's growing, it's a young population, in part because it is located on one of the fastest growing regions in the world, the African continent, and in part because it has some enormous inherent strengths. The question is how we unlock the value in the economy.

The first area is that our level of input penetration is large and that provides an opportunity. We certainly cannot make everything we import - we will always continue to import quite a significant part of the nation's needs. But there is a growing part of that which can in fact be manufactured locally. An executive from a global multinational corporation was telling me this morning about the partnership that his company has with a state-owned enterprise, Transnet, on the production of locomotives. Just in excess of 60% of the value of new electric locomotives that will be powering this economy, moving things across the country, will be local. We could have gone the route of just importing the finished product; arguably it would have been a bit cheaper. But if we want to build an industrial economy, if we want other South Africans to get into the supply chain, we need to do it this way. So in that particular partnership with that company and the state-owned enterprise, we have brought other South African players in as component manufacturers. One of the partners there is a coach-building and maintenance company run by a black woman. It's a practical example of how our National Infrastructure Plan is fostering these relationships.

We've got a competitive exchange rate now. The Rand against the Dollar has depreciated in the last number of months, and that provides an opportunity for South African exporters, but also for South African companies that want to reclaim part of the domestic market. So you can look at the challenges, or you can see the enormous opportunity that a more competitive exchange rate brings; it means you've got a more competitive price when you want to sell your products to local consumers and you are competing against imports. It's bad for the oil price, it means we pay a bit more on oil and we pay more on imported capital equipment. But on the consumer goods sector, it's the moment to launch a deep offensive, to reclaim the domestic market.

When government does anti-poverty programmes - social grants is one of them - many in the private sector remains sceptical, and they want to know whether it is sustainable. And of course we have similar concerns - we think a growth-in-jobs directed way out of poverty is the fundamental solution, but in the meantime social grants play a key role in promoting a greater cohesion in the society. But there is something else to it - it also creates markets. When a senior executive of Pep was telling me about his business recently, he was very clear that the social grants have been one of the most significant drivers of demand for Pep stores in many parts of the country.

So the question then is, as we do these things, are South African businesses as the private sector utilising that space? Because the state essentially helps to create markets, to bring poor people into commercial markets. We don't want to leave it there and have it connected only via grants - we want to bring them in as workers, as entrepreneurs, as people with all the other elements of economic citizenship. But the first connection of that is the markets we are creating.

We have institutions of innovation, which is the third area I want to deal with. Universities have enormous research capacity. Recently someone came to me and said, "You know Minister, you guys have got to do something, there is something outrageous happening." And I said, "What is it?" And he replied, "You know, there is this American company, running around to all the South African universities, looking at the new innovations coming out and then immediately contracting with those academics and registering a patent on it. You must do something." And I asked, "Isn't this an opportunity for South Africans? You are here, you know where WITS is, you know where UJ is and where Stellenbosch is, so allow the innovation."

I want to tell you another story - I hosted the Minister of the Economy from the United Arab Emirates a few months ago. And he came with a big delegation and they were very pleased to be here. They showed some promo videos, and one of them was of what they call a floppy sprinkler system - it's a system that has been engineered to give the least amount of water for the maximum effect. Instead of wasting water, it is designed for water-poor countries or water-poor parts of a country. And they said this was a big thing the UAE is pioneering now. They have it in Sudan, and in many other places. As we talked it became evident that the invention was South African. It was invented here, but bought and now globalised by the UAE. So that's an example of how institutions are generating knowledge that is usable, but we need an entrepreneurial skill to do that.

Let me give you another example of skills. I recognise there are challenges in some of the DVET colleges and some of the universities with quality and we need to address that. But I went to launch the new Quantum Taxi that Toyota has produced. And the Quantum Taxi has got a fascinating story because five years ago every minibus taxi in South Africa was imported. I sat down with Johan van Zyl, the CEO. By the way, he has now been appointed the CEO for Toyota Europe - he is a South African businessperson who is so good at his work that Toyota is making him CEO of their most important market. Johan gave a couple of ideas, we engineered the arrangement, and it resulted in Toyota bringing the production of minibus taxis to South Africa, to eThekwini. In one of our trips to China, we spoke to a company called Beijing Autoworks, and they set up an assembly plant here in Gauteng. Today we have produced more than 35,000 taxis in South Africa, which were previously imported.

Then I went to the Quantum factory in Durban. And as we were walking on the production floor, in each major section Johan had an engineer introducing the thing and talking to us about it. So we had electrical engineers, materials engineers, and so on. And as we went through this production line, what struck me was that the engineers were uniformly black South Africans, and mainly women. And so when we got to the end of the line I said to him: "Johan, it is impressive that you've got all these black South Africans as engineers. How do you manage? I hear that there as such problems in getting skills - are you not facing this?" He said to me, "You know, Minister, there are sections of this plant where we are the best performing plant in Toyota - and they are run by the people you have met now. And you know why? It's because I don't buy the whingeing and the arguments that you often hear at dinner parties. The job of a university is to train people to think - my job as a business man is to train them to work. I bring them in, I teach them how to work, I take the conceptual skills they have learned elsewhere and I teach them the rigours of disciplined production. And by doing that and exposing them to Toyota's culture of quality, I see that the people I have employed meet all the international standards."

Now the same labour market that he draws his people from, all of us draw our people from. It's not to say there are not challenges with our education - there clearly are challenges we have to meet - it's to see that there are opportunities too. Winning people and winning nations are not ones that only focus on their problems - they are the ones that see the opportunity, grab it and run with it.

I will give you a final example because I think these examples illustrate different things. In the DSTV programme Grey's Anatomy they had this fancy scanning machine. It is a great machine - a person is injured, about to die, they
wheel him into the trauma unit and put him on this machine. They punch the screen, his bones gets enlarged, they see where the fractures are and they immediately operate. Now that machine is made in South Africa. It is South African intellectual property, a company that is in fact 93% state-owned, through the IDC, the Industrial Development Corporation. And it is a great success story, but the problem is as long as it remains small numbers, you don't transform an economy. We need a private sector that spots these opportunities and brings an energy to these kind of things. Much as we need to improve our work as the state, and address the many challenges that there are in the state.

The next area is industrial funding. And there the Department of Trade and Industry and the Small Business Development Department have set out what they have available, but without the toolbox. I want to talk about one element of a toolbox only. Now the Industrial Development Corporation is one of our public institutions and I spoke about them in respect with this scanning machine. And they are quite an extraordinary institution. In the last five years the IDC invested R60 billion of its own money in the South African economy. And it is in projects that are sustainable - in other words, not grants in failing companies but companies that will be able to compete in the modern world.

In my budget vote in parliament a few months ago I announced a new R23 billion programme that the IDC will launch. It is a programme to promote black industrialists. It will make available money to black South Africans who need to enter the productive sectors of the economy - agro-processing, auto manufacturing of components, textiles and clothing, components for the green economy, the setting up of tourism infrastructure and support services, the transport component sector, pharmaceuticals, all of these areas and many more -- this fund will be available. It will provide concessional rates - a minimum of a 150 basis points off the traditional IDC cost of funding, plus additional discounts on that if localisation and job targets are met. And the idea is to have somewhat simpler systems. We still have to risk evaluate projects, there still has to be a core of business logic and a sustainability path, but subject to that there is money available as one element, and that is the supply side of capital. That, connected with the demand side - how state procurement is going to be supporting the development of black industrialists - creates enormous opportunity. Not just for black South Africans, but also for traditional companies who need to be expanding and diversifying their supply chain - many more companies can come into that supply chain. You can increase the level of economic dynamism and growth. You can create new markets and opportunities. There are opportunities to export, so the global challenges can best be combatted by us not sitting and bemoaning the fact that it is going to rain tomorrow, but to take out the umbrella. And these are the measures we are taking now.

So, as I conclude, we want to have a partnership. We are in very successful partnerships with parts of the private sector already. We can deepen that and bring more people in, but we can also deepen the existing partnerships. In each of your businesses, as we look at partnerships, the question is not what the state can do more - sometimes it may be a relevant question - but how society can benefit more from that partnership. Because the more value this partnership brings to society - in enhanced growth, in inclusive growth, in jobs and so on - the more logic there is to the state putting resources into the partnership with the private sector. So in the end, like any good businessperson, you know you run value in every transaction and every relationship you have. So do the state - we need to get that value, but the value we want is for the South African people as a whole.

The National General Council has made quite far-reaching decisions. I have resisted the temptation to run through its key decisions, because the ANC is making an announcement and providing the details of that. But I wanted to say that what comes out of that is a renewed commitment by the ruling party that we've got to fix the problems of performance in the state. We start off by recognising our side is not perfect in what we've done, but we also make the point there are enormous bits that work very fundamentally. I am going to conclude with my final statistic and it is electricity. Everyone is quite pleased that we haven't had load shedding in a while, but imagine being subjected to lengthy load shedding 365 days a year. Well, if you don't have electricity you effectively have the equivalent of perpetual load shedding. The first electricity in South Africa was produced in the year 1890, in my hometown of Cape Town. And between 1890 and 1996 - I use 1996 because that was the first census year after the democratic transition - 5.2 million homes were connected to the electricity grid. From 1996 to last year an additional more than 7.5 million homes were connected to the grid. In other words, in less than 20 years we have achieved more than in 106 years before democracy. And so if we have the challenges that we have now of energy generation, the key of that is we had an artificial energy shortage 25 years ago because Soweto was in darkness. So 4 ½ to 5 South Africans per home have been brought into the modern age with access to electricity - a life-changing access.

A few months ago, the president opened Medupi power station's Unit Six, which will produce 794 megawatts of energy and the PICC, the Presidential Infrastructure Coordinating Commission, are now monitoring the implementation of our renewable energy programme, which is a partnership with the private sector. To date we have more than 2,000 megawatts of energy that has come onto the grid through renewable energy. Just to contextualise - Medupi's Unit Six alone is generating significantly more energy that most countries on the African continent. So you can see how important investment is in modernising it. Our challenge is to help electrify the continent, and we are involved in some big projects, like Grand Inga, to help with energy on the continent. So there are some big initiatives and we are beginning to see some of the fruits of that. We are very confident about the future, even though we know for the next year and a half these global headwinds are tough, and they are going to require careful navigation.

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