OBG talks to Andris Piebalgs, European Commissioner for Development

Interview: Andris Piebalgs

How has the economic crisis in Europe affected economic relations with South Africa?

ANDRIS PIEBALGS: Luckily, the crisis has not had a big impact. In 2011 EU-South Africa trade grew by more than 10% to €43bn, and has recovered to its 2007 pre-crisis levels. The EU is still South Africa’s most important trade partner, and trade flows have remained remarkably resilient. Trade with the EU still represents more than that of China and the US combined.

Our development aid with South Africa is very well complemented by trade policy, which makes the fight against poverty much more effective. I am also pleased that 50% of exports from South Africa to the EU are manufactured goods. This is quite unique if you look at other trade partners, where exports are mainly raw materials. For example, 90% of South African exports to China and 70% to India are in raw material form.

The strength of this relationship is also visible when you look at foreign direct investment (FDI). The EU remains by far the main investor in South Africa and accounted for 80% of FDI stocks in 2010, reaching around €80bn. A number of EU companies operate in South Africa, providing jobs to locals. Our market is almost entirely open to products from the country.

To what extent have bundled packages of aid, trade and capital been effective for Africa?

PIEBALGS: There is no doubt that the world landscape of trade, growth, investment and development has been rapidly changing over the last 20 years. We all have to adapt to these changes if we want to be successful and work for the benefit of the poor. The recent Busan forum on aid effectiveness was groundbreaking, precisely because it included emerging economies like Brazil, China and India, as well as the private sector and civil society, for the first time.

Part of this adaptation is in increasing coordination and synergies between the different actors, which come from different perspectives. For example, China, India, Brazil and South Africa are still recipients of foreign development aid, while at the same time are themselves becoming aid donors. It is not surprising then that they create their own modalities, which can not only provide useful innovation but also make the challenge of coordination more complex.

We have to remember though that the scale of aid by emerging donors is still marginal in comparison to the EU, so we shouldn’t overestimate its impact. For me, the most important element is transparency. This will help us to avoid misunderstandings and allow aid to be more effective in developing countries.

What role can the EU play in helping to reduce inequality and high unemployment rates?

PIEBALGS: Inequality remains a big challenge in many countries. When I visited South Africa in September 2011, I was pleased to see that it takes this issue very seriously. The overall objective for EU cooperation with South Africa is indeed the reduction of poverty and inequality. This is enshrined in the EU-South Africa Strategic Partnership, signed in 2007. In this context, our work focuses on employment creation to reduce inequality, promoting sustainable economic growth and fighting social exclusion. We can also help by sharing our experiences and know-how, and by combining our development and trade policies.

A good illustration of our work is the EU-funded Risk Capital Facility, which has provided funds to small and medium-sized enterprises (SMEs), creating employment opportunities and supporting entrepreneurship among previously disadvantaged people. Thanks to this programme, we have helped 10,000 South Africans to find employment. Based on the success of this project, the government has recently launched a similar scheme to support the growth of SMEs. The EU is also committed to helping more concretely by supporting programmes that promote the exchange of experience and the twinning of organisations and scholarships. Inequality is a global challenge, and we need to use innovative ideas to address this problem.