Minister’s Address to the Swiss Chamber Dinner in Honour of the visiting State Secretary

His Excellency, Swiss State Secretary for Economic Affairs, Mr Jean-Daniel Gerber,
Members of the Swiss Delegation,
Ladies and gentlemen,

It gives me great pleasure to be invited to give this address to the SwissCham dinner tonight and on eve of the 2nd Joint Economic Committee (JEC) between South Africa and Switzerland. Tomorrow, the State Secretary and I will be opening the JEC which co-chaired by Mr Xavier Carim, the Deputy Director General for International Trade and Economic Development in my department and Ambassador Monika Rühl Burzi, Bilateral Economic Relations, State Secretariat for Economic Affairs of Switzerland. I trust that those discussions will be fruitful and will contribute to the already good and growing economic relations between our countries.

Trade relations
Ladies and gentlemen, since the 1st meeting of the Joint Economic Committee meeting in 2008, total trade turnover between Switzerland and South Africa have grown significantly. Despite the financial crisis between 2008 and 2009, total trade grew by 24%, from R21.5 billion to R28.3 billion. South African’s exports to Switzerland amounted to R21.5 billion in 2009 compared to R15.3 billion compared to the previous year. Our imports from Switzerland grew from R6.19 billion in 2008 to R6.28 billion in 2008. South Africa’s large exports compared to imports in our bilateral trade can be explained by the fact that our exports to Switzerland consists mainly of precious metals, diamonds and non-processed minerals. Our imports from Switzerland, are composed mainly of value added products, mainly medical products, foods and drinks, and other mechanical products. We would like to diversify our export basket to processed and value added products. In this regard, the dti has recently undertaken outwards selling missions to Switzerland and Austria to promote processed foods, wines and flowers, as well as electronic components. The delegation was very well received and had a large number of meetings with potential clients, which proved highly promising. The visit was a success and some of the business delegation already reported that they have received export orders, or are soon to conclude business, as a result of the mission. Next year the dti is planning to organize an inwards buying mission for potential importers from Switzerland.

Inwards investment
On the investment front, our relations continue to grow. Swiss-owned companies employ more than 21 000 people in South Africa. Recent new investments have included those made by Nestlé in the field of mineral waters, Zurich Insurance in the financial services sector and pharmaceutical giant Roche in the chemicals industry.

For 2010/2011 the dti with our Embassy in Berne has decided to focus on the Renewable Energy Sector in efforts to encourage inward investment and cooperation. Switzerland has a wealth of know how and expertise in the field of Alternative Energy. With the development of the current Feed-In tariffs and other crucial framework for Renewable Energy, South Africa has become a very attractive market for Renewable Energy investments. A road show through Switzerland to elevate awareness for the investment opportunities in this field is planned to take place during the year, followed by a fact finding mission to SA October 2010.

In February 2010, I announced the Second Industrial Action Plan – IPAP2. IPAP 2 builds on the National Industrial Policy Framework (NIPF) and the 2007/8 IPAP. Its purpose is to scale up South Africa’s efforts to promote long-term industrialisation and industrial diversification beyond reliance on traditional commodities and nontraditional services. To achieve this, the country aims to expand production in value-added sectors with high employment and growth multipliers that compete in export markets as well as compete in the domestic market against imports. Much emphasis is placed on more labour absorbing production and services sectors and the increased participation of historically disadvantaged people and regions in the economy.

Manufacturing and other productive sectors of the economy are the engines of long-term sustainable growth and job creation in developing countries. To reinvigorate these sectors, the government intends to: 1) develop proposals to enhance access to concessional industrial financing for investment in IPAP priorities and other productive sectors; 2) revise procurement legislation, regulations and practices to enable the designation of large, strategic and repeat or ‘fleet’ procurement in a range of sectors; 3) deploy trade policies more strategically to include campaigns against practices such as customs fraud, under invoicing, smuggling and illegal imports and to use tariffs to benefit strategic sectors; and 4) target anti-competitive practices.

I wish to invite Swiss companies to take advantage of the opportunities presented by IPAP 2.

Economic Situation and the impact of the Financial Crisis on South Africa.
SA was largely spared the systemic financial sector implosion some other countries went through. This was largely thanks to a combination of prudent financial regulation, the National Credit Act which limited “reckless lending”, the maintenance of exchange controls – which limited potential exposure, and our infrastructure development programmes.

This crisis is not of our own making. It had its origin in the bursting of a financial bubble in the developed work – a bubble caused by a proliferation of speculative activity fuelled by a hands off approach by regulatory authorities mesmerized by narrow free market fundamentalist ideologies. We in SA were largely spared from experiencing the systemic financial sector implosion some other countries went through due to a combination of prudent financial regulation, the national credit act and the maintenance of exchange controls – which limited potential exposure of pension funds or municipal accounts to the kind of unsafe investments in derivatives that a number of their counterparts elsewhere had made with disastrous consequences.

But we were not able to escape the second order, real economy, effects of what soon became a global economic crisis. It is against that background that we have to record, and grapple with the reality of, the loss of around 900 000 jobs. Most of these jobs lost were in mining – where the crises produced an abrupt fall in demand and in prices for many mineral products – and in manufacturing which experienced a 30,4% fall in physical volume of production, and suffered 202 000 job losses between October 2008 and December 2009. In manufacturing, among the sectors most strongly affected were those most integrated into global value chains and producing consumer durables dependent on credit finance for their purchase. In SA as elsewhere this included the motor industry which drives at least 6 to 7 other sub sectors and the already fragile clothing and textile sector, which nevertheless continues to provide employment to nearly 100,000 people. We are fortunately now officially out of the recession as is the global economy as a whole. According to latest figures for December manufacturing output was 3,2% higher than in corresponding month 2008 – first annualised rise for 14 months. But there is still great uncertainty about the durability of the recovery with most agreeing recovery is fragile with the risk of a double dip recession still a possibility.

Ladies and gentlemen, I would not like to waste anymore of your time. I wish that your mission in South Africa will be a success and that you will have fruitful deliberations in the Joint Economic Committee meeting tomorrow.
Thank you.

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