Full Speech: President Zuma to the Black Business Council Summit

Fellow South Africans and friends, Good morning to you all.

I am pleased that the Black Business Council has heeded our call to develop black industrialists across many sectors of our economy.

I remember raising concern that there were no black industrialists in the country when we last met last year.

The theme of your 2012 Summit: “Economic Transformation and its Role in Industrialisation of Black Firms”, is very strategic and instructive.

Other than the lack of black participation in the industrial sector, the theme also speaks to the fact that over the last few decades our economy has been undergoing major structural changes that threaten to de-industrialise the economy.

Research indicates that while countries such as Chile and India have achieved sustained growth through rapid industrialisation, African economies have failed to industrialise.

We must seize the moment now and promote manufacturing as the backbone of our industrialization drive, for sustained economic growth.

The launch of the flagship Black Industrialists Development Programme is a quick and timely response.

For its part, Government has adopted the National Industrial Policy Framework and the Industrial Policy Action Plan.

Our New Growth Path and the Action Plan identifies the manufacturing sector as one of the key programmes to aid economic growth and job creation. That is why we encourage you on this path.

We encourage you on this path as a lot of progress is already being made.   

Government has created a number of instruments to promote manufacturing.

For example, the Automotive Investment Scheme worth 2, 69 billion rand has been instrumental in securing approximately 15 billion rand investment commitments from assemblers and component suppliers.    This demonstrates an overwhelming vote of confidence by global automotive companies in South Africa’s policy framework and capabilities.

Our Clothing Textile Competitiveness Programme has effectively stabilised a deeply vulnerable sector.

To date, approximately 300 million rand has been disbursed to protect 50,000 jobs in the sector.

South African companies, namely Foschini, Truworths and Edcon have committed to procuring 70% of their merchandise domestically.

This is a very important example of public and private sector cooperation in the national interest to grow the economy and to save jobs.

The value of the IDC’s funding approval has increased by 55 percent, with 13, 5 billion rand committed to support investment in 268 companies.

In addition, an amount of 6, 1 billion rand has been spent by the IDC to support companies in distress as a result of adverse economic conditions.

Through the South African Revenue Service, we are stepping up our efforts to stop the flow of unwanted and illegal imports of goods into our country.

We are also vigilant against illegal business practice such as under-invoicing and the importation of sub-standard products which undermine local manufacturers.

Government also remains committed to address other and equally pressing policy issues such as the Broad Based Black Economic Empowerment.

While we have registered impressive progress with respect to BBBEE, especially in the areas of financial services and mining sectors, manufacturing is stubbornly lagging behind.

We also need to align the BEE codes with the industrial strategy.

We therefore welcome the dti proposal for a specific financing mechanism to fund majority black-owned manufacturing companies.

This is one of the measures you should consider as you discuss strategies to boost black-owned and controlled industries as part of economic transformation.

Esteemed compatriots, We cannot escape the fact that we are meeting during a difficult economic climate locally and abroad.

While we were still recovering from the 2009 economic crisis, we have been hit by another global crisis affecting Europe and the United States, our strategic economic partners.

The European Union and the USA are the main importers of South Africa’s manufactured goods. They collectively import 38% of total manufactured goods. It can therefore be expected that exports of manufactured goods will be adversely affected by the current crisis.

Adding to the negative global economic outlook are the internal challenges.

The ongoing strikes in the mining sector have had a significant effect on the economy in 2012.

As of mid-September, the National Treasury estimated that the total rand value of production lost in platinum and gold mining has been roughly 4.5 billion rand, while 118 million rand was lost in coal.

The strikes have spread to other sectors such as manufacturing, logistics and services.

The announced municipal workers strike could include most of SAMWU’s 190,000 members. This will add to 75,000 miners who are on strike as well as 20,000 truckers.

Our economic data does not indicate a significant drop in business confidence yet since the strikes and the global economic decline, but our responsibility is to ensure that we do not reach a crisis point.   

A decrease in domestic business confidence will result in lower investment and job creation.

Lower foreign investment can raise the cost of government borrowing, since foreigners hold about 37 per cent of all rand-denominated debt.   

These are just some of the difficulties we can find ourselves in, should we delay in finding solutions to the labour disputes.

The rights of workers and employers are guaranteed in the Constitution and are also catered for in legislation. We have adequate mechanisms to resolve disputes.   

We therefore call on all parties to the labour disputes to redouble their efforts in order to find amicable solutions. We must get the economy back to full steam and create the jobs that our people so desperately need.

Together we also need to deal with the wrong perceptions about our country or the economy locally and abroad.

On 27 September 2012, the rating agency Moody’s downgraded the country’s long-term foreign currency rating and local currency rating and maintained the outlook at negative.

Some of the reasons cited by Moody’s are not new to government.

They have been the focus of many official government publications, including the Budget Review and our National Development Plan. In confronting these issues, government is already implementing concrete actions.

These include the following: 

–    We are investing in infrastructure to increase capacity in our networks.

–    We are reducing the deficit and stabilising debt.

–    We are instituting a range of measures to improve the competitiveness of the manufacturing sector, including regulatory reforms and competitiveness.

–    We are investing in education and skills development.

We are convinced that our policies and interventions as government, our strong tried and tested democratic institutions, as well as dedicated and patriotic leaders in government, business, labour and the community sectors will enable the country to emerge from the current phase sooner and stronger.

I have convened a meeting of business, labour and community representatives tomorrow in Tshwane to discuss what we can do together, to get our country out of this current situation.

Working together within the NEDLAC framework we were able to extricate the economy from the 2009 recession and save jobs. We should be able to achieve the same objectives this time around.

We are going through a rough patch like a number of other economies around the world. We will work together to get things back on track.

Today I would like to send out a clear message to investors locally and abroad. South Africa is open for business.   

I thank you.