Economic Development Minister Ebrahim Patel attended a student leadership summit held at the University of Johannesburg and encouraged all student leaders to turn into economic development activists.
Patel spelled out to the students the vital role they play in society. The sheer number of youth passing through the education system is increasing in numbers in addition to joining the workplace and economy. He told students that they have the right, responsibility and obligation to assist, build and shape the economy of the country.
Speaking to more than 200 student leaders at a student leadership summit, Patel encouraged students to adopt and embrace the government’s New Growth Path (NGP) whose objective is to create a transformed, industrialised and jobs rich economy.
Patel continued to speak about the success of government’s plans and ventures to transform the economy and change society is essentially influenced by the ability of all higher educational institutions to teach and train graduates, and upon graduation, they leave with the required skills to help build and contribute to the industrialisation and manufacturing in the country.
Patel admitted that only 640 000 jobs have been created since the government adopted the New Growth Path in 2010. There is still a long road ahead and good deal more really needs to be accomplished by both government as well as the private sector to elevate the rate of job creation and at the same time for the economy to be able to absorb graduating students into the economy.
The World Economic Forum’s Centre for Global Competitiveness and Performance through its Global Competitiveness Report and report series, aims to mirror the business operating environment and competitiveness of over 130 economies worldwide. The report series identify advantages as well as impediments to national growth thereby offering a unique benchmarking tool to the public and private sectors as well as academia and civil society.The Centre works with a network of Partner Institutes as well as leading academics worldwide to ensure the latest thinking and research on global competitiveness are incorporated into its reports.
The Global Competitiveness Report 2011-2012, comes out amid multiple challenges to the global economy and a continuing shift in the balance of economic activity away from advanced economies and toward emerging markets. Policymakers are struggling to find ways to manage the present economic challenges while preparing their economies to perform well in an increasingly complex global landscape and the report offers a unique tool in addressing some key issues.
This year’s report findings show that Switzerland tops the overall rankings. Singapore overtakes Sweden for second position. Northern and Western European countries dominate the top 10 with Sweden (3rd), Finland (4th), Germany (6th), the Netherlands (7th), Denmark (8th) and the United Kingdom (10th). Japan remains the second-ranked Asian economy at 9th place, despite falling three places since last year.
South Africa moved up 4 places to position 50 and leads the African continent.
The South African government is prepared to act in order to cushion the overall economy from the current global economic scenario, which unfortunately presents significantly greater uncertainty for developing nations.
“Precisely what we suggest is that we are going to assess and manage debt; we intend to make certain we do more than enough for infrastructure. We are going to do things we have to do to refloat the economy,” Finance Minister Pravin Gordhan stated.
“Our own view is that it’s 60/40 against a double dip recession while other people are predicting a 50/5 chance, dependant upon the decisiveness with which other countries in the world actually starts to deal with its problems. We will have to wait and see,” said Gordhan. The National Treasury and the Reserve Bank have already released a press release that the country would keep an eye on the impact of the downgrading of the US and sovereign debt crisis in Europe in relation to the South Africa’s economy.
Last week, rating agency Standard & Poor downgraded the US credit rating, reduced from AAA to AA+. The Treasury has briefed Cabinet on the effect of global developments and additionally precisely what it meant for the economy. What was currently happening in the recovery stages (which usually take 5 years at the very least) following the 2008 global financial crisis was that political constraints, as with the US, are now being experienced.
“… At which brinkmanship was exercised by key political players [and] the problem of sovereign risk, countries were required to bail out their banks. That took on a lot of debt and in addition to the debt, historically developed countries have taken on too much debt,” said the minister, adding that South Africa’s debt to GDP ratio was between 34 and 35 percent this year, when compared to the 80 to 200 percent of Japan.
The uppermost level of debt to GDP that South Africa is predicted to reach is 40 percent. “Political brinkmanship and political dithering along with a absence of decisiveness in certain regions of the world has created uncertainty in the world concerning whether or not we are going to have measures to make sure that the right level of growth is achieved in South Africa,” said Gordhan.
South Africa is going to take a growth friendly strategy along with the consolidation of debt. “What we’re undertaking is monitoring the channels through which South Africa could possibly be impacted upon,” he was quoted saying, adding the fact that this may very well be by way of financial systems. Gordhan said South Africa’s financial regulatory system was basically sound. He explained that South Africa had made it through the first crisis and that “we will ensure we make it through.”
South Africa continues to be cautious about how precisely it borrows money and that it has not asked the general public to pay extra for what it has borrowed. “All of us intend to make certain that we are able to bounce back if required,” said the minister.
Regarding the issue of South Africa’s conditional R2.4 billion loan to Swaziland, Gordhan pointed out that South Africa is going to keep an eye on the situation in that country. He explained that a joint board, following a 2004 agreement, will get together annually or more times if required to monitor the situation.
Previously Cabinet spokesperson Jimmy Manyi stated the advance to Swaziland was not a loan from the South African fiscus but a guarantee that is backed by their own South African Customs Union (SACU) payments.
The three tranches to Swaziland is going to be paid dependant upon the proven fact that the Swazi government generates confidence building measures not to mention that fiscal and related technical reforms requested by the International Monetary Fund are put in place and that South Africa offers capacity building support. Additionally it is based on the pillar that there is co-operation in multi-lateral engagements.
Repayment of the loan is going to be carried out by debit order, which will be paid to that country by way of a debit order against the SACU account which happens to be held by South Africa’s Reserve Bank. The money, which will not be taken from taxpayers, is furnished by the Reserve Bank on a 5.5% interest rate.
The National Empowerment Fund (NEF), an agency of the Department of Trade and Industry, has unveiled the Enterprise Development Fund (EDF) to invest in small, medium and micro black businesses by way of financial loans varying anywhere between R250 000 (US$37 000) and R75-million ($11-million).
The only real distinction between the EDF and various other agencies of the department is the fact that EDF raises its capital as a result of contributions by big businesses, who will shell out 3% of their annual profits in the project.
This simply means that big business is going to be assisting smaller ones get established.
The NEF has recently obtained funding of R2.3-billion ($298-million) coming from the Treasury, and is also getting excited about a prospective cash injection coming from the top 40 companies on the Johannesburg Stock Exchange. This sum of money could quite possibly meet or exceed R5.3-billion ($749-million).
Making contributions towards empowerment
Philisiwe Buthelezi, the fund’s CEO, stated: “We are thinking about creating a brand new industrial capacity by way of inputs driven by black South Africans.”
She revealed that the fund is designed to bridge the gap between advantaged and disadvantaged citizens – “not by taking from the haves, but stating the way we can partner to empower the have-nots.”
As a result of giving 3% of their profits, private establishments are going to generate points as an a assessed entity according to the Broad-based Black Economic Empowerment Act of 2003, which states that comapnies making contributions will earn a 15% weighting towards 100% compliance.
The financing is voluntary however if businesses do not comply, they have to deal with shedding their empowerment accreditation points.
Contribution will lead to specific tax benefits – firms that do conform will get a tax benefit of up to 10% off their taxable income for the reason that NEF is tax-exempt, as a result companies that commit to the fund defintely won’t be subject to a donations tax.
Lawrence Mavundla, president of the National Federated Chamber of Commerce and Industry, explained: “The legislation states that businesses need to contribute 3% when it comes to enterprise development and 2% ought to be allotted to corporate social investment.”
Mavundla depicted his expectation that big corporate will likely be prepared to contribute to the fund. “I sincerely hope the NEF will in addition provide post-funding mentorship to assist these small black companies to develop,” he added.
For the reason that a shortage of practical experience and skills can be described as risk to the success of small companies within a competitive industry – and quite a few of them do falter even after funding – post-funding mentorship can be considered as a means to fix this challenge.
Leading organizations which include Volkswagen, Chrysler, Bank of America, Merrill Lynch, Nestle and Edcon already have indicated interest in the fund, said the NEF.
“To make investments and expand the fund a business is required to sign a letter of participation, agreeing to pay out more than a minimum contribution of R5 million ($747 000),” explained Buthelezi.
Funding small business in South Africa
South Africa boasts a variety of agencies geared towards improving small businesses.
They range from the Small Enterprise Development Agency, which offers business development and support services for small enterprises; Khula Enterprise Finance, which happens to be associated with funding of small to medium enterprises; the Industrial Development Corporation, and others.
Young entrepreneurs aided
The inclusion of young entrepreneurs within the overall economy is in addition a national priority, reinforced by agencies for example, the National Youth Development Agency (NYDA).
Because of its major target group aged between 14 and 35 years, the NYDA endeavors to scale back unemployment within this age bracket, as well as boost social cohesion.
The NYDA assists young entrepreneurs to establish new businesses and even to develop established ones. It was actually introduced on Youth Day, 16 June 2009 by President Jacob Zuma and was the consequence of a merger between the Umsobomvu Youth Fund and the National Youth Commission.
Among the many NYDA accounts of success is the one about a 25-year-old Ntokozo Kenneth Ngcobo, who is the owner of Miazi CC, an electrical design and installation company. Miazi boasts a variety of big clients including Eskom and government departments.
Ngcobo said: “I believe my electrical engineering diploma and employment experience offered me a firm foundation in addition to make it possible for me to network with the relevant people.”
He explained that his objective for the next five years is to break into new markets, because he at present operates exclusively in his home town of Pietermaritzburg in KwaZulu-Natal.
Despite the fact that South Africa’s economy is without a doubt displaying signs of growth, it will continue to deal with unstable times ahead, according to Deputy Finance Minister Nhlanhla Nene.
“There is no room for complacency and in addition we continue to have to deal with a considerable amount of uncertainty during this current period of adjustment throughout the global economy,” he was quoted saying.
During the first quarter of 2011, the local economy expanded by 4.8 percent.
“Whilst this recovery is more robust compared to a year ago in South Africa as well as in almost every other emerging market countries, its fundamentals are certainly not yet sustainable; in addition to being highly dependent on support from expansionary fiscal and monetary policies,” Nene explained.
Skills challenges and education continues to be a major factor that still to be confronted by the Republic in addition to a vibrant economy is necessary to deal with poverty and unemployment.
“Unemployment represents our most significant problem: no more than 13 million South Africans, or 41 percent of the working-age population, currently have regular employment,” revealed the deputy minister.
He conveyed concern around the high level of unemployment among the younger generation at 42 percent. “Even though the economy has recovered, employment opportunities continues to be below its pre-crisis level. Something has to be done.”
The New Growth Path, which intends to generate five million work opportunities over the next 10 years, is projected to generate in excess of a million jobs in infrastructure development and housing, while an additional 500 000 job opportunities would be generated within the agricultural sector and 350 000 in manufacturing. Travel and leisure is aimed towards 225 000 jobs not to mention mining expecting 140 000 opportunities.
The deputy minister pointed out that higher employment in the manufacturing sector, at the same time, will depend upon the successful implementation of the second Industrial Policy Action Plan (IPAP2), which was in addition revealed last year to offer new direction and impetus with regard to South African manufacturing.
The reform of development finance institutions is in addition going ahead.
Nene mentioned that the Path will certainly fail to meet its targets if an environment which is conducive to private-sector growth and business investment is not promoted. “This demands from Government to provide economic stability and help reduce the cost of capital via sound macroeconomic policies.”
The deputy minister acknowledged the role played by the private sugar industry in its initiatives to generate opportunities, for instance offering bursaries for studies in agriculture, sciences and engineering. “These areas are some of the critical skills needed to fuel our sustainable and inclusive economic growth.”
The South African sugar industry provides an annual estimated average direct income of R8 billion, along with direct employment within the sugar industry at approximately 77 000 jobs.