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“The success of a project like this is dependable on the support of sophisticated packaging and marketing channels that is fortunately available on our farms” says Gerrit. The farms supply all technical support ranging from establishment to computerized irrigation of the orchards. The project is finalized by the Department of Land Affairs and Industry Development.
ALG Estates manages their whole citrus supply line from the orchard to the retailer. This provides work for 120 full-time employers and a further 800 seasonal workers for 8 months of the year.
By Alex Hitzemann
Currently, South Africa’s racially selective Black Economic Empowerment (BEE) policy utilizes a points system to award economic advantages to businesses with a significant percentage of black ownership and/or management. The policy has gone through several major revisions and has been a flash-point for debate in South African political theater. Black Economic Empowerment (BEE) projects in the South African agricultural sector have an alarmingly high failure rate.
However, a BEE citrus project in the Upper Olifants River Valley near Citrusdal in the Western Cape has proved to be an exception. Cedar Citrus started in 1999 due to unique co-operation between 32 of ALG Estate’s farm laborers, where every individual received his own share of Citrus land. ALG Estates is a family operation of 6 farms producing some 18,000 tons of citrus a year mostly for the export market.
In the first year more than 24,000 trees were planted by Cedar Citrus and a further 12,000 where planted in 2002. Cedar Citrus started making a profit in 2010. In 2012 it paid off its startup loan to the Industrial Development Council and is now expanding its operations with the purchase of additional farm land.
The Western Cape government awarded Cedar Citrus’ good performance over the years with a sprayer, 4 crate wagons, a trailer and recently this brand new John Deer tractor.
During 2015, the company exported 1,500 tons of citrus from their production unit of 36 hectares realizing a total turnover of R12 million for the year.
In their next move towards more financial independence the workers jointly decided to plough back their profits and extended their operations by purchasing additional farmland to plant more citrus for the export market. 92 hectares of additional farmland has therefore been purchased on which new citrus orchards will be established.
This of course was only made possible being part of a bigger organization such as ALG Estates. Their employer is an established citrus exporter. “Constant mentorship combined with in-house training and being part of an established value-adding export chain are the necessary ingredients for success in an operation such as this,” says Gerrit van der Merwe, CEO of ALG Estates.
“Cedar Citrus is managed as one of our production units that receives continual expert external advise from professional entomologists and horticulturalists that specialize in citrus management. This is essential for pest and disease control as well as general orchard health. We also handle all their admin such as HR, financial administration and record keeping. External chartered accountants audit the company annually.
Cedar Citrus directors Lena September and Dirk Dirks at a dam under construction which will supply irrigation water to their new 20 hectares citrus block.
“All 32 shareholders are furthermore employed in our various operations such as production, processing, packaging, marketing and general administration. Three of the shareholders occupy middle management positions while two are directors with executive powers. This ensures that they grow with our own operation and establish their own independence.
“Over the last few years the Cedar Citrus patch of 36 hectares coincidentally turned out to be the most lucrative of all the production units on our six farms. They produce mostly popular soft citrus varieties such as Morr and Orr as well as navels, which are exported to North America, Europe and sold locally to the Woolworths supermarket chain. We are especially pleased that the 32 shareholders of Cedar Citrus jointly decided to waive their profit payouts from the company and rather re-invest it in the expansion of their own operation,” says Van der Merwe.
Gerrit van der Merwe and his son Gerrit Junior who is in the process of taking over the reigns of this family-run operation going back some 250 years. The estate is the second biggest citrus producer and exporter in the Western Cape region of South Africa.
The first phase of the company’s extension on the newly acquired land will be to plant 20 hectares of new popular varieties for the export market. This necessitates infrastructure such as a farm shed, farm manager housing on site, electricity, drainage, water supply and a pump house to irrigate the new orchards. It takes five years for a newly established citrus orchard to get into full production and ten years to make a profit on the initial capital outlay. The Western Cape government awarded Cedar Citrus’ good performance over the years various rewards such as 4 crate wagons, a trailer, and recently a brand new John Deer tractor.
“Cedar Citrus is one of the best performing projects of its kind in South Africa and the envy of many farmers country-wide. Not only is the project a financial success, richly compensating the beneficiaries, but a very good example of how BEE schemes should be implemented and managed in South Africa. Congratulations to Gerrit and his team at ALG Estates on this beautiful project,” says Charl Senekal, the country’s largest private sugar producer and chairman of Pro-Agri Forum the exclusive club of former South African winners of the Farmer of the Year Award.
Anthony Penderis on behalf of ALG Estates produced this report. Some portions were edited for publication in Africa Agribusiness Magazine by Alex Hitzemann
Gerrit van der Merwe: 082 569 8787; firstname.lastname@example.org
Anthony Penderis: 084 306 0331; email@example.com
Africa Rising, Sakata and Eastern Cape Department of Rural Development and Agrarian Reform partner to promote sustainable development and food security.
This year Africa Rising Foundation held a three day celebration leading up to Mandela Day on July 18, 2016, with a range of community projects in Qunu, the home of Nelson Mandela.
Founded by Nelson Mandela’s grandsons Ndaba and Kweku Mandela, Africa Rising focuses on inspiring a new generation of youth who believe in and work towards an empowered Africa. This year marks their second Nelson Mandela Day Initiative, joining the global call to action for doing good on Nelson Mandela Day and beyond.
The weekend’s activities kicked off with the launch of Mandela’s Community Gardens on Thursday, 14 July. In partnership with the Department of Rural Development and Agrarian Reform and seed company, Sakata, Africa Rising launched a drive to distribute one million seeds to one million household farmers over the next year.
The initiative promotes sustainable development and food security by giving farmers vegetable seeds to grow their own food in line with the Eastern Cape’s plans to address food security and production concerns in the region.
In addition to seed distribution, 67 plots of land have been made available on Madiba’s farm in Qunu, for companies to sponsor a child in the Qunu/ Umtata area. Children can plant vegetables and access their plot anytime until harvest time. They can also keep the produce for their families to consume or sell and share to other households and people from surrounding communities.
“It is important for us that the 67 children chosen are from this very community so it’s easy for them to commute and take part in the development of their plots from seed to harvest”, said Ndaba Mandela.
The plots are sponsored at R10,000 each with half of the funds dedicated to the child’s education and the other half utilized on the farm to ensure all the necessary resources are available to farm the plots. All the plots are entered into a competition and at harvest time the plot with biggest yield and best quality vegetables will win a prize. Through this project the youth can play a part in curbing food inflation, contribute to a reliable source of food security for themselves and their immediate community, as well as save money which can be spent on other needs.
According to a recently launched 2016 Stats SA Community Survey, at least 464,838 households in the Eastern Cape ran out of money for food in the last year and 17.6% of these households missed a meal. Add to this continuing drought, a growing population and youth with little interest in agriculture or desires to move away to bigger cities, it’s easy to see why partnerships such as these are of utmost importance. According to Agriculture MEC Mlibo Qoboshiyane, “We want to ensure that cropping is increased and we are already seeing more land under production. Collaborative partnerships such as these, between local communities, provincial government and private sector play an important role in developing a sustainable approach to the issues of food security.”
In addition to addressing these challenges, Ndaba has high hopes for this project and it’s immediate benefits in the community, particularly for the youth. “A lot of the time kids don’t have anything to do, in Johannesburg there are a lot more facilities and activities for children to immerse themselves in after school, whether it be sport, whether it be music. In the Eastern Cape there aren’t as many options so we’re encouraging the children to spend time in their gardens, cultivating their produce, learning about agriculture and keeping them away from activities of a more harmful nature”, says Ndaba.
MEC Qoboshiyane comments on the sustainability of the project: “The reason we decided to come here and work with young people from their schools is to plant a seed of courage. We want to ensure that young people are creating a new culture of love to plant and love to produce. Everything starts small and then grows incrementally and that is what we want to see from Mandela’s Community Gardens. Young people must be cultivated to be a seed, yielding a crop.”
This initiative focuses on getting the youth involved in agricultural activities to empower themselves and make a difference in the community while making a positive impact on food security in the area. “It’s really inline with the spirit of Nelson Mandela to make sure that young people get involved in doing agricultural work. Once this project is successful we shall try and add other elements like worm farming and cattle farming to the gardens to create an ecosystem that produces enough for the community to start selling to distributors,” comments Ndaba on the project’s future plans.
“Community Gardens play a key role in organising a community to be able to produce everything that they consume, therefore being truly sustainable, saving money and living a more healthy lifestyle. We encourage other provinces and countries to establish similar community initiatives to combat food inflation on a larger scale,” Ndaba adds.
To find out more information about this project or how to get involved with sponsoring a plot on the Mandela homestead to one of 67 children in the community please email firstname.lastname@example.org
About Africa Rising
Africa Rising is a conduit for the New African Generation. Africa Rising is committed to publicising the positive image of Africa in order to instill a sense of pride and purpose in young Africans. Africa Rising is the voice of the African youth worldwide who believe in themselves and their continent and act on this to build a prosperous Africa.
Sakata Seed Southern Africa’s Seeds (Pty) Ltd grew out of C May & Co which was founded in 1931. Over the years the company developed a diverse portfolio including seed production, packet seed, vegetable, forage, turf and flower seed, vegetable breeding programs and specialised products for the home garden industry.
Trial grounds were acquired in 1947 outside Johannesburg, with plant breeding having been started in 1965. 1973 saw the introduction of the revolutionary and very successful hermetically sealed garden seed packets. A decade later, and an important milestone, Sakata Seed Southern Africa’s’s highly sophisticated seed laboratory was officially recognised as a government approved seed testing station.
In the middle of the 80’s the company transformed its distribution into a franchising operation.Today the company is operating with 7 national franchisees and various international francisees throughout Southern Africa with a franchisor complement of 80. In December 1999, the Sakata Seed Corporation of Yokohama, Japan, acquired Sakata Seed Southern Africa’s Seeds (Pty) Ltd. Sakata is one of the largest seed companies in the world with extensive global research programs in vegetable and flower seed.
About Eastern Cape Department of Rural Development and Agrarian Reform
The mission of the Eastern Cape Department of Rural Development and Agrarian Reform is to promote, support and coordinate rural development and agrarian reform to reduce poverty and underdevelopment through integrated and participatory interventions.
The three strategic goals of the Department are: a thriving farming sector and access to affordable food; improved rural economic livelihoods and creation of employment opportunities; and an environment conducive to the enhancement of service delivery.
These strategic goals have been identified to reflect critical service delivery priorities. They are intended to ensure that the mission of the Department is achieved; provide a line of sight in the process to achieve the overall mandate of the Department, which is to enhance rural development, land and agrarian reform, and food security; and inspire a cadre of officials and stakeholders to strive to achieve these for the benefit of the rural poor and vulnerable.
Interview by Papiso Matsau
In November 2011, Africa Investor (AI), an international investment and Communications group, named you the recipient of the Africa Agriculture Minister of the year award as part of their annual AI Agribusiness awards. In your opinion, what have been some of your ministry’s most notable accomplishments since you took office in 2009?
Our administration invested a lot of work towards the establishment and maintenance of domestic and international markets. Moreover, we sought to open new markets in regions like the South and Central America and the rest of Africa. The benefits of these engagements have been astounding. We have seen trade with countries like Mexico, Argentina and Brazil increasing significantly. Our membership of BRICS is also expected to lead to further gains in terms of trade and investment with countries that share the same philosophies and vision. BRICS represents a block of countries that are destined to occupy a higher ground on economic growth and development terms going forward and we intend to maximise the benefits of being part of that collective.
Another notable achievement is the success we have had in halting job losses in agriculture. In fact, Statistics South Africa, the national statistics agency of the Republic, recorded a 87 000 growth in jobs between the second quarter of 2011 and the fourth quarter of 2012. This is a remarkable achievement, especially at a time when global demand was still fragile due to the economic meltdown in many parts of the world. It is through our efforts to open up new markets in other developing countries and our commitment to supporting growth of the smallholder farmers in the country that we have managed to achieve these results.
Shortly before commencing my term of office, our country had drifted to becoming a net importer of food. This of course was a major cause of concern for the current administration as it would leave us vulnerable to unfavourable movements in global food markets and in so doing threaten our food security situation. Today, however, we are proud to say that we have managed to reverse that situation and have become, once more, a net food exporting nation.
Although I do not have the exact statistics at this point, allow me to also mention that we have gradually increased the number of black smallholder farmers in the country. This we have done through ensuring that they have access to technical support and finance. Access to finance has always been the smallholder farmer’s biggest constraint but, working with the Land Bank, a state owned development finance institution, we have ensured that financial products tailor made for the needs of these farmers were developed and made available.
In some instances we have worked with the private sector to foster partnerships that will further develop smallholder farmers into prosperous entrepreneurs. A case in point is the partnership with Walmart/Massmart, which has seen to the development of smallholder farmers in Limpopo. The farmers were equipped with skills, training, finance and access to markets. Similar projects are in the pipeline for other parts of the country where the retailing giant has operations.
Since 2009, we have signed memoranda of understanding with several countries in the African continent. This is in line with our objective of increasing trade and engaging in mutually beneficial development programs with other African countries. We signed the following: Centre for Coordination of Agriculture, Research and Development of Southern Africa (CCARDESA).The Memorandum of Understanding, the CCARDESA Charter, was signed in Pretoria on August 2011 and launched in Gaborone, Botswana July 2011. The purpose of this Charter was to provide Member States with a framework for the establishment of a sub-regional organization that will coordinate agricultural research and development (R&D) in the Southern African Development Community (SADC) region.
Seed Harmonisation Regulatory System was signed in Windhoek, Namibia during the Council of Ministers meeting in November 2010: The purpose of the MoU was to regulate the movement of seeds in the region, seed certification and phytosanitary measures for seeds. It is aimed at providing member states with a legal framework to cooperate in the implementation of the system.
The Minister hosted, in Johannesburg, the African Ministers’ Climate-Smart Conference in preparation for the COP17 Conference that was to be held in Durban, South Africa. The Minister was also instrumental in the development of the African position on agriculture for COP17
Bilateral engagements include the Republic of Congo (Brazzaville): Heads of State Summit for the Three Rain Forests Basin held in the Republic of Congo (Brazzaville) on 31 May to 3 June 2011.An agreement in the field of agriculture was signed in October 2010, the purpose of the agreement was to maintain and strengthen their bilateral relations in the field of agriculture, forestry and fisheries.
Abuja, Nigeria from 8 to 10 March 2010: High level Conference on the Development of Agri-Business and Agro- Industries in Africa. The Minister met with her Nigerian counterpart and discussed the potentials of the two countries’ agriculture sectors, with Nigeria interested expressing keen interest in developing her agro-industries and agro-processing. South African agro-processing and agro-Industries are encouraged to invest in Nigeria.
South Africa is among the 26 nations to be signatory to the Comprehensive Africa Agriculture Development Program (CAADP). The primary goal of CAADP is to eliminate hunger and reduce poverty through agriculture. In order to achieve this goal, the CAADP agenda aligns itself with the Maputo Declaration that called for African nations to increase public investment in agriculture by a minimum of 10% of their national budgets and to raise agricultural productivity by at least six percent. Has South Africa achieved this commitment? What would a 10% increase in public agricultural investment mean for the average South African farmer? What programs has this initiative funded? Can you briefly describe some of its successes?
The Department is currently undertaking a budget tracking exercise to determine allocations to agriculture and rural development across the three spheres of government. I am confident that this will reveal that South Africa is investing heavily in these areas, although the national budget of the Department does not constitute the 10% target.
While not contesting the target set through the Maputo Declaration, it should be noted that in the case of South Africa, the primary agriculture sector contributes between 2.5% to 3% to the country’s gross domestic product (GDP) and it may therefore be difficult to justify an allocation of at least 10% of the national budget to the sector. The situation is made even more complex in a country that is still burdened by the legacy of apartheid that manifests itself in high levels of poverty, unemployment and inequality.
The CAADP agenda outlines certain strategies that should be employed in order to actualize its goal of reducing rural poverty. Strengthening the capacities among the agribusiness community is listed as one of these strategies. How has your Ministry improved the agribusiness community’s ability to operate in South Africa?
Agribusinesses in South Africa are doing relatively well, although like all the other industries, they have also in some ways suffered the consequences of the global economic meltdowns of recent years. Within the CAADP processes, the Department of Agriculture, Forestry and Fisheries consulted with agricultural industry stakeholders to make inputs on how the CAADP agenda should be shaped in South Africa. There have been two consultation meetings with civil society organisations. The agribusiness community in South Africa is a vibrant one which adds significantly to the country’s economy. Various departments, such as the Department of Trade and Industry, have established incentive schemes to promote agribusinesses as part of building rural economies. We also strive to maintain acceptable turnaround times in our regulatory services to keep the costs of doing business as low as possible for agribusinesses in the country.
South Africa helped lead the way to the establishment of the Centre for the Coordination of Agricultural Research and Development in Southern Africa (CCARDESA). The stated goal of the CCARDESA is to secure regional food security through research and innovation. The Centre intends to focus primarily on improving the agricultural practices of smallholder and small commercial farms. What has been the impact of the CCARDESA on smallholder and commercial farmers, thus far? How does your Ministry ensure that the research findings and suggestions of the CCARDESA reach the average South African Farmer and the agribusiness community as a whole?
CCARDESA was only launched and implemented less than a year ago. So, it is too early for us to assess its impact. South Africa has been invited to serve on the board of CCARDESA through the leadership of the Agricultural Research Council (ARC). A regional planning workshop is being conducted by the new board of CCARDESA to identify and agree on priorities for the year as well as to ensure clear alignment to CAADP multi-country productivity programmes through research.
While giving a speech marking the establishment of CCARDESA, Botswana’s Minister of Agriculture remarked, “the issue of food security is particularly challenging to our region because despite the various challenges we have, the region is endowed with reasonable resources, that if put to good use, can change the situation.” How far is South Africa from achieving food security? What role do you see for South Africa and its neighbors in achieving food security? Could increasing trade within the region assist all parties involved in reaching their agricultural needs? Do you believe increased regional agribusiness related trade and investment could provide more jobs to South Africans?
We are on the verge of taking a Food Security Policy to Cabinet, which will respond to both national and regional concerns about food security.
South Africa is food secure as a country, however up to 13% of citizens experience food insecurity for a number of reasons, including lack of income due to the high levels of unemployment, inadequate storage facilities and distribution networks. It is with this realisation in mind that we have embarked on programs aimed at increasing household food security in the country. In this regard, we are actively assisting smallholder and subsistence farmers, particularly in the former homeland areas with potential for production. Our target is to put one million hectares of land with potential for agricultural production, into production within the next few years. This year farmers will be harvesting the first crops from this programme, which has proven to be successful and well received.
Agriculture and agribusiness have been identified in the New Growth Path as key jobs drivers, and the National Development Plan envisions up to 1 million new jobs in these sectors by 2030. Regional trade development is part of this, as is expanding trade especially with Brazil, Russia, India and China in the context of BRICS.
Leading up to last Novembers’s global climate-change meeting in Durban, your Ministry fought hard to ensure that agricultural issues occupied a main part of the meeting’s agenda. The Mail & Guardian, a South African newspaper, quoted you as stating, “Feeding our people at a time of climate change is the real challenge. As long as agriculture is the sector that is most vulnerable to climate change, we will always have a responsibility to mobilize the rest of the continent.” How has your Ministry promoted sustainable agricultural practices in South Africa and on the continent? How has your Ministry acted to prepare for climate change events in terms of food security?
We are currently conducting research which installs bio-digesters on farms owned by small-scale and subsistence farmers in the rural areas of one district in the country. The project enhances household food security and job creation and promotes rural development by providing alternative sources of energy. The project has training and capacity building components to it that are aimed at improving its sustainability in the long run.
We have legislation and policies that are aimed at addressing the sustainability of agriculture in the country. Chief among those is the Conservation of Agricultural Resources Act (CARA) 43 of 1983, whose objective is to conserve agricultural resources. A number of programmes focusing on the maintenance of the production potential of the land are implemented. The LandCare programme is aimed at optimising productivity and sustainability of natural resources to enhance greater productivity, food security, job creation and better quality of life for all and identifying measures to address issues of LandCare including mitigation and adapting to climate change. Under this programme we are encouraging best farming practices such as diversification, selection of crops with shorter germination period and shorter growing season as well as developing new breeds for livestock and crops in order to adapt to the changed environment particularly in dry land farming areas.
We are currently conducting a climate change research project which analyses an ensemble of present day and future climate simulations with the aim of determining the crop suitability of selected crops for the South African region. This analysis has the potential to identify regions where temperature related events can negatively impact crop production.
Agricultural production is risky as it is very sensitive to the extreme weather and climate conditions. The sector continues to be affected by the impacts of natural hazards due to the frequency of extreme weather and climate events. The expected impacts of climate change make it even more vulnerable. It is in that light that among the Departmental programmes early warning system for natural hazards disseminates warnings and advisories in line with the expected weather and climate conditions for prevention and mitigation of disaster risks in accordance with the Disaster Management Act 57 of 2002. The disseminated information includes the suggested strategies for day to day farming activities including sustainable agriculture. We continue to raise awareness on the impact and benefits of climate change to minimize the impacts of climate change in agriculture, forestry and fisheries production and productivity due to unexpected climatic hazards. We are currently developing a climate change adaptation and mitigation plan which puts emphasis on adaptation and mitigation measures that can assist to adapt and reduce vulnerability to climate change and improve productivity.
How has your Ministry worked with potential private investors? Have you had any investors that you would like to mention and do you have any stories of their successes?
The National Agricultural Marketing Council (NAMC) works closely with private investors such as farmers, exporters, farmer organisations, retailers, and agro-processing firms, on a number of issues that call for collaboration. Mention has already been made of the partnerships that have been created with Walmart/Massmart. There are other similar partnerships that we are actively pursuing with various private sector partners that we may not divulge for confidentiality purposes at this stage. The Walmart/Massmart project addresses everything that smallholder farmers require in order to be successful and have sustainable businesses.
The Department also participates in a public private partnership, which is led by the office of the President of the Republic of South Africa, President Jacob Zuma. This PPP promotes food production, especially in rural areas and on under-used communal land.
Can you recommend any agribusiness related activities in South Africa that would be open to private investors and that would be profitable and most beneficial to South Africa’s people?
South Africa is full of opportunities. There are many agriculture related opportunities that one can think about. One that I can think of is increased capacity in the soybean value chain. This is in line with the fact that South Africa produces and exports soybeans while importing soybean oilcake. The second to consider, which is more long term, is increased capacity in the mohair and wool value chains considering the proportion of raw wool and mohair that this country exports. Increased production of products such as paprika, cotton provides good opportunities to investors.
There are many such opportunities, and the area of aquaculture already mentioned is just one of these. Other areas of development include bio-fuels industry. The promulgation of a blending mandate will offer huge opportunities for the development of this industry.
On February 28th, 2013, you gave a speech on the occasion of BRICS provincial Road show in Kimberley, Northern Cape Province. In this speech you mentioned many of the international trade advancements and knowledge sharing South Africa is making with fellow BRICS members. You mentioned taking inspiration from urban gardens in Brazil; how much of South Africa’s food needs do you think an initiative for urban farming could achieve?
There is great potential in this regard, although it will not, on its own, solve the problems of food insecurity. What it does do is provide fresh food, mostly vegetables, which are often the missing ingredients in a nutritional sense. It also serves to develop among children an interest in agriculture, which will help build the next generation of commercial farmers.
During the February 28th speech, you also mentioned South Africa’s work with China via the Understanding on Agriculture Cooperation and the Cooperation Exchange in Aquaculture Mechanization agreements. Do you see South Africa’s growing relationship with China as a key to achieving food security and economic growth? In the long run, how do you see this partnership growing?
In 2012 we hosted a delegation from China and among the issues that they were interested in, is agro-processing. Their visit was coordinated by my department. This year, our colleagues will reciprocate that visit by travelling to China. This is to make sure that we create a platform for forging a clear understanding of each other’s capacities and to learn as much as we can, where possible.
In your BRICS speech, you also noted South Africa’s strong brand recognition in fellow BRICS nations. Do you see this brand awareness in other non-BRICS countries? How has your Ministry worked to promote the South African brand abroad?
The Department has offices in non BRICS countries such as the USA, Belgium, France, Italy and Switzerland as part of ensuring that South Africa is part of the global business network in the agriculture, forestry and fisheries sectors. Part of the mandate for these offices is to promote the SA brand whilst pursuing market access for our agricultural, forestry and fisheries products. We hope to open more foreign offices as part of our broader ambition to become active players in the global marketing chains.
What do you see as a role for Western-based agribusinesses in South Africa? Is South Africa open to Foreign Direct Investment and partnerships between local and foreign companies in its agribusiness market? Can you briefly describe any such current arrangements?
I suppose that a number of direct foreign investments in the food industry are viewed in perspective of their agricultural potential. The deal regarding Walmart/Massmart and its small scale grower scheme should be considered in this light. Foreign direct investment is always a good indication of the environment (country’s prosperity) and is accepted regardless of the country of origin as long as it will be customised to assist government deliver on its socio-economic commitment to the people of our country. We always encourage joint ventures between local and foreign companies whenever such possibilities arise.
Thank you very much for your insights.
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.