Interview by Papiso Matsau
What impact do you think that AGOA has had on South African Trade relations?
I think that trade relations between the US and South Africa is largely driven by AGOA at this point. We have exports from the US to South Africa that is worth 7 billion dollars. We export 8.7 billion dollars’ worth of goods largely through AGOA so we actually have a trade surplus with the Unites States. If we were to look at the 2010 figures, we have seen an 11% growth in jobs in South Africa because we export to AGOA and in manufacturing GDP we have seen a 2.78% increase. I think that AGOA is the main instrument of trade between South Africa and the United States.
South Africa sends about 2000 products to the Unites States via AGOA; some of them raw materials, some of them agriculture, some of them manufacturing, and so on. But I think that the impact on jobs, the impact on the GDP from the 2010 figures is the enormous one and the fact that we have a trade surplus with the United States.
Do you have any suggestions to AGOA to better serve its purpose?
Look, I think that a country like South Africa has obviously taken good advantage of AGOA because you get many countries that only export oil or only export some raw materials or just two or three products; South Africa exports 2000 products. We think there is still some protectionism by the US. For example, we’re not allowed to export canned peaches to the United States because I think the farmer in Georgia won’t be happy with the competition. I think that we export lots of agricultural goods but we face many non-tariff barriers; so the goods can come in but, for example, sanitary barriers are still there. So, for example, the US makes some of our fruit wait for 24 days when they could qualify for 22 days, so the shelf life diminishes. I think those are the kind of issues we would raise. And the last one is that we really need certainty with AGOA. We can’t wait until the last moment before it is reauthorized otherwise we will really lose orders. For example, if AGOA is to be reauthorized in 2015 it would be really good if in the middle of 2014 we had a sense of how AGOA would continue.
What other improvements do you think can be made to better support the South African environment?
I think that we want the range of products to be increased. Like I said, we export 2000 of a possible 6000 products. South Africa can increase the number of products except that the US sanitary regulations keep quite a few products out, so it is through non-tariff barriers, in tariff barriers it’s allowed in but in terms of non-tariff barriers it’s kept out. I think an example of such a product would be sugar; the sugar market in the US is being protected by keeping sugar from South Africa out of it. We can understand some of those restrictions, we have tried to be very sensitive to the US market. And so, for example, our largest agricultural product that we export to the US under AGOA would be citrus- oranges and we send that only when California and Florida in off-season. We are very sensitive to the US market. We are not here to squeeze out Florida or Californian’s oranges, we just want to be in the gap period so that the US market can have access to oranges all year around.
We would also want to improve AGOA by increasing the range manufactured goods, beneficiated goods, to the USA. And so we are working on a very important project; say, for example, Boeing. Boeing is helping South Africa turning Titanium ore into powder, then we export that. So that creates more jobs in South Africa. So, I think we really need to increase our product range, we need to overcome some barriers here and we need to increase the proportion of manufactured goods within that product range. But I think overall we are very proud of our achievements in AGOA. I mean, every C-Class Mercedes Benz and every 3 series BMW you see driving around in the US is made in South Africa and it comes to the USA via AGOA. We of course also have our wines.
A lot of people believe that regional integration is crucial in achieving the goals of AGOA and various national needs. In your opinion what is the importance of regional integration?
I think that Africa and the African Union has understood the critical importance of regional integration. I mean, we often do more trade with Europe than we do with Africa. So, intra-Africa trade is very low, it is only 12% of the total continent trade. The reason is not that we don’t want to talk to each other, that we don’t want to trade with each other, the reason is that the infrastructure doesn’t speak to each other. We don’t have railway lines and road networks that connect Africa. We have railway lines and road networks from the mine to the harbor. That is only designed to take goods out. So, even if sometimes a country wants to send a product to another African country it will probably have to go via a European country to reach another African country.
So, with regional integration, the political will is there now; three regions East Africa, Central Africa and Southern Africa have all signed an agreement to integrate. Now, we need to build the infrastructure to assist that integration. I think that offers the US enormous benefits because it will not have to negotiate market prices with 54 countries, it can now begin to negotiate market access with Africa and have cheaper rates. I think that is very important but part of the things we are trying to persuade the US of is that even with South Africa’s success under AGOA we should still have a role to play after 2015. To exclude South Africa would be a big mistake because, while for example a country like Congo may send a few products to the USA such as rubber, it would first have to send it to South Africa to turn into tires, these tires would be put on the Mercedes or BMW and then they would be sent to the USA. The same goes for leather seats; the hid may come from Botswana but it must be sent to South Africa to be turned into leather and then made into car seats. You can look at South Africa as the factory of the continent. If you eliminate South Africa you will hurt the continent because then what do the other counties do with their raw materials.
One of the problems you mentioned was infrastructure, what do you think can be done about, not just infrastructure, but also any other problems that may hinder integration?
President Obama was in South Africa recently, one of the calls that was made was for him to support integration efforts in Africa. He is willing to do that. And we have all heard this announcement about Power Africa; how the US wants to make sure that one component of infrastructure, namely the supply of energy can be taken care of. We want the US to play a more active role in the overall infrastructure campaign; building roads, building railway lines, building harbors, building airports, etc,etc. Also in the soft logistics: How do goods pass over borders? Trucks should not have to wait for two days at the border post because the products lose shelf life. So I think there is a major role for counties like the US to come in and help build our infrastructure. And companies in the Unites States, we just got a major contract with our locomotives that is being supplied by General Electric. The deal we made with General Electric is that we need 100 locomotives, we need 10 urgently so build them in the US and send them over, the [other] 90 we can set up a plant in South Africa and our people can assemble them. So, I think we are beginning to find creative ways of helping out.
Which other areas in South African sectors do you think could do with further improvement?
Other than the infrastructure as a location for investment there should be, across Africa, but in South Africa as well, manufacturing capacity. We have got the gold, we have got the diamonds someone needs to get into jewelry making. We have got agricultural products; how do we increase our juice-making capacity? How do we improve our canning? How do we add value to our different raw materials because Africa will not create significant jobs and skills unless we go to a higher level of operations and it takes a certain number of workers to mine, it takes a few workers to harvest, it will take a whole lot more workers to add value to the agricultural products. I also think that we also need assistance in the knowledge economies. We need counties like the US to help us set up astronomy schools and to bring the ICP companies into Africa to assist us with the technological revolution. Another example is the cellphone revolution people are doing their transactions on their phones, they are not even going into banks anymore. So I think that investing in infrastructure, manufacturing and technology would greatly assist help.
Most importantly, Africa will have 50% of the world’s population under the age of 35 in two decades. We need the world to come and invest in our human resources, to come and give skills to those young people, otherwise they will be guns for hire for any fundamentalist or extremist cause in the world. We need people to get scholarships, we need people to come and set up universities on the African continent, we need the highest form of skills to be developed. Those are the four main areas of investment that not only South Africa, but the rest of Africa, require.
Can you please discuss how South Africa benefits from its frequent association in the media with the BRIC (Brazil, Russia, India and China)?
We live in a globalized world so globalization doesn’t respect national boundaries. Goods move at the push of the button, capital moves at a flick of a button, crime is transnational, trade, investment, everything is transnational. So the only way you can get protection in the world is to be associated with other similar countries, we see that if we are too dependent on Europe and America when they go into a recession we lose jobs in Africa. Not because our economy is bad or our banks are weak, we have the strongest banks in the world in South Africa, but we lost a million jobs because we are too dependent on Europe and the United States as our export markets. So need to find other trading partners and investment sources. We also have to find other developing economies in a similar situation to us and that is where Brazil comes in, where Russia, India and China come in, together with South Africa and other countries like Turkey, Indonesia, Mexico and others, we are the emerging economies/ markets in the world. I think that because we have similar conditions, we have similar problems and similar dependencies we now know we can’t put all our eggs into the Euro-US basket. Now we are trying to shift our eggs a bit into Africa and other emerging markets. That really is the major reason for South Africa’s association with BRICs. The second reason is that at the time when the US for example doesn’t have disposable investment income and is scared of Africa and their media only tells negative stories about Africa no US investor is bold enough to go and see for themselves or invest in Africa.
China has seen the opportunity in Africa and I always tell the US that China is there in Africa because the US isn’t. If the US was there, we would want the competition, we would want to have choices, we don’t want to make another mistake and put all our eggs into the Chinese basket. When the US deals with Africa they have all these preconditions; democracy, human rights, etc. The problem is they still trade with the Middle East and none of those conditions are insisted upon. So, why insist on it with Africa? And then you also complain when the Chinese come and invest in Africa? So the point that I’m making is that China has been a wonderful source of capital for the continent which bought our resources, although we would prefer to sell them manufactured goods. Africa has growing needs and beggars can’t be choosers.
In your opinion, how do you think South Africa could better attract US investment?
I think that there are so many studies that show that Africa is the next frontier and so we just need the US to pause for a bit and to look at Africa with different eyes; to see it as a continent of opportunity and not a country of problems. I think that is what President Obama was trying to signal when he went to Africa in June. The second point I think that we need to make is that the rate of return of investment in Africa is more than anywhere else in the world. If you invest there you get 8% returns. The global return is 3%, the US return is less than 2% so business sense would say you have got to be in Africa. I think we will even make it easy for the US to come into Africa by suggesting that they should come in via South Africa because South Africa has the second best banking system in the world. South Africa has the rule of law firmly entrenched, it’s got an internationally recognized legal system; if you transact in South Africa you can be pursued anywhere in the world. It’s got great ease of doing business, its good a comparably good lifestyle; any of your managers would love to live there. So, come to South Africa; we also have good companies who can hold your hand and take you to other opportunities on the African continent. That is why South Africa is referred to as the “gateway” into Africa. We are trying to make it as easy as possible.
I think that South African farmers are leading the agricultural revolution on the continent. We are going in there, helping to bring tracts of land into agricultural production. I think in much the same way, our retail sector is expanding into the rest of Africa. The converse is also true, we have some middle class Africans who come to South Africa to do their shopping. So, I think that South Africa is fairly well received; I think the fact that Africa voted for a South African to head the African Union is a major vote of confidence in the role that South Africa plays and people recognize that NEPAD (New Economic Plan for Africa’s Development), the AU have been worked on very hard by South Africans. And, South Africa has enormous credibility in Africa because we are the ones facilitating peace talks, keeping peace and conflict resolution as well as post peace reconstruction in Africa. So I think South Africa has a good reputation on the African continent. However, we are aware that we must remain humble, that we must not be the Big Brother that I think people fear. South Africa can be regional super power.
Lastly, the role that South Africa plays in Africa, and the role that Africa plays in the world has been brought to the fore a lot in the last few weeks when Nelson Mandela was in hospital. We have seen the whole world unite in thought and prayer around Nelson Mandela and think that we see him not only as a South African but as an African and I think that if Africa could produce and person of that stature, then I certainly believe that the world should now be ready to embrace Africa as a whole, especially its economic opportunity.
This has been very informative, thank you very much for your time.