SA infrastructure plan spurs Davos interest – Rob Davies

2014-01-22 15:39

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Investment prospects for Africa and South Africa look bright, Trade and Industry Minister Rob Davies has said.

Speaking from the World Economic Forum (WEF) in Davos, Switzerland, he said an increasing number of investors attending the event were turning their gaze south.

“A number of investors [at Davos], from a range of industries, are beginning to look at the African continent. This includes people who have not been here before, or people who’ve run their African operations out of the Middle East [or elsewhere].

“[They] are now beginning to explore the possibilities of increasing their investments in ... Africa and also looking to South Africa as an important gateway to run operations in the southern part of the African continent.”

Davies said it was noticeable to those attending the forum that Africa was coming of age economically.

“The future of the African continent seems to be moving into more value-added activities, industrialising our continent. And that’s our ambition.

“One of the things ... that is noticeable here [in Davos], is that Africa has moved out of the fringes and is becoming increasingly seen as part of the mainstream...”

The continent’s prospects were bright.

“The prospects for Africa continue to be bright, with the continent as a whole anticipating to raise the growth rate from about 5.1% last year to 6.1% this year.

“And for South Africa to also increase its growth rate to 3.2% this year – that’s the IMF [International Monetary Fund] estimation.”

An area of high interest was South Africa’s infrastructure development plan.

“[There is] considerable interest that I’ve detected in the infrastructure development programme. A lot of companies around the world realise that we’re quite serious and have a good track record.”

Government had spent R1 trillion on much-needed infrastructure development and this figure was poised to increase.

Among the challenges facing the country was how to create a new, strong competitive advantage for its manufacturing sector.

In this regard, South Africa had to “bite this bullet” of adding more value to its mineral products, an issue that had long been talked about.

“This means that we have to create a price advantage for beneficiating raw products inside South Africa. So we’ve got to make sure that the raw material is available at a competitive price for those activities.”

Davies said there was a need to establish support measures around this.

He signalled what he called a “fairly significant change” in the country’s trade profile over the next few years.

“We’re very conscious of the fact that we’re talking about industrialising the African continent.

“That means we can find opportunities for our products on the African continent, but we’re also going to have to accept that we will have to take products from other countries and that other countries will also be industrialising.

“So I think we’re looking at a fairly significant change in our trade profiles, in the medium term, with the African continent.”

This change should provide “major advantages” for local industry.

On the current rand exchange rate – the currency recently hit a record low against the US dollar – he said this was not necessarily a bad thing for manufacturing.

“[I’m] not so sure that the [current] exchange rate of the rand is necessarily a bad thing for our manufacturing industry. I don’t think it’s the answer and it could [create] cost pressures.

“But, certainly, when we had an over-valued exchange rate a few years ago, that was a serious impediment to manufacturing and also to exports in general. So ... it’s an opportunity as well as a challenge.”

On the threat of a major wage strike in the platinum sector, Davies said government would prefer to see more labour stability.

“We would call on everybody ... not to engage in illegal activities and, as far as possible, to try to find a solution through negotiation that does not require strike action.”

Davies said there were large numbers of corporate members attending this year’s forum in Davos.

The South African team at the WEF – which opened today and runs until Saturday – was in discussion with them.

“Part of the interaction we have is to meet them and discuss investment opportunities that are here,” he said.

Other national ministers attending the event include Finance Minister Pravin Gordhan, Minister in the Presidency Trevor Manuel, Science and Technology Minister Derek Hanekom, Economic Development Minister Ebrahim Patel, Public Enterprises Minister Malusi Gigaba, Water and Environmental Affairs Minister Edna Molewa and Communications Minister Yunus Carrim.

There is also a large contingent of CEOs and business leaders from major South African companies.

The theme of this year’s meeting is The Reshaping of the World: Consequences for Society, Politics and Business.

It is taking place against the background of a world economy showing signs of recovery.

Davies confirmed this by saying: “The IMF ... is anticipating that world growth will increase to about 3.7% this year. Some of this will come from a very, very, minor recovery in Europe on top of the slightly more robust recovery in the US.”

He said there was much discussion in Davos on the structural challenges stemming from the recession and the prospects looking ahead.

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