Posted: November 27, 2015
Address by Deputy Minister Masina on the occasion of the Eastern Cape Province Economic Symposium, East London International Convention Centre, East London
|Premier of the Eastern Cape, Honorable Mr Pumulo Masualle
MEC of Economic Development, Environmental Affairs and Tourism, Honorable Sakhumzi Somyo
The rest of the Eastern Cape Cabinet
Leadership of the economic sector
Ladies and gentlemen,
On behalf of the Department of Trade and Industry, I wish to communicate our sincere gratitude for having been invited to form part of this important annual symposium.
We are grateful because it affords us an opportunity to share our industrial policy perspective with critical social partners and also to share our understanding of how the Eastern Cape fits into the larger national picture within the context of our industrial policy.
This is quite crucial in respect of the profile of the Eastern Cape in comparison of the other regions in South Africa. The Eastern Cape is amongst those provinces that we can classify as rural regions, at least for purposes of economic aggregation. This classification is concerned with assessing the peculiar opportunities for growth that exist in these regions differently from the other regions that have been the industrial epicenter of our inherited economy.
Central to this is the question of the resource capacity of rural regions and their potential for economic growth. Therefore to answer the question of which areas can be specified as opportunities for Economic Growth in the Eastern Cape; I wish to make four related points.
Firstly, In this regard, government identified several strategic ports that would serve as Industrial Development Zones. These include the Coega IDZ in Port Elizabeth, the East London IDZ, the Dube Trade Port in Durban, the Richards Bay IDZ, the Saldanha Bay IDZ and this the OR Tambo IDZ.
South Africa has built a cumulative private investment portfolio of at least R4.7 billion in existing IDZs, mainly at the Coega and East London Industrial Development Zones.
I assume that this forum will also know that there is a committed investments value of R14.2 billion mainly for Coega and East London IDZs. Therefore the economic activities that already organize within the Industrial Development Zones have already proven themselves to be the epicentres of provincial growth within the existing economic infrastructure framework.
Secondly, I want to make the suggestion that our existing economic infrastructure is not sufficient to realize the optimal potential of the Eastern Cape. This is because the East London and the Coega IDZs are located in the historically developed metropolitan centres and therefore reproduce investment patterns that exclude the non-metropolitan areas of the province.
The trends of investment in-flow into the Eastern Cape suggest that the real impact of growth remains concentrated in the historic industrial centers. Therefore the growth in employment, outside the public works programme and public sector, remains visible mostly in the historical metropolis.
Therefore my third point is related to the question of how growth can be centered on not just the developed cities of the Eastern Cape but also must be imagined towards rural towns. This brings me to the question of the possibility of up-scaling agricultural activities in the rural base of the Eastern Cape into both commercial enterprise and a source of manufacturing inputs.
Agricultural activities in themselves carry huge commercial potential. This is in the areas of farming for the supply of food articles to retail shops, private institutions and government institutions at a mass scale.
It also serves as a feeder sector into manufacturing and agro-processing sectors. This could be in the form of food canning, timber and meat supplies.
In this regard, agriculture serves as a base for capital formation. This accumulated capital in turn may serve as investment for diversification in the transportation and services value chains.
In this context my fourth point is about the Black Industrialists programme that we were asked to talk about in relation to the economic transformation and growth objectives of the Eastern Cape. This is in relation to the question of the state actively organising capital investment outside the rigid framework of private financial institutions.
As government we have a strategic impression that there is a need to expand the base of entrepreneurs and industrialists from the current small base of mainly white entrepreneurs and industrialists.
The black majority need to produce more and more entrepreneurs and industrialists as a way of creating multiple avenues for channeling economic opportunities and benefits to the black population.
Expansion of the base of black industrialists may rapidly create more employment and thereby rapidly reduce poverty and inequality. This is due to the fact that the emergence of a black industrialist class implies that there will be the creation of new industrial assets.
The creation of new industrial assets has a direct impact on employment creation and economic growth. In the context of this region, these new assets must emerge out of the conversion of the subsistence land resources available into commercial values. As already expressed above, this will require entrepreneurial creativity.
The primary impact of the black industrialist programme is intended to be the creation of new and diverse industrial assets upon which employment could be created. However, this is not the simple explanation of this impact.
The second intended impact of this programme is related to the need for the restructuring of the South African economy. South Africa’s industrial economy is spatially concentrated and systematically leaves out great sections of the population in investment-starved regions.
As I had already mentioned, the major industrial activity in our country takes place in old metropolises like Johannesburg, Durban, East London, Port Elizabeth, Cape Town and the mining regions of the Northern Provinces.
Thus, a stronger base of competitive and innovative black entrepreneurs and industrialists is not only necessary but may also be much better placed to drive the government’s efforts for industrial decentralization, given that large numbers of our population live in less industrialized and rural regions of our country with high unemployment levels.
It is for this reason that as government we decided to pursue this Black Industrialists Programme as part of the strategic instruments that underpin our Industrial Policy Action Plan.
We understood that there is a need for a dedicated policy and financing initiative that must actively boost the capacity of black industrialists in a capital markets environment that favors particularly established white capital.
The greater majority of black entrepreneurs have no historically accumulated capital-assets as a result of our history of political and economic suppression.
Thus, they have limited capacity to finance their industrial ambitions and have difficulty accessing private credit without productive assets to use as collateral.
Similarly, there is a tendency by Development Financial Institutions to employ similar measures as those of commercial banks in determining eligibility for credit access.
Thus part of the objectives of this program is to systematically align the respective functions of these Development Finance Institutions towards a quantitative black economic empowerment output that will qualitatively alter the racial balance of industrial ownership
The question that arises is on how the private sector and government of the Eastern Cape can partner around a concrete local industrial strategy that can pull capital from our Black Industrialists programme towards the areas of this region that are less industrialized.
In so far as value chains are concerned, the existing Industrial Development Zones can become the export exit ports for the other commercial and industrial output that can be produced in the other areas of the province.
By way of summary, I want to state that the opportunity for growth in the Eastern Cape depends on our capacity to bring to industrial and commercial economic life the natural resource advantage like agricultural land that the province possesses.
This unlocking of potential involves the harnessing of entrepreneurial creativity among the established and emerging business networks and the ability of provincial government to harness both private and public investment to capitalize the industrial ambitions of provincial entrepreneurs.
In this regard, I do hope that you will also leverage on the Black Industrialists policy initiative to build developmental business platforms that will pursue the Eastern Cape’s industrial and economic growth objectives.