Address by Mr Patrice Motsepe President of Business Unity South Africa

09 September 2006

Her Excellency, Madam Deputy-President, Honourable Cabinet Ministers, Leaders of the Constituencies in NEDLAC and distinguished guests. I am pleased to stand before you today as we once again collectively reflect on the state of our nation and review the progress we have made as the NEDLAC social partners in the year since the last Summit.

It is appropriate that this gathering is called a Summit. It suggests that we are standing on high looking both back at the paths we have followed and also forward into the future with our vision clear and unimpeded.

If we look back at the road we have travelled together since the inception of NEDLAC in 1995, we can see that we have made excellent progress. Our democracy is mature and stable, resting securely on firm fundamental principles such as certainty, transformation, a market-oriented economy and entrenched property rights, that create a sound environment for economic growth. South Africa is currently reaping the rewards of a decade of difficult economic adjustment and disciplined monetary and fiscal policies. Some tough decisions have had to be taken. Economic growth may well now have moved to a sustainably higher level. In 2005 business registrations in South Africa increased by about 15% (over 200,000) from its previous total of about 1,400,000.

Over the past two years South Africa's average growth rate has risen to 4.7% - from 3.2% over the previous five years. This can be ascribed to our improved economic fundamentals which, among other things, have led to higher credit ratings by the international rating agencies. Foreign direct investment has also increased somewhat, although disappointingly not yet at satisfactory levels.

Twelve years on, the commanding heights of the South African economy are being increasingly addressed in a robust way. We are gradually moving towards a more inclusive and competitive economy, but there are no grounds for complacency. We live in an uncertain and changing world, and one in which we want to strengthen our position among emerging markets.

We need to address external market development and market access so that as a nation we can increase our international competitiveness. In this regard, business is extremely supportive of the steps taken by government to open up the economy and increase South Africa's access to foreign markets. In addition, we believe that the NEPAD initiative provides a new dimension to the country, both in increased opportunities as well as in making the region a more attractive investment destination.

Naturally, there are some things we can't control, like world crude oil prices. BUSA also regrets the breakdown in the World Trade Organisation negotiations. This failure at the multi-lateral level does not bode well for the developing world of which South Africa is part. It is essential that the United States revise its position on domestic agricultural subsidies, and that the European Commission do likewise regarding increased market access. We believe that these matters must be finalised before developing countries - including South Africa - make any concessions on industrial products. The mantra must be 'fair trade'.

BUSA fully supports ASGISA and will do all in its power to ensure that we achieve our common objectives of achieving a growth rate of 6% as well as halving unemployment and poverty by 2014. Through ASGISA we can achieve faster economic and business growth so that substantial progress can be made in reducing unemployment, poverty and inequality, and also in bridging the gap between the first and second economies.

In particular, BUSA welcomes government's commitment to invest R372 billion in infrastructure development over the next three years. The infrastructural backlogs in a number of government driven areas are an impediment to higher growth - and we need to catch up. Our export performance depends on efficient sea and land transport links. We would also like to urge government to ensure that there is significant participation by black business and BEE compliant companies in all projects.

It is widely recognised that the emphasis must now be on delivery - especially at local government level - in ways which will make a real difference to the lives of as many South Africans as possible. Where appropriate, greater use should be made of public-private sector partnerships to unblock bottlenecks to delivery in various parts of the country. We need to find innovative ways to strengthen capacity and delivery, particularly in the rolling out of infrastructural spending. One area of investigation could be to see whether streamlining provincial and local government - backed by enhancement and redeployment of skills - would facilitate effective delivery.

Accelerated growth, however, does not only depend on the level of infrastructure investment. It is also dependent on the involvement of the private sector which currently accounts for 71% of gross investment and 80% of net investment in the economy. We continually need to improve the business operating environment so as to promote higher levels of investment and growth.

Business can contribute to the success of the ASGISA programmes in a number of ways, such as by increasing its level of investment, entering into public-private partnerships, supporting skills development, accelerating transformation through BBBEE mechanisms and employment equity and by procuring goods and services from small businesses to encourage SME development. BUSA is, however, increasingly concerned that red tape is stifling investment in the economy.

BUSA recently conducted research on the current state of preferential procurement in the public and private sectors of the economy. We have now identified key lessons to facilitate the effective use of preferential procurement as a vehicle to promote the development of sustainable SMEs, particularly black-owned SMEs. To facilitate the implementation of these recommendations in the public and private sectors of the economy, BUSA is developing a guide on implementing an effective preferential procurement and enterprise development strategy.

At a recent meeting between the Presidency and BUSA, Her Excellency Deputy-President Mlambo-Ngcuka offered the insight that as a country we are being successful in achieving the "Accelerated Growth" part of ASGISA. She feared, however, that we are not being quite as successful on the "Sharing" part of the initiative. I think that this is a wise observation - and one on which we need to reflect - as it captures the essence of the Nelson Mandela Memorial Lecture recently delivered by President Mbeki at the University of the Witwatersrand. He too reflected on the sort of society that we should be striving to create in South Africa, and also on the threats to our social and national cohesion. While arguing that our nation has begun to exhibit many critical common features deriving from a unified vision of a society based on non-racialism, non-sexism, shared prosperity, peace and stability, President Mbeki made it clear that we still have a long way to go. This, too, I believe is true.

In our first decade of freedom we focused on setting up a non-racial democracy. It is fitting that we now, in our second decade, seriously contemplate the sort of society we want South Africa to be. In doing so, we should, however, be careful not to lose focus on the need to de-racialise our economy. The greatest threat to our democracy and social cohesion remains the exclusion of the majority of our people from the economic benefits of our new dispensation.

There is no doubt that the benefits of South Africa's growth must be shared by as many of our citizens as possible. There is also no doubt that we need to ensure that we are a cohesive and inclusive society. Therefore, we need to find ways to bridge the divide between the first and second economies. Without positive - and speedy - action there is every danger that this divide will become a canyon beyond the span of any bridge.

It is BUSA's considered view that the systematic implementation of ASGISA's targeted intervention of responding to the challenges of the second economy provides a golden opportunity to harness the capacity of the first economy to overcome the challenges of unemployment and poverty alleviation.

Against this background, BUSA has developed a proposal on "Bridging the Economic Divide: A Strategic Partnership to Underpin the Implementation of ASGISA's Targeted Intervention of Eliminating the Second Economy". The proposal elaborates the specific interventions that need to be introduced effectively to make use of the leverage of the first economy to address the second economy. Central to the implementation of the multi-faceted strategy is the use of procurement and enterprise development opportunities of the public and private sectors to create and support sustainable black-owned, youth-owned, and women-owned small business enterprises capable of igniting labour-absorbing economic activities to benefit people in the second economy. We look forward to discussing this proposal with government, and our other social partners.

Our country's history has shown that we can always find ways to meet the challenges that face us, even when at first glance they might seem daunting. What has been an important part of the secret? Social dialogue has helped us find our way so far, and has brought us closer together on many issues. While we might not share the same views on every subject, we, I believe, have matured as social partners to the extent that we recognise that we all share this great country and must work in partnership to make it even greater. This bodes extremely well for the future of social dialogue in general, and for the NEDLAC processes in particular.

NEDLAC is the primary institution in South Africa to facilitate social dialogue. BUSA remains committed to NEDLAC, and to institutionalised social dialogue. Admittedly, there are some weaknesses in NEDLAC's operations that need to be ironed out. It is important, therefore, for the NEDLAC review process to be completed as soon as possible, so that NEDLAC will be better equipped to meet the challenges of the next decade.

However, it must be recognised that social dialogue has made an invaluable contribution to South Africa's progress so far. Without the existence of a structure like NEDLAC, the first ten years of our democracy could well have seen more difficult relations between the social partners than has been the case and this has had a very positive effect for an emerging market like South Africa. Indeed, it can be argued that the sight of the social partners meeting regularly under the auspices of NEDLAC has been reassuring to investor confidence and supportive of social stability.

BUSA is confident about our capacity to host a spectacular World Cup - we have admirably demonstrated our ability to host large scale international events such as the World Summit on Sustainable Development and the rugby and cricket world cups. In addition to the economic opportunities that the World Cup will offer to South African business and entrepreneurs, it will also present us with a unique opportunity to project a positive image of our county and continent to the rest of the world and to brand South Africa as an attractive investment and tourism destination. We must also not lose sight of the fact that 2010 can serve as a catalyst for nation-building and cohesion amongst all South Africans.

Similarly, transformation is key to creating a more inclusive society in our country. One of BUSA's key strategic objectives is to support the effective implementation of the objectives of BBBEE. We have welcomed the engagement with government on both the first and second phases of the BBBEE Codes and look forward to their imminent promulgation. They will bring certainty to the market place, and will also go a long way to speed up our transformation efforts which are not progressing as fast as we had hoped.

BUSA is strongly of the view that business in South Africa should not approach the Codes merely from the point of compliance. Rather business leaders should recognise that BBBEE is a national imperative and is necessary to address a peculiar South African condition. BUSA is promoting this view amongst its constituency - not only because it is the right thing to do, but also because the manner in which companies approach empowerment will impact on the attitudes of investors and their view of our country.
We all need to dedicate ourselves to working together as we continue to chart our country's course towards greater growth, development and transformation. If we do not do this, then we stand in danger of failing those in this country who most need the benefits that a vibrant economy will bring. As government and leaders of the social partners we must ensure that we work in partnership to build our economy so that we can create jobs and alleviate poverty in our country. Nothing else will be good enough and, indeed, we will be failing our fellow citizens if we do not dedicate our collective efforts to this end.

There is an African proverb that says "if you want to travel fast, travel alone. If you want to travel far, travel together". We need to travel far to reach our goals and we must continue on this journey together. But there is no reason why we should not - with NEDLAC's help - make all haste to get to our destination as quickly as possible.