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Cape Town – South Africa’s ability to compete globally hinged on building regional trade relations with African countries, Trade and Industry (dti) Minister Rob Davies said in Cape Town on Tuesday.
The minister was speaking during a CNBC Africa recorded panel discussion with anchor Godfrey Mutizwa, Nedbank chief economist Dennis Dykes, deputy director of Stellenbosch University’s Future Research Abel Sithole and Sea Harvest CEO Felix Ratheb.
Mutizwa pointed out some scary stats to shock the panelists into debate, such as the fact that South Africa ranked 148 out of 148 on the World Economic Forum’s (WEF) labour index, South Africa ranked 53 out of 148 countries on the WEF’s global competitiveness index, and had the second largest economy in Africa, after Nigeria unseated the country off the top perch in April.
“Ranking is not an exact science,” quipped Davies, moving to dispel the notion that rankings would have a negative effect on the country.
Value-added chain
“South Africa needs to move up the value-added chain and we need to industrialise not only South Africa but Africa too,” he said. “The infrastructure deficiencies such as energy and skills development need to be prioritised and we need new competitive advantages to sustain growth.”
Davies, hot on the heels of a trip to the US to defend the African Growth and Opportunities Act (Agoa), said Africa needed to work closely together as a continent to ensure it moves higher up the value chain and pointed to the coffee sector as an example.
“Africa exports $6bn worth of coffee annually and that then gets turned into a product that makes external countries $100bn,” he said. “The coffee product is being captured outside Africa.”
Free-trade agreements
“There is strong domestic growth in Africa, but our markets are too small, which is why we need to regionalise and create continental FTAs [free-trade agreements],” he said. “We need to create a space for Africa to grow opportunity.”
Davies said a few companies were responsible for the majority of exports, mostly primary products.
“Value-added products is where the growth is for the majority of companies,” he said.
Debate on South Africa's global competitiveness presented by @brimstoneltd @cnbcafrica and @Nedbank pic.twitter.com/g4uY2CGD2E
— Nisaar Pangarker (@nisaarp) August 19, 2014Various trade agreements, such as the Agoa as well as the Brics agreements, gave South Africa a leading advantage to grow its economy, he said. “Many industries, such as the motoring industry, have achieved a lot in this environment,” he said. “But, a big challenge is defending the integrity of Brand South Africa from substandard products.”
Coming from a banking perspective, Dykes warned that the dti protectionist policies were harmful to a competitive environment. “There seems to be something structurally wrong,” he said. “Any protective measures should be limited and should run over a limited period of time.”
Negotiating for competition
Ratheb praised the dti’s role in brokering negotiations with countries and said this was the greatest challenge facing global players like Sea Harvest. “It’s up to the business and your business model to be competitive,” he said. “The climate has to be right. For example, it’s hard to explain to Germans why a strike would have an impact on supply.”
Ratheb said Sea Harvest was more focused on job creation than automation. “South Africa can be competitive, while creating jobs,” he said. “We’re just as productive with 100 people on the factory floor that is not automated as a factory in Germany that has four people operating an automated factory.”
Sithole agreed. “Automation does not service our demographic,” he said.
The panel concluded that while South Africa’s competitiveness would be improved with a focus on Africa and key trade partners, domestic conditions such as labour relations, skilled resources and energy and manufacturing infrastructure would need to be focus points of attention for government and business alike.
- Fin24
