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Empowerment is partly about redressing historical disadvantage, but it is also about investing in
capabilities and opening doors of opportunity for all
BUDGET VOTE NOTES
Presentation by the Deputy Minister of Economic Development
Mr. Enoch Godongwana
Cape Town, South Africa
12 April 2011
Introductory Remarks
•
Racially biased structural unemployment
•
From 1970 to 1995,
–
overall employment grew about 17.6% but 0% for Africans
•
During the same period, employment of African workers grew by zero (0%) percent.
•
Mining and Agriculture
•
Skills
•
Between 2001 and 2008 when we experienced rapid growth in employment accompanied by:
–
Rising incomes
–
Rising African employment
•
Track record of the ANC in changing the structure of the economy in a manner that is inclusive
•
This was the first pro-poor employment growth in 40 years.
•
The period between 2004 and 2007 witnessed an economic growth that was only second to that of the
1960’s.
Global Economy
• Global financial Crisis in 2008 reversed
this trend in employment
– Management of the economy more
interventionist
• Changing role of the State
– Changing economic theory and understanding
– Shift in the global balance between North and
South
• IMF Outlook
• Bric
New Growth Path
• An integrated response
• Comparative advantage as a resource
based economy
• Infrastructure
• Sectors with forward and backward
linkages
Dispelling the Myths
Two myths about the NGP:
(1) There are those who believe that the 5
million jobs target is solely going to be
created by the public sector.
– The NGP is predicated on both the state and
private sector playing a role
(2) The second myth is that of viewing the NGP
in isolation from other government
initiatives.
The NGP works together with other government
policies such as the IPAP II
Infrastructure
• Resource based economy
• Critical in leveraging our resources in infrastructure, such
as Power, Water and Logistics in general
• Assuming a 4.4% growth in the next 15 years, need to
do the following:
– Double our capacity in electricity from 43MW to 90MW
– Invest R900bn in Roads, Rail and Ports
• The Challenge is localisation of the infrastructure
• Hence the Green Economy
• IDC and Transnet working on localisation revitalising
wagon manufacturing
Economic power in the global economy
is becoming more dispersed
The rise of emerging economies
A changing leaderboard
Share of global GDP
World’s biggest economies
(real GDP, US$ trillions at 2005 prices and PPP)
(real GDP, 2005 prices and PPP)
160
CAGR
(20082030)
Emerging markets
Developed markets
140
120
61%
100
4.3%
80
57%
60
1990
41%
39%
38%
20
62%
59%
51%
2.0%
43%
United States
United States
China
2
Japan
China
United States
3
Russia
Japan
India
4
Germany
India
Japan
5
France
Germany
Brazil
6
Italy
Russia
Russia
7
United Kingdom
United Kingdom
Germany
8
China
France
United Kingdom
9
Brazil
Brazil
France
10
India
Italy
Mexico
0
1990
2000
2008E
Source: Economist Intelligence Unit
2020F
2030F
2030F
1
49%
40
2008
Source: Economist Intelligence Unit
Global economy: outlook
Projections
2011
2012
Economic growth and outlook around the globe
Region / Country
2008
2009
2010e
2011f
2012f
World output
1.5
-2.2
3.9
3.3
3.6
Advanced Economies
United States
Euro area
Japan
0.2
0.0
0.3
-1.2
-3.4
-2.6
-4.1
-6.3
2.8
2.8
1.7
4.4
2.4
2.8
1.4
1.8
2.7
2.9
2.0
2.0
Emerging and developing economies
Sub-Saharan Africa
South Africa
Nigeria
East Asia & Pacific
China
South Asia
India
Latin America
Brazil
Europe & Central Asia
Russia
5.7
2.0
7.0
6.0
6.1
5.2
3.7
6.0
8.5
9.6
4.8
5.1
4.0
5.1
3.9
5.2
1.7
-1.8
5.6
7.4
9.1
7.0
7.7
-2.2
-0.2
-6.6
-7.9
4.7
2.7 (3.8)
7.6
9.3
10.0
8.7
9.5
5.7
7.6
4.7
3.8
5.3
3.5
7.1
8.0
8.7
7.7
8.4
4.0
4.4
4.0
4.2
5.5
4.1
6.2
7.6
8.4
8.1
8.7
4.0
4.3
4.2
4.0
Source: World Bank, GEP – Jan 2011
8
Growth in GDP was 2.8% in 2010
Real gross domestic
product at market prices
increased by 2.8% in 2010
The largest contributions to
the growth of 2.8% per cent
were as follows:
• The mining and quarrying
industry based on growth of
17,1 per cent;
• General government
services based on growth of
5,3 per cent;
• The manufacturing industry
on growth of 4,1 per cent;
2004 to 2007 was our best GDP
performance since the 1960s
Annual average GDP growth
1960s
5.7%
1970s
3.3%
1980s
1.5%
1990 to 1993
-0.4%
1994 to 2003
3.0%
2004 to 2007
5.1%
10
South African economy:
Fixed investment
Gross fixed capital formation
100
110.1%
% Change (q-o-q) *
80
• Real fixed investment
spending by public
corporations
continued to be the
main driver of overall
investment activity.
60
40
20
0
-20
Government
Public corporations
Private sector
Total investment
-40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2010
|
2009
|
2008
|
2007
|
2006
|
2005
Source: SARB
11
Historical Employment Trends
• Between 1970 and 1995
– Employment grew by 17.6%, less than the population growth rate
– Staggeringly, African employment grew by zero during this period
– Relatively slow economic growth and skills-biased technological
change
• Between 1995 and 2001
– Employment grew by 16% but this was slower than the increase in
the labour force (lab force growth was 5.2%, mainly African women)
– Faster growth, continuation of skills biased technological change
• Between 2001 and 2008
– Rapid growth in employment by 23% and rising incomes
– In fact, first signs of pro-poor job growth in 40 years
– Bifurcation phenomenon
• Both high skill and low skill jobs created, but nothing in the middle
• Between 2008 and 2010
– Jobs bloodbath, combined with large wage increases
– Biggest losers were younger, less formal, less skilled and female
workers
12
Employment Growth 1970-1995
'000
African
1970
1995
% change
Coloured 1970
1995
% change
Asian
1970
1995
% change
White
1970
1995
% change
Total
1970
1995
% change
Agric
Mining Manuf Electric Cnstrct Wholes Trnsprt Finance Comm
2 260
610
514
30
290
310
138
37
1 089
930
353
814
49
239
792
249
201
1 648
-58.8
-42.1
58.5
62.3
-17.5
155.6
79.7
449.6
51.4
117
7
166
2
79
77
28
7
160
220
13
231
7
85
203
43
47
239
88.4
77.6
39.3
190.2
8.8
163.7
57.6
590.8
49.7
7
1
6
0
9
51
7
3
22
2
4
97
1
12
105
19
30
72
-70.4
397.4
50.2
446.1
36.1
107.5
162.1
942.8
224.2
98
63
282
14
98
270
165
144
325
86
100
314
37
92
422
165
350
597
-11.8
59.6
11.5
162.8
-6.4
56.3
0.1
143.7
83.8
2 482
680
1 026
47
476
708
338
190
1 596
1 239
469
1 456
94
429
1 523
476
628
2 557
-50.1
-31.0
41.9
101.2
-9.8
115.1
40.8
230.8
60.2
Total
5 277
5 275
0.0
642
1 090
69.7
165
343
107.7
1 458
2 164
48.4
7 542
8 872
17.6
13
Employment increased by
157 000 in
quarter 4 2010 – of that 127 000 was created in
the Community and Social Services of which
Govt is a big player
Source: StatSSA, 2011
Changing Role of the State: The State is
expected to deal with a myriad of social
challenges
Areas of Focus
Infrastructure
Energy, transport,
communications,
water,
housing.
Skills
New
economies:
Green economy
Knowledge
economy
Main economic
sectors:
Agriculture &
agroprocessing
Mining and beneficiation
Manufacturing (IPAP2)
Tourism/other services
Look for employment
opportunities in “jobs
drivers” and implement
policies to take
advantage of them
Social capital:
The social
economy
The public
sector
Regulatory
Impact
Reduce Red Tape
Spatial
opportunities:
Rural
development
African regional
development
17
Infrastructure and Economic
Linkages
To transform infrastructure constraints into job creation opportunities there are three
essential elements:
(a) a proactive government that interprets and intervenes where necessary,
(b) mainstreaming the procurement strategies with the opportunity structure
offered by infrastructure programmes, and;
(c) linking infrastructure projects with domestic industrial capacity
•
Utilise infrastructure to anchor the economy’s long term growth and development.
•
Linkages between spatial economies. Without the right spatial linkages, localization will be
severely limited.
•
The import penetration that may result will weaken job creation, lead to less than
proportionate increase in economic growth and provide an insufficient expansion in the tax
base.
•
This talks to the need to support innovation and R&D activities.
Actions are required to secure supply in
each of four time periods
Time period
Impact in
2014-2017
Impact in
2010-2013
Capacity
addition
▪
Ensure DSM
success
Decisions to
be taken in
2010 that
impact each
horizon
▪
Enable
signing of
critical PPAs
▪
Enable PCP
2
3
▪
4
Pursue
import
options as
back up
▪
5
Decide which
option to
commit to
(imports, gas,
coal, further
DSM) and
what is the
back up
1 16GW incremental plus 10GW replacement for decommissioning by 2028 in the proposed scenario
19
26GW1
5GW
9GW
10GW
1
Impact in
2018-2020
Impact in
2021 onwards
▪
6
Define long
term base
load option,
including role
of life
extension of
existing coal
fleet
Private Sector Leads R&D activity –
Govt and Science Councils lagging
Source: Development Indicators 2010, Presidency
In Conclusion
• South Africa and the rest of the African continent present a myriad of
business opportunities across numerous sectors of economic
activity.
• Investment activity throughout the continent experienced a
slowdown in 2009, but the outlook remains positive as recovery
gathers momentum.
• Certain challenges remain, but the South African Government is
strongly committed towards a continued improvement in the
investment environment going forward.
• The South African Government is focused on the expansion of the
industrial capacity and the rest of the African continent.
• We would like to be your investment partner !
Dankie,
Siyabonga,
Thank You!
Broad Developmental Strategy
• Accelerate labour absorbing jobs
• Sustainable and decent Jobs
• Make an impact on poverty and extreme
inequalities
• Response in the form of the NGP and
NIPF
– Value added and labour absorbing industrial
production
• Diversifying the economy