Address by Eastern Cape MEC for Economic Development, Environmental Affairs and Tourism Hon. Lubabalo Oscar Mabuyane at the Eastern Cape Export Symposium held on March 27, 2019 in the Buffalo City Metro.
Executive Mayor of Buffalo City Metro
Mayoral Committee Member of Nelson Mandela Municipality
Chairperson of the ECDC Board
Chief of Executive Officer of the ECDC
Buffalo City Metro Municipal Manager
Director of Export Development at DTI
Ladies and gentlemen
Good morning to all of you,
We are gathered here today to discuss and find opportunities in a very tricky and hotly contested terrain and that is export trading. It would be amiss of me not to locate the issue of trade in our country to our past, particularly in a month where we celebrate Human Rights. As you would know, one of the Rights we were fighting for during the struggle was a Right to be free from the bondage of apartheid, an evil system which separated our citizens along racial lines.
I am highlighting this fact because the fight for freedom in our country was fought from all angles including in International Trade platforms, thus many countries of the world decided to impose trade sanctions on Apartheid South Africa. We are forever grateful to the International community under the auspices of United Nations and individual organizations such as OPEC, IMF and other progressive countries such as Iran for imposing heavy trade sanctions which forced that regime to finally open its eyes to the reality that South Africa should be free and that her people should live together in harmony enjoying equal rights and equal opportunities. There is a lesson to learn from that episode that befell the apartheid regime even for our democratically elected government. And that is the eyes of the world are watching how we handle matters of governance and civil liberties of our citizens.
Programme Director, after the 1994 democratic victory, the UN General Assembly invited South Africa to resume its participation in activities of the General Assembly and this was followed by lifting of trade sanctions by countries of the world. What this meant is that South Africa could sell products to the world and that the world could sell products to South Africa. Since then, our country has maintained warm trade relations with countries such as Germany, the United States, China, Japan, the UK and Spain exporting products such as diamonds, fruits, gold, metals, minerals, sugar and wool among others. We have also seen a surge of machinery, transportation equipment, chemicals and manufactured goods imports making their way into our country and economy. However, when we scratch the surface and get into the crust of Free Trade, we would realize that our country imports more goods than it exports and this imbalance leads to trade deficits for our country. By implication, this has a direct impact on trade in our province.
Like in any economy worth its penny, export trading plays a pivotal role in the provincial economy with an average growth rate of 3.8 percent between 2009 and 2018. Nationally, our Province contributes 4.2 percent of national exports to internationally markets and is ranked 5th in terms of its contribution to the value of national exports following behind Gauteng, Western Cape, KwaZulu-Natal and North West. The question posed by Legendary Jazz Artist Oliver Mtukudzi in his famous song “Todi” which says Senzenjani, What Shall We Do is also relevant for us.
To answer this question, we must firstly reflect on the importance of exports to an economy. Secondly, we must look at the state of our export trading. Thirdly, we must look at the opportunities that exist for us increase our exports to international markets and lastly we must chart a way forward to seize these opportunities.
Striking a balance between exports and imports
Programme Director, we are part of a highly competitive global economy which is premised on the principles of Free Trade. Speaking on the question of Free Trade in 1848, renowned revolutionary Karl Marx had this to say: “The protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.”
The revolutionary sense that Karl Marx spoke about in 1848 is the same sense that drove the founders of our democracy to advocate for Free Trade with the rest of the world to “hasten social revolution” instead of adopting protectionist trade policies which have short term gains and long term consequences.
Programme Director, there is not a single country that should be the dumping ground of products from other countries. Nations of the World should therefore be willing to buy imports from other countries as much as they enjoy the benefits of exporting their own products to other countries. The trick in all of this Free Trading is striking a balance between exports and imports. Too many imports to a country are bad for job creation and growth of industries. What we must agree on though, is that there are bad imports as much as there are good imports. And our province should have an appetite for good imports such as machinery and smart technology that we can use to develop quality products from our natural resources for the export markets.
In the same breath, we must aggressively enhance productive capacity in our province to export quality products to Africa and the rest of the World.
The state of export trading in the Eastern Cape
To do that, Programme Director, requires us to ensure that the export base in our province increases in terms of new and emerging exporters, through sector diversification and a conducive business environment.
Over the years, our Province experienced a fluctuating balance of trade, with 2012 to 2015 being the worst period for the province as the value of imports exceeded the value of exports. During this period, imports increased as a result of an increase in demand for textile, clothing and leather, chemicals products, rubber and plastic products, metal products, motor vehicles and furniture by the local market.
This fortunately changed in 2016 when our Province saw a positive trade balance of R2.6 billion. However, this was short-lived as the economy again registered a trade deficit of R3.8 billion in 2017. With the volatile market trends throughout the 2018 period, the Eastern Cape economy again saw a positive trade surplus of R4.2 billion in 2018 as a result of significant increase in exports.
That said, Exporters in our Province continue to encounter a number of challenges in entering export markets, and these are not unique to the province, but apply to the rest of South Africa. These include:
• Competition in Foreign markets
• Difficulties to make contact with potential buyers
• High Costs of marketing products
• High costs of Transportation and Logistics
• Red tape in obtaining Export documentation, and
• Volatile exchange rates that have a negative effect on bottom lines.
When government speaks about creating a conducive environment for businesses to thrive, this is where we must show our mantle. All of these factors are within the realm of government to solve.
The ECDC, in conjunction with provincial and national partners such as the DTI, is directly involved in providing opportunities to export-ready Eastern Cape businesses to penetrate local and foreign markets in the most effective manner by means of non-financial support. Various trade missions & exhibitions have been facilitated which has enabled the participation of companies from the province. In the financial year 2017/18, 80 companies participated in the missions, while in 2018/19 financial year, 39 companies participated in the trade promotion missions.
Programme Director, in terms of export development, 135 companies were taken through export awareness and training sessions in 2017/18 and 350 companies participated in the 2018/19 financial year.
We want to encourage other companies who have an interest of exporting goods to Africa and the rest of the world to make use of Export Helpdesks which we have established in the two Metropolitan Municipalities of our Province. These Export Helpdesks are key contact points for businesses endeavouring to enter international markets and offer assistance such as export information, export trainings, sector reports and various other initiatives aimed at assisting exporters.
On the Provincial government side, the sixth administration will practically liberate our Exporters from these challenges by moving away from simple acknowledging them but to taking action to remove impediments to Export Trading. The investments on socio-economic infrastructure and reduction of production costs including municipal rates will be a thing of the past under the sixth administration. There is no ANC-governed municipality in our Province which will make it difficult for Exporters to produce goods.
We will also work closely with the Education Sector to find common ground on the curriculum so that it can develop skills that are aligned to industry.
As a Province that has a huge potential in agriculture that is not realised due to land and water resources impediments, we will also set up institutional arrangements that provide long-term, secure access to land and water critical for agriculture development.
Opportunities to increase exports
Programme Director, President Cyril Ramaphosa is working tirelessly to restore the mishaps we have made which relate to our State Owned Entities. These entities such as the troubled Eskom are the window through which investors look into our economy. I must add though that the challenges we see coming out of Eskom are indicative of a special kind of capture that happened long before the ANC came into power. It’s just not normal what we see happening at Eskom and we must scratch the surface to get to the bottom of it; we must find out what really happened pre-1994 as much as we are confronting the challenges of today. Because it’s scary how certain sectors of our society are hovering above Eskom with a persistent narrative of calling for the privatisation of Eskom.
Ayifuni ukubanjwa esiqwini into ka Eskom hleze ijike ngathi. We must dig deep because Eskom is the engine of our economic development or else we can kiss our aspirations of becoming relevant Exporters good bye.
Nevertheless, the vote of confidence we saw through investment pledges at the Investment Conference late last year should indicate to all of us that the Global economy is ready to receive South African exports.
Europe continues to be receptive to our exports, despite our trade deficit of R2.7 billion with the region in 2018, while our Province continues to enjoy a trade surplus with Africa, Asia and Oceania. Our export questions should be answered by the African market if we play our cards right. The signing of the Africa’s Free-Trade Agreement by President Cyril Ramaphosa last year signals the progressive intentions of our government to our long held view that South Africa cannot grow without the growth of the rest of Africa. We are told that under the agreement, traders will not pay tariffs on 90 percent of goods, while 10 percent of sensitive items will be phased in later. We agree with President Cyril Ramaphosa that the agreement “which will allow the free movement of goods and increase African intra-trade, represents a new dawn for the continent” and that Exporters from our Province should seize this opportunity. Already, the provincial exports to Southern African Customs Unions stand at R2.9 billion (6%) and to the Southern African Development Community, stand at R1.7 billion (3%). The African free-trade agreement should see our Exporters making inroads to other African countries, particularly East, West and North Africa taking advantage of our three Ports.
A plan to increase Eastern Cape Exports
The exports that have to reach these African countries must come from the Exporters who are gathered here today. We have called you here today to have a meeting of minds which I think is long overdue as other provinces are way ahead of us. Programme Director, we are going to liberate ourselves in this Province from this tendency of walking while other Provinces are running to reach their developmental goals. If there are flat tires on the way, we will replace them.
We organized this information sharing platform for potential and key industry players in the export market in our Province with the sole purpose of engaging you on how we can assist you to overcome the challenges I spoke about earlier and enable you to seize the opportunities that exist in the Global economy and in the African Markets in particular.
When we come out of this session we should be able to have a clear plan with timelines of what has to be done by whom to create an enabling environment for international competitiveness for Eastern Cape Exporters. We should also be able to have consensus on the plan of action we will pursue to expand the exporter base by including super exporters, SMME’s, HDI enterprises, secondary co-ops, export villages as well as Black industrialists. When we meet for the Symposium next year, we should report back on the implementation of the decisions we would take over the next two days.
Let us engage.