A valued partner: OBG talks to President Jacob Zuma

What are the tangible benefits of South Africa’s membership in the Brazil, Russia, India, China and South Africa (BRICS) bloc?

ZUMA: We understand that our role in BRICS is to find ways to underwrite and strengthen the huge recent improvements in the economic performance of both Africa and South Africa. As the African participant in BRICS we feel South Africa’s role as a catalyst for growth in the continent is recognised by the most dynamic economies in the world. This is very important. We also believe that BRICS strengthens our ability to represent the political interests of the developing countries of Africa more effectively in global arenas. BRICS membership will consolidate our recent trade gains. Exports to these countries have shown remarkable growth over the 10 years leading up to South Africa’s inclusion, mainly driven by growth in trade with China. Trade with Russia and Brazil has, however, remained feeble, whereas exports to India have shown more promise.

Total trade with BRIC countries amounted to R263.5bn ($32.3bn) in 2011, which is 30% higher than in 2010. The increase in South African exports was the main driver, rising by 33.8%, whereas imports grew by 26%. Both these growth rates exceed the average annual growth rates over the past 10 years – a good indication of the current economic climate within the BRIC states, which have a combined potential market worth over $320bn. This is an immense untapped treasure, creating numerous opportunities for South African exporters.

Interventions to capitalise on these opportunities have begun. They include a South African expo in China that will grow into a permanent exhibition to showcase us as an exporter of manufactured products and services, and a destination for high-yield investment. These markets will be targeted annually with international investment and trade initiatives to ensure South Africa’s foothold becomes significant. Technical and professional exhibitions, as well as sector-specific missions in cooperation with the private sector, will help to bolster South Africa’s presence in these markets.

In addition, the Department of Trade and Industry will champion the construction of a new high-capacity 28,400-km marine cable system linking the BRICS states. This initiative will benefit BRICS countries by providing autonomy of communication. Furthermore, it will reduce reliance on the developed world to interconnect current infrastructure, and it will accelerate economic growth in BRICS countries.

South Africa is well placed to promote and lead such initiatives due to the respect it commands around the globe and its well-established financial markets. Furthermore, South Africa is in a position to promote itself as the African hub of BRICS due to its location on the southern tip of Africa, proximity to European time zones and role as a facilitator for logistics.

In addition, we are championing the BRICS Trade and Risk Development Pool (BTRDP) project, which will combine the risk reinsurance of all five BRICS countries into a single pool. It is envisaged that implementation of the BTRDP will harness collective insurance and reinsurance capacity, facilitate inter-BRICS trade and investment, and help reduce the current dependence of BRICS nations on insurance capacity provided by North American and European markets.

How does economic inequality affect stability?

ZUMA: The kind of deep inequalities found in South Africa undermine social cohesion. That said, the cohesion built up through the transition to democracy and the substantial improvement in conditions for the poorest South Africans helps to moderate the pressures. It remains critical, however, to address the deep inequalities inherited from apartheid, as the goodwill brought by the transition will not last forever.

We can point to core areas of progress, as well as areas that need acceleration. Our main areas of progress have been the desegregation of education and skills development; the elimination of overt legal racism in the economy, including opening all business areas to all races, and ensuring labour laws cover all workers equally; the establishment of a more rational and efficient tariff structure and increased international trade; substantial improvements in infrastructure provision, especially for main highways, telecoms and broadband, the extension of basic municipal services to historically black communities; and a substantial reduction in gaps in income by race and gender.

Inequalities remain, but we are driven by our political mandate to find effective ways of addressing them. Our New Growth Path is the medium-term strategy for job creation, while our National Development Plan, which we hope to finalise shortly, will sketch our development strategies for the next 20 years or so.

What is being done to tackle corruption?

ZUMA: We are aware that corruption is a threat, and that we need to ensure it does not get out of hand. An assessment by the OECD in 2010 indicates South Africa has undertaken major law reforms to address corruption and that awareness of the crime in the country is generally high. The government has, since 1997, put in place a solid legislative framework and institutional structures to combat and prevent corruption.

We have adopted a multi-pronged approach. On a country level, the National Anti-Corruption Forum, which consists of government, business and civil society, has been established as a collaborative structure.

The government’s quest to address corruption through partnership also extends to international cooperation. The country has ratified the Southern African Development Community’s protocol against corruption of 2003, the African Union Convention on Preventing and Combating Corruption of 2005 and the UN Convention Against Corruption of 2004. In June 2007 South Africa acceded to the OECD Convention on Bribery of Foreign Public Officials in International Business Transactions and became the 37th member (and first African member) of the OECD Working Group on Bribery in International Business Transactions. Our compliance with the requirements of these legal instruments is continuously assessed and these assessments are critical in strengthening our anti-corruption efforts.

I myself have made executive decisions to show that I am prepared to act against the threat or suspicion of corruption. Ministers have also acted in this way.

Government priorities include the unlawful transfer of farms and investigations into municipal mismanagement, as well as corruption related to supply chain management, including mining licences, identity document theft, social grants and cyber-crime. A multi-agency working group has taken steps to tighten up procurement systems and eliminate abuse. Measures include increasing fraud-monitoring capabilities, more transparent public disclosure of tender processes and centralisation of procurement processes.

How open is South Africa to foreign investment?

ZUMA: We have great potential to attract foreign direct investment. The government is committed to improving the investment climate as well as the cost of doing business. In the World Bank’s 2012 “Ease of Doing Business” report, South Africa moved up a position to 35th out of the 183 countries surveyed. In the World Economic Forum’s 2012 “Global Competitiveness” report, we moved up four places to 50th out of the 142 countries surveyed. Overall, South Africa was first in the ease of attaining credit, first for auditing standards strength and first in securities exchange regulation. We ranked third in the protection of minority stakeholders and 10th in protecting foreign investors.

South Africa also managed to make inroads in terms of ease of starting a business (moving from 74th to 44th), ease of registering a property (from 90th to 76th) and ease of trading across borders (improving two places). Regarding infrastructure, South Africa ranked 43rd and 46th for quality of roads and for railway infrastructure, respectively. We welcome foreign investment through our highly regarded stock exchange, and we welcome direct investors who can bring new skills, markets and technologies into our economy.