BUSINESS SOUTH AFRICA PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON LABOUR 20 MAY 2002

1. BUSINESS SOUTH AFRICA PRESENTATION TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON LABOUR 20 MAY 2002 CAPE TOWN

2. Proposed agenda for Portfolio Committee on Labour Cas Coovadia: Introductory remarks Ben van der Ross: Overview of BSA Progress being made with the unity processes with the BBC Cas Coovadia: Black economic empowerment Roger Baxter: Breaking through the economic growth barrier in South Africa

3. Primary Functions of Business Organisations • 1. Umbrella Body/ies • Represent the interests of business as a whole • Promote / protect the macro interests of business in respect of national matters such as legislation, taxation, labour issues, etc. • Represents business internationally. • 2. Chamber Movement • Concentrates on local level service delivery and direct support to its members (corporates, to a large extent - smaller business).

4. Current Structure of Organised Business in South Africa Business South Africa (umbrella body) Multi-sectoral / Chamber Organisations AHI SACOB Sectoral Organisations Agri SA Banking Council etc. See slide 3 for full list Unique - largest 60 companies only SAF

5. Uni-sectoral Members of Business South Africa • Agri SA • Banking Council • Building Industries Federation of SA (BIFSA) • Chamber of Mines of South Africa • Chemical and Allied Industries’ Association (CAIA) • Insurance Industries Employer Association (IIEA) • Life Offices Association (LOA) • National Association of Automobile Maufacturers of South Africa (NAAMSA) • Printing Industries Federation of South Africa (PIFSA) • Retailers’ Association • Road Freight Employers Association (RFEA) • South African Federation of Civil Engineering Contractors (SAFCEC) • South African Insurance Association (SAIA) • South African Petroleum Industry Association (SAPIA) • Steel and Engineering Industries Federaiton of South Africa (SEIFSA) • Sugar Maufacturing and Refining Employers’ Association (SMREA)

6. Black Business Council (umbrella body) Multi-sectoral / Chamber Organisations NAFCOC FABCOS Various professional and business organisations and associations See slide 5 for full list ABASA ABSIP

7. Black Business Council Members • Association for the Advancement of Black Accountants of Southern Africa (ABASA) • Association of Black Securities and Invesment Professionals (ABSIP) • African Minerals and Energy Forum (AMEF) • Black Information Technology Forum (BITF) • Black Lawyers Association (BLA) • Black Management Forum (BMF) • Congress of Business and Economics (CBE) • National Black Business Caucus (NBBC) • South African Black Technical and Allied Careers Organisation (SABTACO) • South African Institute of Black Property Practitioners (SAIBPP) • South African Communications Forum (SACF) • Black Business Executive Circle (BBEC)

8. The Business Unity Process 1. At overall level Merger of BBC / BSA Membership will accommodate at least all of the current members of BBC and BSA

9. The Business Unity Process 2. At chamber level AHI FABCOS NAFCOC SACOB These organisations will develop an effective working arrangement to co-ordinate their operations and agree how they will relate to the merged BBC / BSA.

10. Growth and Development Summit • Driven by the Department of Labour • NEDLAC is implementing agency • 4 agreed themes • More Jobs, Better Jobs - Decent Work for All; • Addressing the Investment Challenge; • Advancing Equity, Developing Skills and Creating Economic Opportunities; and • Local Action for Implementation and Development.

11. Format of Summit Not yet final but expect: - keynote address by President; - addresss by each constituency; - signature of pre-negotiated agreements The Agreements • Currently being negotiated by Task Teams • Business representation on each Task Team - 3 from BBC / NAFCOC and 3 from BSA • Focus is on identifying a limited number of specific, substantial, but “do-able” objectives. • Too early to predict exact outcomes

12. However • 1. Issues on which consensus is already emerging are: • an expanded public works (or Public Employment) programme; and • focus on the learnerships initiative. • 2. Many other important and relevant issues are being identified. • 3. Will have to agree processes to take these forward.

13. BLACK ECONOMIC EMPOWERMENT

14. Broad Principles Historical legacy Socio-political imperative Recognition of economic imperative Sound business principles – sustainability Government role in addressing non-commercial risk

15. Specific areas Target group HDSA / Black Consistency Funding Capacity of financial sector Effective utilisation of government funds

16. Funding – continued Donor and international funds Structure into PPP? Utilisation of mechanisms in Strategy Doc? Prioritisation Scorecard Support balanced scorecard

17. BEE Advisory Council Business representation BBC / BSA Interim Leadership Access to financial services Dealt with in Financial Sector Charter Targeted investments Dealt with in Financial Sector Charter

18. Employment Equity / Skills Development Mining and Petroleum Industry Charters Learnerships Intervention in school and university curricula SETA’s

19. Ownership Direct / Indirect Broad-based Capacity of trustees / fund managers Government role

20. Control Fulcrum of power Indirect ownership representation Executive management

21. Business – partners with government Need for sustainability Sound business practice Funding Positive energy CONCLUSION

22. SOUTH AFRICA AT A CRITICAL ECONOMIC THRESHOLD: KEY ISSUES TO BREAKING THROUGH THE ECONOMIC GROWTH BARRIER?

23. PLACING SOUTH AFRICA SQUARELY ON THE GLOBAL INVESTMENT RADAR SCREEN Thailand Brazil Malaysia China South Africa? Mexico Singapore Korea Ireland Argentina Poland Hong Kong Chile

24. South Africa, towards a shared vision South Africa is a remarkable country. Arising from the ashes of its dark apartheid past, the country experienced a smooth and peaceful transition to democracy. A solid foundation for democracy and economic prosperity has been laid. The focus is now shifting towards realising the economic miracle. A vision of a prosperous fast growing South Africa which provides sustainable employment opportunities and rising living standards to all its people is a shared vision that all South Africans can aspire to.

25. Significant achievements in the new democracy • Significant progress has been made in ensuring that South Africa’s young democracy is built on solid foundation. • Institutions that support democracy have been put in place. • Fiscal and monetary policy have achieved a much more stable macroeconomic framework. • Trade & exchange control liberalisation have opened up South Africa’s economy to global forces including access to new markets. • South Africa, at the corporate, government and civil socdiety levels, is playing a much more significant role in global debates (e.g. in multilateral discussions) • There is no doubt that these achievements have contributed to a more sustainable and higher economic growth platform for South Africa.

26. South Africa has a number of advantages and strengths • South Africa has a number of advantages, some absolute, which form part of the attractions of the country for domestic and foreign investment: • Abundant natural resources and natural attractions. • World class infrastructure. • A well-developed and efficient capital market. • A world class banking and financial services sector. • World class companies in a number of sectors. • The world’s cheapest industrial electricity price with reliable supply. • Abundant supply of labour. • A government which is willing to globalise the economy. • Cheap real estate costs.

28. Opportunities are opening up • ·As market barriers are reduced so new market opportunities for South African exporters are being realised (AGOA, EU-SA FTA, US-SACU FTA, etc.) • ·Access to global capital and foreign direct investment in the rapidly globalising world economy is resulting in new opportunities for investment, technology transfer and improved economic performance in South Africa. • ·NEPAD and increased regional integration will help stabilise the region and reposition Africa for the 21st century.

29. SETTING THE SCENE: WHERE IS SOUTH AFRICA AT?

30. SOUTH AFRICA’S ECONOMIC PERFORMANCE: • Yes good progress has been made in stabilising the macro- economy, reducing inflation, reducing the budget deficit, stabilising the fiscal situation, relaxing exchange controls, liberalising international trade, introducing a new skills development paradigm and stabilising the labour market. • But, South Africa’s investment and growth rates remain far too low to tackle high unemployment and to raise living standards.

31. SOUTH AFRICA STANDS AT A CRITICAL ECONOMIC THRESHOLD The economic growth trajectory of the economy needs to be raised to a significantly higher level through a massive expansion in the growth of economic opportunity and investment. Failure to raise the growth trajectory from the current 2.5% per annum rate, given South Africa's 7.6 million unemployed people, may undermine the country’s long-term future. Organised business rejects the latter scenario as unacceptable. But we must understand the dangers of not raising the economic growth trajectory.

36. SOUTH AFRICA’S ECONOMIC PERFORMANCE RELATIVE TO COMPETITORS: • Low savings and investment rates. • Little foreign direct investment. • Relatively low economic growth rates. • High unemployment.

42. SOUTH AFRICA NEEDS TO RAISE THE ECONOMIC GROWTH TRAJECTORY TO A HIGHER LEVEL THROUGH: • A massive expansion in the growth of economic opportunity and investment. • A massive expansion in the skills base of the broad population to ensure all people participate in the growth of opportunity.

43. In general, for an economy at South Africa’s stage of development the key driver of economic growth will be supply-side investment. • That fuels an export boom. • Raises employment and disposable incomes. • That allows steady growth in the size of the domestic market. • That encourages foreign participation in our economy (FDI and portfolio investment).

44. IS SOUTH AFRICAN BUSINESS ON AN INVESTMENT STRIKE?

48. What factors drive investment? • The availability of investment projects (which are currently closed in the telecom, energy, rail, port arenas!) • The size of the domestic market and access to other markets. • The availability of the factors of production (skills, capital) at world competitive prices. • Ultimately investment decisions are driven by risk and cost adjusted rates of return criteria. • If the costs and risks of investing in South Africa are too high – investment will not take place

49. INVESTMENT DECISIONS ARE DRIVEN BY THE RISK AND COST ADJUSTED RATE OF RETURN RELATIONSHIP • RISKS: • business & financial risks • Property rights • Legislative • Political • Security • Labour market • Marketing • REVENUE • Economic growth • Market contestation • COSTS: • Cost of capital • Cost of labour • Cost of technology • Cost of intermediate products • Costs of logistics RISK & COST ADJUSTED RETURNS = The investment hurdle rate = rate of return required by an investor after covering the risks and costs of a project over the long-term.