SPEECH BY MR ATTIE DU PLESSIS ON BEHALF OF THE BUSINESS CONSTITUENCY ON THE OCCASION OF THE GROWTH AND DEVELOPMENT SUMMIT

7 June 2003

Mr President, Cabinet Ministers, leaders of the NEDLAC Constituencies and honoured guests. I am indeed privileged to stand before you today on this historic occasion as we rededicate ourselves to working together to continue to chart our country's course towards greater growth and development.

The explorers of old used to set off on their journeys with no clear idea of where they were going, no reliable means of navigation and no guarantee that they would ever return to their homes. Foolhardy, perhaps - but also bold and fearless and daring - and driven by the desire to find better opportunities. Like these adventurers of times past, South Africa is on a journey of discovery. We too set off in 1994 with very different ideas about where we wanted to go and how to get there.
A shaky start perhaps, but when we look back at our point of departure it is amazing to see how far we have travelled and the extent to which opinions have converged about where we want to go.

What has brought us to this point in our journey? As business, we do not pretend to have the solutions for all the questions in life, but we believe that we can answer this one and it is, very simply, partnership.

The one fundamental thing that has made all the difference is that we have realised that none of us can undertake this journey alone. We need one another, we rely on one another and our future is dependent on each of us using our various strengths and talents to make sure that we keep on travelling to a destination that we are close to agreeing on.

Let me state categorically, business does not just accept this spirit of partnership, it wholeheartedly embraces it. The negotiations in NEDLAC that have preceded this Summit, in marked contrast to some previous processes, have demonstrated the maturity of the interactions between the social partners, not only in NEDLAC, but also in structures such as the Black Business Working Group, the Big Business Working Group and the Millennium Labour Council. This bodes extremely well for the future of social dialogue in general, and for the post-Summit process in particular. NEDLAC will have a crucial role to play in these, and other, processes and, we believe that the time is right for us to think about better resourcing for the institution so as to ensure its effectiveness.

What we need now is a common and united purpose that will permit us to build on these positive beginnings. The time is right for us to endeavour to take a more visionary approach to our future. As business, we believe that we should unite all our efforts around a common goal to break the back of unemployment by the year 2014. This may sound a surprising goal to be motivated by business for whom employment is the consequence of investment decisions. Let us set aside, however, the argument about cause and effect for the moment and focus on the goal and the vision. This is certainly a goal well worth striving towards and, given enough determination and the courage to make difficult decisions, it might just be attainable. We have, despite our different views, come so far in the last decade and if we chart our progress over the last nine odd years, we can see many remarkable achievements.

Foremost amongst these, I would like publicly to record our recognition for government's success in stabilising the economy.

From a very unstable and troubled economic position in 1994, government finances are now in exemplary shape and provide for substantial real increases in future spending, especially in areas such as infrastructure and capital investment that will be needed to support future economic growth. Indeed, the problem now is not one of money, but one of delivery capacity. Our economy is less vulnerable to external shocks as is demonstrated by the record of positive economic growth even in the face of adverse global conditions. In addition, government's policies have resulted in the country's investment risk profile being significantly improved, a fact increasingly being recognised by international rating agencies. All these factors have led to greater predictability and certainty in fiscal and monetary policy. This is good for the country, and also good for business' central role in growing the economy. Without a doubt, government's approach to economic policy over the last few years has greatly strengthened our prospects for better overall economic performance over the long-term. Business' response has been to lift current levels of private investment in real terms by more than seventy percent on 1992 levels.

We are now beginning to see some progress in the transformation of our economy and this too should have a positive effect on our growth rates. On this subject, I would like to make it clear that business is totally committed to black economic empowerment. We are supportive of government's BEE strategy and are enthusiastically and creatively pursuing its successful promotion. In our view, BEE is a critical element of any strategies to promote not only growth and development, but also the key issue of redistribution of opportunity.

Let us for a moment assume that we are at a midpoint on our imaginary journey, it is time now to take stock and then plot our course ahead for the next decade.

All the scenario projections of government, South African and international corporates and multilateral agencies are roughly congruent. Our current growth path of between 2 and 3 percent, while a good performance in many respects, is not nearly enough to make real inroads into our pressing social problems. And since unemployment is the greatest contributor to poverty, and growth and employment generation the best alleviator of poverty, from any standpoint, political, economic or moral, this is simply not good enough and we have to do better in the emerging market growth league table.

We need to strive for the 5, 6 or even 7 % growth that will help us meet the challenges we face.

An absolutely essential condition for higher growth, and the jobs it will bring, is investment. At present, our growth rate is being supported by total fixed investment of about 15% of GDP. This ratio needs to be much closer to 25% if sustainable growth rates at higher levels are to be achieved. Government has created the space for a higher rate of public investment through its stabilisation policies. But the creation of an environment that encourages and promotes greater private sector investment remains a critical challenge. We simply have to remove the impediments to both domestic investment and foreign direct investment. Unless conditions can be established which ensure competitive returns on investments - measured by alternative opportunities in South Africa and abroad after risks and costs have been accommodated - investment will not happen. It is not our task to delve into too much detail here. Suffice it for business to flag the need for further understanding and debate amongst the social partners on investment drivers such as the requirements for projects to meet the cost of capital and provide competitive returns if the investment is to take place.

Similarly, we need to encourage savings. The inadequacy of our domestic savings remains a significant constraint on domestic investment, which, in turn, negatively affects foreign investment, and consequently total investment and employment creation. We call for an all inclusive new national campaign in this regard which recognises that savers must be offered incentives to save and cannot be exhorted or even punished into saving if it is against their economic interest.

As elsewhere in the world, it is true that economic growth in South Africa will be largely enterprise-driven. We simply must energise our enterprises by establishing a conducive enabling environment which facilitates business development, encourages entrepreneurial activity amongst all our people and facilitates the ability of enterprises to generate the competitive advantages that permit them to compete in the global economy.

Business is not, in this respect, pointing fingers at any constituency. Instead, allow us to indulge in a little introspection. As a business community, we recognise that we have not done all we could to keep our journey on an even track.

For example, some South Africans, including some people in our own ranks, have been pessimistic in terms of confidence and have sometimes tended unnecessarily to talk down South Africa in the international world, particularly given the fine quality of macro-economic management referred to earlier. Business will strive further to build and project a more balanced and confident stance. Confronting issues like HIV / AIDS and crime will assist in this task.

In addition, organised business has been divided along racial and other lines for far too long, to our own detriment and that of the country. Let me assure you all, these divisions are being bridged, both at a Chamber level and at the confederal level. In many ways, black and white business is already united and the nature of business' representation at this Summit reflects the significant progress being made in this regard.

As organised business in South Africa, there are some issues that we would like to put on the table today.

Firstly, to return to the theme of making it easier to invest and take risks, particularly for small and medium enterprises, we need to recognise that we are competing for investment and trade on a global basis. All investors, whether domestic or foreign, are inherently cautious and in assessing any country as a potential investment destination they would look at the acceptability of its total regulatory regime - in other words, not just the total cost of the tax burden in its various forms, but also the cost and effort of complying with all regulatory and legislative requirements. While appropriate regulation is a reality and has its rightful place - indeed it is necessary for the conduct of our economic life - too much can deter those who might otherwise invest in our country. International experience clearly shows that an appropriate regulatory and institutional environment is the single most important element in an economic growth strategy.

Business firmly believes, therefore, that there is a strong case to be made for instituting a Regulatory Impact Assessment (RIA) process in South Africa.

The RIA model is not new. It has been applied in a number of other countries with considerable success. In most cases, the RIA structure has been preceded by an evaluation of the regulatory regime by a task force appointed by government, but with representation from the social partners. This is a proposal that business would like to explore in greater detail with government. We are confident that the post-Summit processes will offer the opportunity for such discussions.

Earlier I suggested that we should aim to break the back of unemployment over the next ten years. In pursuance of this goal, and as our own contribution to the growth and development of our country, business commits itself to a number of initiatives designed in the shorter term to contribute to, and complement, government's provision of a safety net for the unemployed and the poor, whilst the longer term benefits of sound macro and micro policies and greater economic growth flow through.

These commitments are over and above investment in the South African economy by enterprises and sectors, and also additional to business' support for NGOs and CBOs which, even in 1998, funded thirty four percent of their budgets from corporate grants. By way of illustration, I would like to point out that a limited survey we have just conducted amongst a small number of sectors has revealed that these intend to undertake more than R145 billion of new capital investments in the next few years. I am sure that you will agree that this reflects a tangible demonstration of business' confidence in the South African economy.

To return to our specific undertakings, the first commitment is to the continuation of the Business Trust beyond its original five-year lifespan. Discussions within our ranks and with government are at an advanced stage and, in partnership with government, business aims to broaden and extend the Trust's successes in future endeavours.

As I have indicated, we believe that the last five years have seen the emergence of a shared analysis that this country requires a broad range of initiatives that will result in significant economic growth and consequent reduction of unemployment. The on-going restructuring of our economy will have to be underpinned by greater industrialisation. We, therefore, need to implement large scale economic and social infrastructure programmes, as well as increasing investment and building the skills and capacity of our people. The Business Trust could be a strategic public private partnership to unlock capacity in pursuit of a few focused dimensions of these goals, for example, through maximising the benefits of prioritised and large scale investment and infrastructure projects.

The Business Trust has achieved impressive results in the time it has been in existence. Business, in addition to its extensive corporate social investment, has already committed almost R1 billion to the Business Trust to-date. In a country like ours, as with so many other emerging markets, where the real challenge is not so much (or even at all) money, but the capacity to deliver results on the ground, the Trust has shown real results that have positively benefited two and a half million disadvantaged South Africans.

The successes of the Business Trust have clearly shown the benefits that flow from thorough planning, prioritisation and dedicated focus. As I said just now, it has long been recognised that our problems in getting job creating initiatives off the ground or delivering social goods are not necessarily the result of a lack of money, but rather the shortage of skills and capacity to undertake projects at scale. The Business Trust has marshalled these skills and, more importantly, can share them with others so that we can broaden our efforts to grow employment and reduce the poverty that plagues so many South Africans.

With this in mind, business commits itself to a second area of activity, that of strengthening its role in initiatives to build human capacity in our country. With our social partners, we intend to pursue an aggressive strategy to increase the number of learnerships in South Africa, particularly for the unemployed. We will also make every effort to make the SETAs more effective and efficient.

Thirdly, we will also make an appeal to our local business communities and structures to engage with their municipalities to see what role they might be able to play in assisting with the delivery of services at the local level. We appeal to these municipalities, and also our labour and community colleagues, to see this engagement as an opportunity and not a threat. Private participation in the delivery of services need not, and should not, lessen affordability of services for the poor - indeed, it should have the opposite effect.

Fourthly, business also sees a role for itself in the implementation of large scale public works programmes. The research on such initiatives has already been undertaken, in part by business think-tanks, and business is now getting ready to put its shoulder to the wheel to make this a reality. While public works programmes might not provide people with a long-term income, they provide a short-term safety net and help equip people with the skills that might permit them to obtain more permanent employment. At the same time they improve the country's infra-structural capacity and efficiency, ultimately impacting on service delivery and economic growth.

There remains critical planning work to be done after today's Summit to ensure that such programmes deliver on the scale that is necessary. Critical to any successful public works programme will be effective management of such programmes. If the private sector is to contribute managerial capacity on the requisite scale, appropriate business principles will have to apply.

Finally, business is committed to strengthening its procurement programmes to enhance small business development. Business' commitments on procurement are already having a considerable impact on stimulating small and medium business development and, given the commitments in the BEE Charters already concluded or in the process of being discussed, will have an increasingly greater impact.

I began this address by referring to the brave and intrepid explorers of old. We have recently lost a great South African who every day of his life displayed such qualities. I speak of Walter Sisulu and on this occasion we would do well to remember some of his words:

"Half the battle shall have been won if indeed our efforts as leaders of our countries, parties and communities can at least inspire hope in our people for a better life."

Walter Sisulu managed not only to inspire hope, but also to make that hope a reality. It is our task, Mr President, ladies and gentlemen, to do likewise.

Our journey is well on track, but we need to pick up speed so as to arrive more quickly at our destination. We cannot falter in this mission, nor shall we. The promise of a better life for all beckons. Let us go forward together to that destination.

I thank you.