South Africa open for business

South Africa remains a reliable investment destination which is open for business, writes Dr Rob Davies the Minister of Trade and Industry.

Much has been said about the flight of capital from South Africa in recent weeks suggesting that the country has become an investment pariah. This sentiment has been coupled with the decision by ratings agencies to downgrade South Africa’s investment status. We are cognisant of both the domestic and international factors that have contributed to concerns about the stability of South Africa’s economy.

As we conclude 2015, it would however be important to contextualise some of the successes we have had in building an investor friendly environment. Amongst others, we have finalised the new Protection of Investment Bill, which aims to balance the rights and obligations of investors and government while also preserving the right of government to regulate in the public interest. One of our most significant interventions has been the establishment of a One Stop Inter-Departmental Clearing House which will provide efficient support to investors to ensure that South Africa offers an investment friendly environment.

We are also implementing Incentives and support services for investors through our Special Economic Zones (SEZs) programme. As part of the suite of SEZs the six Industrial Development Zones (IDZs) established between 2002-2014, have attracted a total of 59 investors on site with an investment value of more than R10.7 billion.

This is important for the country’s growth and development agenda because research shows that inward investment is the most reliable predictor of future economic growth and South Africa’s Gross Domestic Fixed Investment (GDFI) to Gross Domestic Product (GDP) currently stands at approximately 20%. This is benchmarked against the international norm where the fastest growing developing countries have Gross Domestic Fixed Investment (GDFI) to Gross Domestic Product (GDP) ratios of above 30%. The target in the National Development Plan for FDI inwards is also set against this international benchmark of 30%.

In as far as South Africa’s ability to attract investment goes, it bodes well for our country that despite a global trend which indicates declining FDI levels, we have been able to attract over R140 billion in the 2013/14 financial year. This is almost double the amount of FDI in 2012. South Africa was also the recipient of US$3.31 billion in FDI from January 2015 to July 2015 which also saw the creation of 5 037 jobs.

Our efforts to create an investor friendly environment are bearing fruit and we have deveIoped a robust investment pipeline over the past five years. We have converted a number of these projects into committed investments, culminating into launches this year. I would like to indicate a few areas where we are doing very well:

South Africa and the Automotive sector

South Africa’s Automotive Production and Development Programme (APDP) is one of our most successful programmes which have attracted private-sector investment of over R 25.7 billion over the last 5 years. In the past year, we have seen additional commitments by Mercedes – R 2.4 billion, General Motors – R 1 billion, Ford – R 3.6 billion, Metair Group – R 400m, BMW – R 6 billion in manufacturing the X3 range in its Rosslyn plant; Goodyear R 670 million and VW -R 4.5 billion. Earlier this month, Beijing Automobile International Corporation, China’s fifth largest car manufacturer, announced an investment of R 11 billion in a completely knocked down vehicle manufacturing plant in South Africa.

These investments must be seen within the context of our national developmental agenda. In this regard, our automotive programme supports 56197 jobs and is expected to create 21 836 new jobs. In addition, this sector employs about 9 million people directly in producing vehicles and the automotive components that go into them. It is estimated that each direct automotive job supports at least another five indirect jobs, resulting in more than 50 million jobs globally linked to the automotive industry.

South Africa and Manufacturing

South Africa is undertaking one of the largest rail investment programs. Through our designation and localisation policy we are scaling up private sector investment, building up local capacity and capability.

Multinationals have affirmed South Africa as a regional manufacturing hub investing in new plants, machinery, technology and upgrading existing plants. Unilever has invested R 4 billion in state of the art plants across the country which are blue prints for their future global production locations. These new investments also contribute to sustainable development, are energy efficient, water neutral and reduce the carbon footprint. Similarly, other FMCG companies such as Nestle, Proctor and Gamble, Samsung, Hisense and Kimberley Clark have also invested in South Africa. The Hisense plant located in Atlantis in the Western Cape, now exports to Africa and is ranked as the second most productive plant outside of China for Hisense. Domestic companies, which are also gearing up for the African and Global markets such as Nampak, Mpact and Tiger Brands, have also expanded their production capacity and investment. These companies have retained and expanded their investment and have been supported through the 12 I Tax Allowance program.

To further encourage and build a competitive manufacturing sector, South Africa has introduced a Manufacturing Competitiveness Enhancement Programme (MCEP). Since its establishment, the MCEP has approved 1 153 projects with a projected investment value of R28 billion. The programme helped to sustain over 200 000 jobs since its inception in agro-processing, metals, chemicals, plastic, electro technical, printing, pharmaceuticals and wood.

Total grants under this programme include:

· R 2.1 billion in Agro-processing sector with an investment value of R 8 billion and 100 000 jobs retained,

· R 990 million in the chemicals sector with an investment value of R 3.3 billion and 33 000 jobs retained,

· R 1.5 billion in Metals sector with an investment value of R 6.4 billion and 36 000 jobs retained,

· R 330 million the Wood sector with an investment value of R 960 million

The Manufacturing Investment Programme (MIP) has also approved 2 314 projects, with projected investment of R 49 billion and 58,127 jobs created, and a total incentive value of

R 6.8 billion

· 624 projects in Agro-processing

· 578 and 509 in Metals and Chemicals subsectors, respectively

South Africa and the Clothing and Textiles Competitiveness Programme

South Africa’s Clothing and Textiles Competitiveness Programme (CTCP) has also yielded results. Between the inception of the programme in 2010 and March 2015, over R 3 billion was approved to support investment in the sector. As a result 68000 jobs were retained in the sector, 6900 new jobs created and 22 new factories in leather and footwear sector opened. By maximising the efforts of government and the private sector, this sector has been successfully stabilised, is steadily regaining domestic market share and is beginning to grow exports.

In the leather and footwear segment, the dti is partnering with the private sector to establish a National Footwear and Leather Cluster. This has already been directly responsible for the creation of approximately 2000 sustainable jobs and a reduction of R 1.4 billion in the sectoral trade deficit.

South Africa and New Economic sectors

South Africa is also becoming a frontier for new sectors of FDI such as the green economy, oil and gas, shipbuilding and the ocean economy amongst others. Our Renewable Energy Independent Power Producer Programme (REIPP) has become world renown and a policy blueprint for other countries and has attracted R 190 billion in investments in the four rounds of bids. The Global Climate Scope report 2015 ranks South Africa 4th from 55 countries for its attractiveness for investment in clean technology.

As the oceans economy gains momentum, we welcome new investment in oil and gas manufacturing and infrastructure. This investment further enhances and supports South Africa’s efforts in establishing Saldanha Bay IDZ as an oil and gas serving hub for the African continent.

The R 900 m Burgan Fuel storage terminal in Cape Town was launched which is a partnership that has been established between Dutch terminal operator VTTI, Thebe Energy and Jicarro a 100% black owned entity.

Hunting PLC, a UK company established a new R 300 m facility in Brackenfell in the Western Cape to supply the African Oil & Gas market.

South African BPS Value Proposition

South Africa’s Business Process Services (BPS) sector continues to maintain its status as a leading global outsourcing destination while moving up the value chain in terms of service offerings.

Highlights for the sector include being nominated as “Offshoring Destination of the Year” at the National Outsourcing Association (NOA) awards in the UK and new investment from American Multinational EXL, CCI in Kwa Zulu Natal and Webhelp who are providing services to Vodaphone of the UK.

South African Film Production Sector

South Africa is now globally recognised as a premier film production location. Disney’s The Jungle Book is due for release in April 2016. Top rated TV drama series Black Sails has been renewed for a third and fourth season.

In the Hospitality sector, Marriot Hotels earlier this year announced they would expand their national footprint and the Westcliff hotel, following investment from Singapore, was refurbished and rebranded as Four Seasons.

We are mindful of our challenges and goals set out in the NDP. We are committed to implement the 9 point plan for South Africa to achieve a higher level of inclusive growth.

As we conclude 2015, we are confident that South Africa continues to provide a reliable and attractive investment destination for multinationals who continue to use South Africa as a base for their regional and continental operations.

We have laid the platform for Regional Integration and Intra-Africa Trade and the roll out of the infrastructure program will serve as a catalyst to boost trade and investment on the continent.

Global economic conditions are affecting all countries and in an increasingly inter-connected world, no country is immune from its effects. What I am confident of is that South Africa remains an attractive investment destination that is open for business.