|
The South African Economy
South Africa is a
middle-income developing country with an abundant supply of natural
resources; well-developed financial, legal, communications, energy
and transport sectors; a modern infrastructure, and a stock exchange
which ranks among the ten largest in the world. At the same time,
the challenges which the country faces are to create a strong and
balanced economy in order to eliminate poverty, develop a dynamic
human resource capacity, facilitate the creation of a prosperous
southern African region and engage the world economy in a
sustainable manner.
In the context of the internationalization
of production processes and the integration of
commodity, financial and technological markets into a single market,
South Africa, like other developing countries, is highly susceptible
to trends in the economies of its major trading partners.
The defining feature of 1998
was the havoc wreaked in the global economy by the onset and
subsequent spreading of the East Asian financial crisis. South
Africa was partially protected from the worst of the crisis. This
was primarily due to a stable macroeconomic environment and the
soundness of the domestic financial system. However, there were some
negative consequences from the Asian crisis – the most important
being that the economy was diverted from its growth trajectory for
the year.
Foreign Trade and
Payments
Weak export growth in the
second half of 1998, coupled with a marked increase in import demand
for high-value capital equipment, resulted in the trade balance
moving from a surplus in the first half of the year to a deficit in
the second half. A decline in net service payments to the rest of
the world from the third quarter of 1998 to the fourth quarter
served as some cushioning for the negative balance on the current
account in the last quarter of 1998.
Overall, the deficit on the
current account increased from 1,5 per cent of GDP in 1997 to 2,1
per cent of GDP in 1998.
In 1998 there was a surplus of
R5,9 billion on the trade account, but this was relatively small
compared to the surplus of R9,1 billion recorded in 1997.
Export volumes were adversely
affected by the fall in demand from Asia. The volume of merchandise
exports declined by 3 per cent in the third quarter of 1998 and by
3,5 per cent in the fourth quarter. However, the physical quantity
of merchandise exports still increased by 2 per cent in 1998 as a
whole, after a growth of some 4,5 per cent in 1997.
The prices of merchandise
exports, many of which are determined in foreign currency, benefited
from the depreciation of the rand. However, a decline of almost 5
per cent was registered in rand export prices from the third to the
fourth quarter of 1998 owing to continually depressed international
commodity prices and the slight strengthening of the rand.
The combined effect of the
drop in export volumes and prices, was a lowering in the seasonally
adjusted and annualized value of merchandise exports from
R137,2 billion in the third quarter of 1998 to R25,7 billion in
the fourth quarter.
The value of net gold exports,
seasonally adjusted and annualized, rose from R26,9 billion in
the third quarter of 1998 to R28,2 billion in the fourth quarter.
Factors contributing to this growth in gold exports include an
increase
-
of about 4 per cent in the physical
volume of gold exports
-
in the averaging fixing price of gold
on the London market (from 288 US dollar per fine ounce in the
third quarter to 294 US dollar in the fourth quarter).
|
Capital account of the balance of payments
(R million), 1992 – 1998 |
|
Capital
movement* |
|
Period
|
Private
sector |
Public
authorities, public corporations and the banking sector
|
Total
capital movements (net inflow) |
SDR
allocations and valuation adjustments |
Total
change in gross gold and other foreign reserves
|
|
Long term
|
Short term
|
Long term
|
Short term
|
|
1992
|
-3 964
|
-6 167
|
2 453
|
3 267
|
-4 411
|
326
|
1 698
|
|
1993
|
2 675
|
-11 934
|
-2 947
|
-2 756
|
-14 962
|
1 609
|
123
|
|
1994
|
775
|
-4 714
|
2 728
|
5 305
|
4 094
|
344
|
2 818
|
|
1995
|
7 255
|
-6 686
|
10 975
|
6 968
|
18 512
|
315
|
3 596
|
|
1996
|
1 330
|
-13 527
|
5 409
|
8 977
|
2 189
|
3 245
|
-1 864
|
|
1997
|
11 171
|
-11 152
|
18 865
|
791
|
19 675
|
257
|
19 208
|
|
1998**
|
20 072
|
-22 685
|
5 137
|
6 553
|
9 077
|
6 165
|
6 305
|
* A minus sign
indicates an outflow
** Provisional figures
Source: South African Reserve Bank
|
Production and consumer price indices, 1992
– 1998 |
|
Production
prices of goods for domestic use
(June 1995 = 100)
|
Consumer
prices (1995 = 100) |
|
Period
|
Goods
produced in South Africa |
Imported
goods |
All goods
|
Goods
|
Services
|
All items
|
|
Food
|
All goods
|
|
1992
|
78,0
|
83,3
|
78,8
|
75,7
|
77,1
|
76,3
|
77,0
|
|
1993
|
83,4
|
87,4
|
84,1
|
80,9
|
85,1
|
82,9
|
84,5
|
|
1994
|
90,8
|
92,2
|
91,0
|
92,0
|
93,1
|
90,3
|
92,1
|
|
1995
|
99,8
|
99,2
|
99,7
|
100,0
|
100,0
|
100,0
|
100,0
|
|
1996
|
107,3
|
104,5
|
106,6
|
106,1
|
106,2
|
109,5
|
107,4
|
|
1997
|
115,5
|
109,7
|
114,2
|
116,4
|
114,8
|
119,5
|
116,6
|
|
1998
|
119,6
|
113,1
|
118,2
|
123,7
|
121,7
|
128,9
|
124,6
|
Source: South African Reserve Bank
Large increases in the volume
of imports were registered in the manufactured goods category for
1998. Increases in this category stemmed primarily from the
persistent high level of real aggregate final demand in the economy,
including aircraft purchases, a commitment to the expansion of the
telecommunications network and the export contracts of automobile
manufacturers requiring imported intermediate goods and equipment to
avoid paying higher prices later. The result was that the volume of
imported goods in the first three quarters of 1998 was 1,8 per cent
up from the corresponding period in 1997. Excluding South African
Airways (SAA) aircraft purchases, import volumes would have declined
by 2,5 per cent in the fourth quarter. For 1998 as a whole, the
volume of total merchandise imports increased by 2 per cent, after a
growth rate of 5 per cent in 1997.
As import volumes dwindled, so
did the import prices. Factors contributing to this scenario were
declining output prices in South Africa’s main trading-partner
countries and a mild appreciation in the average effective value of
the rand from the third to the fourth quarter. The value of
merchandise imports (seasonally adjusted and annualized) declined
from R164,2 billion in the third quarter of 1998 to R156,4 billion
in the fourth quarter. However, there was still a rise of about 14
per cent in the value of merchandising imports from 1997 to 1998.
Net service payments and
transfer payments to non-residents, which had increased from a
seasonally adjusted and annualized value of R16,7 billion in the
first quarter of 1998 to R21,4 billion in the third quarter,
declined to R17,4 billion in the fourth quarter. The drop was
attributable to lower interest payments to non-residents following
their large-scale selling of domestically registered bonds and a
decline in payments for freight and insurance. Owing to the decline
in net service payments to non-residents, the deficit on the current
account narrowed to R19,9 billion in the fourth quarter of
1998, after having widened from R3,3 billion in the first quarter to
R21,5 billion in the third quarter. As a percentage of GDP, the
deficit on the current account increased from 1,5 per cent in 1997
to 2,1 per cent in 1998.
As the intensity of the Asian
contagion subsided towards the end of 1998, the net flow of
international capital (not reserves) was reversed from a net outflow
of R3,6 billion in the third quarter of 1998 to a net inflow of R3,6
billion in the fourth quarter. This change in direction of capital
flow was confirmation of improved investor sentiment towards South
Africa.
There was a net inflow of
long-term capital in the first three quarters of 1998,
notwithstanding a net outflow in the third quarter, during which
non-resident investors reduced their South African bond holdings on
a large scale and locally registered banking institutions increased
their offshore direct investments. Net inflow of long-term capital
subsequently returned in the fourth quarter of 1998, taking the net
inflow of long-term capital to R25,2 billion for the year as a
whole. In 1997, the inflow of long-term capital amounted to R30
billion.
The persistent outflow of
short-term capital during the first three quarters of 1998 turned
into a net inflow of R2,8 billion in the fourth quarter of 1998.
Much of this reversal represented the delayed repatriation of export
earnings after the repatriation period had been extended by exchange
control authorities from 30 days to 180 days.
The gross gold and other
foreign reserves of the country, including the borrowed reserves of
the South African Reserve Bank, declined from R44 billion at the end
of the third quarter of 1998 to R41,8 billion at the end of the
fourth quarter. Overall, the country’s gross gold and foreign
reserves declined from 7,3 billion US dollar at the end of December
1997 to 7,1 billion US dollar at the end of December 1998.
Aggregate import cover, i.e.
the value of gross international reserves expressed as a ratio of
the value of imports of goods and services, was estimated at about
10,5 weeks at the end of 1998 – broadly unchanged from the end of
1997.
The average exchange value of
the rand against a basket of four currencies depreciated by 3,2 per
cent from December 1997 to April 1998. The decline was larger than
the inflation differential between South Africa and its main trading
partners, implying that the competitive standing of domestic
producers in export markets was heightened somewhat by the currency
depreciation. From the middle of April 1998, non-resident investors
began to reduce their holdings of South African bonds. This led to
an excess supply of rands on the foreign exchange market, a scenario
which was exploited by highly leveraged international investors and
other currency speculators who sold rands to establish short
positions which would allow them to profit from a fall in the
foreign exchange value of the rand. The selling of rands was so
severe that the average nominal effective exchange rate of the rand
declined by 21,6 per cent from the end of April to the end of August
1998. The rand weathered the effects of the Russian moratorium on
government debt repayments in August 1998 and began to strengthen at
the beginning of September. The appreciation was to some extent
assisted by the closing of positions by some currency speculators
who were left with short positions at a less profitable exchange
rate than they had expected. In general, the rand strengthened by
6,7 per cent against the four-currency basket from the end of August
to the end of December 1998.
Foreign trade
The importance of foreign
trade to the economy is evident both from the ratio of its exports
(goods and non-factor services) to GDP, and from the ratio of
imports (goods and non-factor services) to gross domestic
expenditure. Despite attempts to diversify its export base, South
Africa is still largely reliant on the export of primary and
intermediate commodities to industrialized countries. However,
manufactured goods account for about 70 per cent of exports to
Africa.
Merchandise exports, based on
preliminary figures, represented 83 per cent (R129,1 billion)
of South Africa’s total exports (merchandise plus net gold exports
and excluding receipts for services) in 1998.
Net gold exports are
responsible for a large part of foreign exchange earnings. Earnings
from this source are, however, directly linked to the international
gold price. In 1998, net gold exports amounted to 17 per cent of
merchandise exports.
Imports mainly comprise
capital goods, raw materials, semi-manufactured goods (approximately
76 per cent of total trade imports) and consumer commodities.
In November 1998, the National
Export Week was held in Midrand, Gauteng. The week was attended by
representatives of the International Trade Center and aimed to raise
the awareness of exporters about the services and service providers
available.
The week culminated in the
presentation of the prestigious President’s Award for Export
Achievement. The company Continental Tyre SA (Pty) Ltd took top honors
overall as well as in the Plastics and Chemicals category.
The other winners were KWV, Durban Clothing Manufacturers, Energy
Measurements, Macadams Bakery Manufacturing, Consani Engineering,
Rand York Minerals, Swasap, Intertrading, Tradewinds Parasol and
Burger International.
At the end of the export week,
the Government and the business sector announced details of a joint
exporting strategy. A key part of the strategy is the establishment
of a National Export Advisory Council, several working groups and
sectoral export targets. The council consists of senior government
officials, parastatals and business associations and advises the
Minister of Trade and Industry and the Government on export related matters. The working groups will investigate the development of
sectoral export strategies; improvements in export finance;
transport and logistics, and further development of an institutional
capacity within the business sector.
Another key element of the
strategy is a small exporters’ program aimed at identifying and
nurturing the development of 100 small exporters every year.
Overall export targets include
increasing the contribution of finished manufactured exports
to total South African exports over the next three years from 20 per
cent to 30 per cent. The targets also include raising manufactured
exports by 14 per cent a year in real terms and increasing the
penetration of South Africa’s exports in non-traditional markets.
Trade relations
South Africa maintains formal
trade relations with various countries by means of treaties, trade
agreements and membership of international institutions concerned
with trade.
The country’s trade is likely
to be increasingly driven by its foreign policy. Evidence of this is
the growing number of official missions undertaken at the highest
level by the President and Deputy President and other ministerial
delegations to countries which, during the sanction years, had not
officially traded with South Africa. Countries in the Far East, the
Middle East and Africa are becoming important focus areas. (See also
Chapter 9: Foreign relations.)
Trade relations with Africa
and the Middle East
The conditions regarding a
South African value-added export strategy in the Southern African
Development Community (SADC), Africa (excluding the SADC) and the
Middle East are guided by the country’s capacities in the domestic
economy, the related targeting policies for increasing manufactured
employment, and the capacities of the receiving market to absorb
South African exports. While the Department of Trade and Industry’s
efforts in SADC markets have tended to follow a path of trade and
investment integration, efforts in the rest of Africa and the Middle
East have tended to focus on export marketing, outward investment
projects and the resultant export demand created by such investment
projects.
The US Agency for
International Development (USAid) has become involved in a project
called Retail Loan Program aimed at increasing micro-enterprises’
access to finance.
Short and
medium-term working capital loans of between R5 000 and R50 000
are made available to established micro-enterprises in all sectors
that are deemed ‘unbankable.’ By May 1998, 130 loans worth about
R2,4 million had been disbursed since the project’s launch in 1997.
The Department has
restructured a number of services to achieve greater value-added exports to these regions. This is done by means of the following
strategies:
-
Analysis of the market
opportunities, barriers and business climate in these regions, as
well as defining and shaping the nature of the
government-to-government relationship as it affects the economic
relationship for South African operators. These are available to
South African companies in the form of country-strategy
publications by the Department. The following country analyses are
available: Uganda, Kenya, Mauritius, Tanzania, Egypt, Israel,
Saudi Arabia, the United Arab Emirates (UAE), Ghana, Côte
d’Ivoire, Senegal, Nigeria, Madagascar, Morocco, Tunisia and
Algeria.
-
The export strategies of individual
South African firms are supported in the form of non-financial
services such as the Export Help Desk at the Department’s
headquarters which serves as a port of first call for exporters
trying to access the Department’s export services. Sector export
promotion specialists at the Department’s headquarters provide the
next tier of service available to prospective exporters. A further
initiative has been the facilitation of export action groups by
sector specialists to help sectoral groupings to formulate
export strategies for these regions.
-
Work done by the Department’s
trade promoters in these regions. These offices are located in
Egypt, Côte d’Ivoire, Kenya, Ethiopia, Tanzania, Zimbabwe,
Mauritius, Angola, the UAE, Saudi Arabia, Israel and Iran. The
offices have been instrumental in providing South African
exporters and service providers with the necessary support in
achieving success.
-
Provision of marketing-related
financial assistance for exporters. This entails support for
primary research, selling trips, exhibitions, export-action group
formation, export finance for capital goods or projects, insurance
for exports and export finance for small businesses.
Southern African Development
Community
The centerpiece of South
Africa’s foreign economic policy is the SADC, comprising Angola,
Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi,
Mauritius, Mozambique, Namibia, Seychelles, South Africa, Tanzania,
Zambia and Zimbabwe. The key policy objective is to strengthen trade
and investment linkages between South Africa and the other SADC
countries.
Trade with SADC countries
increased dramatically during the period 1988 to 1997. Imports from
the SADC increased from R531 million (less than 1 per cent of
total imports) to R2,5 billion (in excess of 2 per cent of total
imports) during that period. The increase in South Africa’s exports
to the region was even more dramatic – from R2 billion in 1988 (4
per cent of total exports) to R15,2 billion in 1997 (11 per cent of
total exports).
At present, the ratio of South
Africa’s exports to imports stands at 6:1. Exports to the region are
concentrated in high value-added sectors such as minerals and base
metals, chemicals, machinery, transport equipment and food and
beverages. These sectors generate overall growth and high wage formal
employment in the domestic economy – and have grown dramatically –
almost tripling between 1992 and 1997.
A disaggregation of South
Africa’s exports to the SADC country by country reveals that
Zimbabwe is the most important market, followed by Mozambique,
Zambia, Mauritius, Malawi, Angola and Tanzania. On the import
side, Zimbabwe features as the most important source of imports,
followed by Malawi, Angola, Zambia and Mozambique.
South Africa’s interests and
objectives in the southern African region are guided by the
existence of strong linkages between the domestic and regional
economy. As the market for a large proportion of South Africa’s high
value-added exports, the growth of the SADC economies is
inextricably linked to the growth of the region’s economies.
In order to strengthen trade,
investment and industrial linkages within the SADC region, the
member states are engaged in negotiations to conclude a Free Trade
Agreement (FTA). The Department has been active in promoting trade
and investment through business missions to SADC countries. Once the
FTA is implemented, the trade integration which it will foster will
provide a range of opportunities for industrial development within
the SADC region in the form of regional specialization and
processing.
South Africa has been decisive
in propelling negotiations to achieve a free trade area towards
conclusion. After extensive consultations with other government
departments, the Parliamentary Portfolio Committee on Trade and
Industry, Southern African Customs Union (Sacu) member states
(Botswana, Lesotho, Namibia and Swaziland), as well as with
stakeholders at the National Economic Development and Labor Council
(Nedlac), South Africa has structured a tariff order which should
set the process of implementing an FTA in motion.
The trade offer was notified
in the Government Gazette of 11 September 1998, and all
stakeholders have been invited to comment. Once the latter have been
incorporated into the trade offer, an intensive period of
negotiations with the SADC member states – addressing both tariff
and non-tariff issues – is envisaged. This should ensure the rapid
conclusion and implementation of a free trade area in the near
future.
During 1998, the Department
led business missions to Angola, Mauritius and Tanzania. The
missions provided a number of trade and investment opportunities
which offer high returns, but which also contribute to investment,
technology transfer, employment and input for local production in
these countries.
On the investment side, the
implementation of Spatial Development Initiatives (SDIs) throughout
the SADC region, coupled with trade and investment missions led by
the Department of Trade and Industry from South Africa to SADC
member states, has resulted in substantial investments in the region
that are mutually beneficial to South Africa and the recipient
countries. The following progress has been made:
- The Maputo Development Corridor
is expected to attract 7,6 billion US dollar in investment in
terms of the projects identified by March 1999. Successful
implementation of the project is ongoing.
- The Walvis Bay SDI has been
approved by the Namibian Cabinet and the process of implementation
has been set in motion.
- The Nacala, Beira and Lobito corridors
were the focus of the Department of Trade and Industry
during 1998. Discussions with Angola, Mozambique, Malawi, Zimbabwe
and the DRC are at a very advanced stage and the prospects for
implementation in the near future appear to be positive.
Coupled with the extension of
the mandates of the Development Bank of Southern Africa and the
Industrial Development Corporation (IDC) to provide finance to the
entire SADC region for the development of infrastructure and
industry, these initiatives have played, and will continue to play,
an important role in stimulating investments to SADC member states,
leading to higher growth, employment and industrial development in
the recipient countries.
Trade with
Europe
Europe is the biggest source
of investment for South Africa, and accounts for almost half of
South Africa’s total foreign trade. Seven out of ten of South
Africa’s top trading partners are European countries.
Since the end of South
Africa’s isolation and the gradual easing of exchange control
announced in July 1997, Europe has become an important destination
for South African investment and a vehicle for effective integration
into the global economy. At the same time, European investment in
South Africa has assumed a larger and more important dimension. Both
bilateral development co-operation and multilateral development programs
through the European Union (EU) form a substantial
element of South Africa’s reconstruction and development. Relations
with Europe, with the EU as the pivot, are economically crucial.
Britain is South
Africa’s largest single trading partner and its biggest export
market. British exports to South Africa were worth R14 billion in
1998 while South African exports to Britain totaled R11 billion.
In May 1998, a trade promotion campaign called Britain and
South Africa: Partners in Opportunity, was launched. The
campaign will be funded by the British Government to the tune of R17
million over three years to encourage trade relations between
British and South African companies.
Also in May 1999, South Africa
and the United Kingdom (UK) signed an investment promotion
and protection agreement.
In July 1998, the British
Minister for Small Firms, Trade and Industry led a delegation on a
visit to South Africa to investigate investment opportunities. In
September 1998, the British Trade and Industry Minister paid a visit
to South Africa to open the UK-South Africa Partnership Week in
Johannesburg.
Trade between Germany and
Africa rose in 1997, with South Africa remaining the single most
important African partner for both imports and exports. German
exports to South Africa were valued at DM5,9 billion in 1997, a rise
of 7 per cent over previous years. German imports from South Africa
were up almost 16 per cent to R9 billion in 1998. The German-South
Africa Binational Commission (BNC) was inaugurated in 1997. The
Commission with its five committees is intended to build further on
the strong commercial links that already exist between the two
countries.
In March 1998, Germany’s
former Federal President, Dr Roman Herzog, visited South Africa –
the first visit to the country by a German Head of State.
In February 1998, relations
between South Africa and Norway were strengthened when King Harald V
and his wife, Queen Sonja, arrived in the country on a State visit.
In April 1998, a trade and
investment mission led by the Minister of Trade and Industry visited
the Netherlands. The Minister hosted an investment conference in The
Hague. The Deputy Minister of Trade and Industry led another
delegation to the Nordic countries in May.
Trade between South Africa and
Denmark has increased significantly since the first democratic
election in 1994. Denmark has also been giving substantial aid to
South Africa since that time.
There has been a steady
increase in bilateral trade between France and South Africa and, at
the end of 1998, France was the fifth largest supplier of goods to
South Africa. South African exports to France totaled more than R2
billion. The Joint Economic Commission between South Africa and
France, established by an intergovernmental protocol in March 1995,
held its second meeting in Paris in November 1998. The growing
number and diversity of events over the months following the last
meeting of the Commission were welcomed as evidence of an
intensification of relations between the two countries. Specific
actions undertaken by both sides during this period, including the
France Technologies exhibition, held in July 1997 and the
French-South African Forum, held during President Jacques Chirac’s
visit to South Africa in June 1998, were seen as important for
consolidating and promoting co-operation between South African and
French firms. Various seminars, visits, exhibitions, bilateral
agreements and financing concessional agreements, among other
things, also contributed to the strengthening of bilateral
relations.
In August 1998, South Africa
and the Belgo-Luxembourg Economic Union (BLEU) signed an agreement
on the promotion and protection of mutual investments. The treaty is
aimed at stimulating direct investment in South Africa and giving
the country access to Belgium and Luxembourg markets. The BLEU is
among South Africa’s 15 largest foreign trade partners and mutual
investment is growing.
Bilateral trade between South
Africa and Switzerland is worth R6,384 billion a year. Almost 400
Swiss companies are represented in South Africa. In August 1998,
Swiss President Flavio Cotti arrived in South Africa on a State
visit.
In June 1998, the then
President Nelson Mandela departed on a State visit to Italy at the
invitation of President Oscar Luigi Scalsaro. Italy is one of the
top five major trading partners of South Africa, with the
two-way trading relations amounting to R8 billion in 1997.
At the end of September 1998,
South Africa signed an investment agreement with Spain. The treaty,
together with a double taxation agreement which is being negotiated,
will boost trade relations between the two countries.
In October 1998, South
Africa’s Minister of Foreign Affairs visited Portugal to
strengthen trade ties. Two-way trade between the two countries totaled
R861 million in 1998.
In November, the Greek Foreign
Minister visited South Africa to further the work of the South
African Hellenic Chamber of Commerce. Greek investment in South
Africa totals R36 billion. Two-way trade totaled R861 million in
1998. Five agreements were signed, among them the avoidance of
double taxation and the promotion and protection of investments.
Equally important for both
economic development to underpin internal progress, and
international integration, are South Africa’s relations with Central
and Eastern Europe, with their emerging and realigning economies.
Trade and investment
ties between South Africa and the Ukraine have increased
substantially in recent years. In April 1998, a high-level
delegation from the Union of Industrialists and Entrepreneurs
visited South Africa to expand economic and trade cooperation
between the two countries. South Africa mainly exports base metals,
electrical equipment, chemical products, fruit, wine, vegetables and
leather goods to the Ukraine. In November, Foreign Minister Borys
Tarasyuk arrived in South Africa for an official visit.
Late in November 1998, former
Deputy President Thabo Mbeki led a high-powered trade delegation to
Russia to boost economic and investment ties between the two
countries. In April 1999, Mr Mandela was on a State visit to
Russia,. He was accompanied by the Minister of Trade and Industry
and a high-powered business, scientific and technical delegation.
Two-way trade between the two countries totals some R600 million per
year.
European Union
The negotiations for a Trade,
Co-operation and Development Agreement with the EU entered its
fourth consecutive year in 1999 as one of South Africa’s priority
foreign trade projects. It was organized around six parallel
negotiating groups: trade-related and non-trade aspects, industrial
tariffs, agricultural tariffs, rules of origin, wines and spirits
and fisheries.
In March 1999, South Africa’s
historic agreement with the EU was concluded. The agreement will
result in the abolition of tariffs on more than 90 per cent of trade
– currently worth more than R10 billion a year – between the 15
EU countries and South Africa within 12 years. The trade
negotiations involved more than 10 000 products. Some, such as wine
and spirits, and fishing, will be dealt with in parallel agreements
which have yet to be finalized. A few other mainly technical changes
were made to a draft accord reached in Davos, Switzerland in January
1999.
South Africa and the EU signed
trade and development co-operation agreements worth R635 million in
April 1999, as part of the EU’s ongoing program in South Africa.
EU grants made between 1995 and 1998 exceeded R3 billion.
Lomé Convention
In April 1998, the member
states of the convention, which links 71 countries in Africa, as
well as the Pacific and Caribbean Oceans (ACP) countries with
the EU, completed their internal ratification procedures. This
allowed the revised edition of the fourth agreement, which included
South Africa’s protocol of accession, to enter into force. South
Africa’s membership is on a qualified basis, which means that it is
excluded from the trade and aid regimes of the convention.
European Development Fund tenders
From an economic point of
view, the most important element of South Africa’s membership is the
fact that, for the first time in history, South African contractors
are allowed to tender for European Development Fund contracts in ACP
countries. These contracts amount to about R70 billion over a
five-year period.
Post-Lomé negotiations
In September 1998, the
so-called post-Lomé negotiations were launched in Brussels,
Belgium. The multilateral process, scheduled for completion by
February 2000, will result in a new arrangement between the ACP and
the EU.
The Americas
North America
The United States of America
(US) is one of South Africa’s largest trading partners. South Africa
is a beneficiary of the US’s Generalized System of Preferences which
grants duty-free treatment for more than 4 650 products. South
Africa’s exports to the US increased from R5,2 billion in 1993 to
R14,8 billion in 1998. Total trade amounted to R34,5 billion in
1998, a 26 per cent increase over 1997. Total US foreign direct
investment in South Africa for the period 1994 to April 1998
amounted to R14,3 billion.
The two countries have
institutional structures to strengthen trade and investment. The
Business Development Committee (BDC), a subcommittee of the SA-US
Binational Commission, was established in 1994 by the two
governments to provide a forum for business people to develop links
and exchange views with each other and with senior government
leaders. The BDC is co-chaired by business people from the US and
South Africa and its programs are driven by the private sector.
The BDC also interacts with the Trade and Investment Committee, a
government-to-government committee of the BNC, which is co-chaired
by the Minister of Trade and Industry and the US Commerce Secretary.
This interaction provides the private sector with an opportunity to
raise and find solutions to the problems it may encounter when doing
business in the US.
South Africa is a beneficiary
of Canada’s General Preferential Tariff (GTP). The GTP rates range
from duty-free to reductions in the most favored nations rates.
South Africa has a memorandum of understanding with Canada relating
to the export from South Africa of certain textiles and textile
products for import into Canada – granting South Africa quotas for
these products.
Since the lifting of sanctions
in 1994, bilateral trade between the two countries has been on the
increase, from R756 million in 1993 to R2,8 billion in 1997. Whereas
in 1993 South Africa’s exports to Canada were worth R353 million, in
1998 they amounted to R1,3 billion.
In September 1998, there was a
Ministerial trade and investment mission to Canada. The mission
coincided with the President’s State visit to that country. During
the mission, a Trade and Investment Co-operation Arrangement was
signed.
|
South Africa’s main imports
|
|
Description |
1996 |
1997 |
1998* |
| |
(R
million) |
(R
million) |
(R
million) |
|
Machinery
and mechanical appliances, electrical equipment and
parts thereof |
39 454
|
43 824
|
51 888
|
|
Other
unclassified goods |
15 544
|
19 047
|
139 787
|
|
Mineral
fuels (mostly oil) |
11 646
|
16 958
|
12 929
|
|
Products
from chemicals and allied industries |
13 595
|
14 551
|
15 649
|
|
Vehicles,
trains, aircraft, ships and associated equipment
|
9 078
|
10 356
|
8 822
|
|
Base metals
and articles thereof |
5 881
|
6 021
|
6 582
|
|
Plastics,
rubber and articles thereof |
5 178
|
5 806
|
5 837
|
|
Textiles and
articles thereof |
5 012
|
5 772
|
5 213
|
|
Prepared
foodstuffs, beverages, spirits, vinegar and tobacco
products |
3 413
|
4 014
|
3 180
|
|
Edible
vegetables, fruit and nuts, cereals, plant oil and
products thereof |
2 978
|
2 942
|
2 882
|
* Not yet
audited
Source: Customs and Excise
Latin America
Argentina, Brazil, Paraguay
and Uruguay are members of the Southern Common Market (Mercosur)
free trade area. In July 1998, the then President Mandela addressed
the leaders of the Mercosur trade bloc, the first time that a
foreign head of State had been invited to address the summit.
Brazil is South Africa’s
biggest trading partner in Latin America, with bilateral trade
reaching R2,3 billion in 1998, a decrease of 19 per cent over 1997.
Bilateral trade between South Africa and Argentina was steady at
R1,7 billion in 1998. In 1998, a Reciprocal Promotion and Protection
of Investment Agreement was signed by the two countries during Mr
Mandela’s State visit to Argentina in July.
Trade relations between South
Africa and Uruguay were boosted in October 1998 when the Minister of
Foreign Affairs visited that country.
In November 1998, Chile’s
President Eduardo Frei Ruiz-Tagle paid South Africa a State
visit, accompanied by a business delegation. A Reciprocal Promotion
and Protection of Investments Agreement was signed.
Asia
South and South-East Asia and
Australasia
Economic relations with this
broad region were severely effected by the Asian economic crisis.
The crisis had its most severe impact in South-East Asia.
South Africa is a member of
the Indian Ocean Rim Association for Regional Co-operation
(IOR-ARC), a project-based regional economic grouping of 15
countries washed by the Indian Ocean. This group covers the eastern
coastal line of Africa, the Arabian peninsula, Southern Asia, and
Singapore, Indonesia and Australia. The IOR-ARC member countries
account for around 7 per cent of world trade. Currently, South
Africa is involved in two projects: a regional ports initiative and
a financial systems harmonization initiative.
In conjunction with the
Government of India South Africa has established an Indo-South
African Commercial Alliance together with a Joint Ministerial
Commission (JMC). Total trade with India has been increasing rapidly
since 1994, reaching R3,3 billion in 1998. Strategic relations with
Australia have also been cemented via the JMC. Total trade with
Australia amounted to R5,5 billion in 1998.
Bilateral trade with
South-East Asia increased rapidly, starting from a low base in 1990,
with an average growth rate before 1998 of approximately 25 per cent
per annum. This trade is more or less evenly spread between
Singapore, Malaysia, Indonesia and Thailand. Total trade with these
countries amounted to R8,3 billion in 1998, with the trade balance
being slightly in South Africa’s favor. This was mostly accounted
for by a large trade surplus with Indonesia, while Malaysia and
Singapore ran surpluses with South Africa. However, in 1998 the
economic crisis contributed to the emergence of a large trade
imbalance with the region, with the most notable impact being a
sharp decline in the value of South Africa’s exports mirrored by a
rise in the value of imports from the region. Total trade amounted
to R8,9 billion.
South Africa has built its
strongest ties in South-East Asia with Malaysia. Evidence of this is
Malaysia being the second largest investor on a cumulative basis in
South Africa as of April 1998. This investment totaled almost R6,67
billion, and was concentrated in telecommunications, energy and oil,
and property. These ties were cemented by two visits to South Africa
in 1998 from the Malaysian Prime Minister, Dr Mahathir Mohamed.
However, a source of concern for South Africa is the rapidly rising
trade deficit with Malaysia.
North-East Asia
Japan is South Africa’s
largest trading partner in Asia, and its fourth largest trading
partner overall. In 1998, total bilateral trade amounted to R21
billion, an increase of 9 per cent over 1997. This trade is
structured along north-south lines, with South Africa exporting
commodities, especially minerals, to Japan and in return importing
manufactured goods, notably automobiles and electronic goods. Japan
is the fifth largest investor in South Africa, with cumulative
investment between 1994 and April 1998 amounting to approximately R2
billion. These investments are concentrated in minerals processing
and the motor assembly and related sectors, especially tires. Japan
is also a substantial aid donor to South Africa.
The importance of Japan as a
bilateral partner for South Africa was demonstrated by former Deputy
President Mbeki’s two visits there in 1998. The first was part of a
visit to the region, including Japan, South Korea and China, in
April. During this visit, South Africa and Japan agreed to set up a
Partnership Forum designed to strengthen bilateral ties. During the
second visit in October, he attended the second Tokyo International
Conference on African Development. This conference, organized by the
Government of Japan in conjunction with the United Nations (UN), was
designed to mobilize support for African development.
|
Status of bilateral agreements by March
1999 |
|
Country |
Signed |
Date effective
|
|
Cuba
|
8 December
1995 |
7 April 1997
|
|
Denmark
|
22 February
1996 |
23 April
1997 |
|
France
|
11 October
1995 |
13 June 1997
|
|
South Korea
|
7 July 1995
|
28 June 1997
|
|
Switzerland
|
27 June 1995
|
29 November
1997 |
|
Austria
|
28 November
1996 |
1 January
1998 |
|
People’s
Republic of China |
30 December
1997 |
1 April 1998
|
|
Germany
|
11 September
1995 |
10 April
1998 |
|
United
Kingdom |
20 September
1994 |
27 May 1998
|
|
Mozambique
|
6 May 1997
|
22 October
1998 |
|
Mauritius
|
17 February
1998 |
23 October
1998 |
|
Netherlands
|
9 May 1995
|
South
African constitutional procedures complete |
|
Canada
|
27 November
1995 |
South
African constitutional procedures complete |
|
Iran
|
9 June 1997
|
South
African constitutional procedures complete |
|
Italy
|
3 November
1997 |
South
African constitutional procedures complete |
|
Sweden
|
25 May 1998
|
South
African constitutional procedures complete |
|
Senegal
|
19 June 1998
|
South
African constitutional procedures complete |
|
Ghana
|
9 July 1998
|
South
African constitutional procedures complete |
|
Argentina
|
23 July 1998
|
South
African constitutional procedures complete |
|
Belgium and
Luxembourg |
14 August
1998 |
South
African constitutional procedures complete |
|
Finland
|
14 September
1998 |
South
African constitutional procedures complete |
|
Spain
|
30 September
1998 |
South
African constitutional procedures complete |
|
Egypt
|
28 October
1998 |
South
African constitutional procedures complete |
|
Chile
|
12 November
1998 |
South
African constitutional procedures complete |
|
Greece
|
19 November
1998 |
South
African constitutional procedures complete |
|
Russia
|
23 November
1998 |
South
African constitutional procedures complete |
|
Czech
Republic |
14 December
1998 |
South
African constitutional procedures complete |
|
Uganda
|
25 January
1999 |
South
African constitutional procedures complete
|
Bilateral trade with China
reached R5,3 billion – R8,8 billion if Hong Kong is included – as
against R4,2 billion and R8,2 billion in 1997. It is anticipated
that this economic activity will gather momentum as the two
countries move to sign a trade agreement and establish a joint
economic commission. Trade with Taiwan tumbled by 9,2 per cent in
1998, mostly owing to poor demand caused by the crisis in the
region.
South Korea is South Africa’s
fourth largest bilateral trading partner in Asia. Total bilateral
trade in 1998 amounted to R5,3 billion, a decrease of 16 per cent
from 1997. This trade is of a similar structure to that with Japan,
although South Africa supplies more intermediate goods to Korean
markets than is the case with Japan. Investments from South Korea
from 1994 until April 1998 totaled approximately R280 million. In
recognition of South Korea’s importance to South Africa, Mr Mbeki’s
visit there in April 1998 resulted in agreements to form several
bilateral committees focused on trade and investment.
Bilateral investment
treaties
The Government’s drive to
attract fixed direct investments (FDIs) has been gaining
momentum since 1994. Starting from R4,7 billion FDIs in 1994, the
1998 preliminary statistics put the figure at R7 246 billion.
By March 1999, 28 bilateral
investment treaties had been signed by South Africa. Since starting
on the program to conclude investment treaties, South Africa has
adopted a highly modern and advanced constitution which ensures an
open, transparent and market-driven investment environment, with
positive government encouragement of investment. This has largely
served to replace any particularly strong need to conclude treaties
to provide for inward investment. To some extent, the focus of
relatively limited resources has shifted towards concluding these
treaties where they can serve to support investment by South African
firms involved in investment and development outside of South
Africa, with a particular focus on current regional action.
Management of multilateral
trade relations
South Africa’s multilateral
trade relations are managed by the Chief Directorate: Foreign Trade
Relations of the Department of Trade and Industry, as are
participation in the activities of multilateral organizations such
as the World Trade Organization (WTO) and the administration of
international trade agreements.
The chief directorate also
deals with matters resulting from the activities of agencies of the
UN that affect South Africa, such as the United Nations Conference
on Trade and Development (UNCTAD). Other responsibilities of the
chief directorate include the maintenance and improvement of trade
relations with individual countries or groups of countries where
such relations are not governed by multilateral bodies.
Multilateral economic
relations
The WTO and UNCTAD, in
partnership with the Bretton Woods Organizations (the World Bank and
the International Monetary Fund) are increasingly setting the
parameters for and directing the economic policies of governments
around the world. This has serious implications for the content,
evolution and trajectory of economic development strategies being
pursued by the developing countries, including South Africa. In
order to influence and shape the configurations of the emerging
system of global governance, it is imperative for South Africa to be
geared to participate actively and effectively in all multilateral
forums to ensure that its particular economic interests and
development objectives are achieved.
|
1999 Provincial election results
|
|
Province
|
Ruling
party |
Seats
gained |
|
Eastern Cape
|
ANC
|
47
|
|
Free State
|
ANC
|
25
|
|
Gauteng
|
ANC
|
50
|
|
KwaZulu-Natal |
IFP and ANC
formed coalition |
IFP: 34;
ANC: 32 |
|
Mpumalanga
|
ANC
|
26
|
|
Northern
Cape |
ANC
|
20
|
|
Northern
Province |
ANC
|
44
|
|
North-West
|
ANC
|
27
|
|
Western Cape
|
NNP and DP
formed coalition |
NNP: 17;
DP: 5 |
United Nations Conference
on Trade and Development
As President of UNCTAD IX,
South Africa is playing an important part in the work of this organization. South Africa attended and fully participated in
important meetings dealing with, among other things, the
Multilateral Investment Agreement, government and private sector
roles and interactions in small and medium enterprise (SME)
development, telecommunications, trade facilitation, trade
efficiency, electronic commerce and the economic development of
least developed countries.
One of the highlights of the
work program of UNCTAD in 1998 was the Partners for Development
Summit in Lyon, France, in November 1998. Some 2 700 representatives
of the private sector, non-governmental organizations (NGOs),
academic institutions and governments, from 172 countries attended.
During the four-day meeting,
18 partnership agreements were finalized between the UNCTAD
Secretariat and private and public organizations.
The partnerships covered the
fields of international transport; investment promotion; electronic
commerce; the promotion of SMEs and entrepreneurship; the
conservation of biodiversity and sustainable development, and
agricultural commodities.
World Trade Organization
The Trade Policy Review of the
WTO concluded its second review of the members of Sacu’s trade
policies in April 1998.
The WTO Secretariat report
noted that South Africa was now rapidly reintegrating its economy
into the multilateral trading system and that the five-year trade liberalization
program, which started in 1995, would help its
products compete internationally. The report stated that
policy-makers should continue with plans to simplify and coordinate
the various aspects of trade policy, especially the tariff
structure. The report said that South Africa had made decisive moves
towards outward orientation with a focus on export promotion by
means of a wide variety of incentives, such as tariff
concessions and credit facilities. The report noted that further liberalization
would help raise the competitiveness of South
Africa’s exports.
The second session of the WTO
Ministerial Conference took place in Geneva, Switzerland in May
1998. Trade Ministers of the WTO member countries decided that a
process should be established under the direction of the General
Council to ensure full and faithful implementation of existing
agreements, and to prepare for the Third Ministerial Conference. In
this regard, the General Council met in special session in
September 1998 and periodically thereafter to ensure the full and
timely completion of its work in preparation for the Third
Ministerial Conference.
The offer on Financial
Services that South Africa made during the negotiations of 1997, was
tabled in Parliament for approval in November 1998. The offer was
approved and South Africa accepted the Fifth Protocol to the WTO
General Agreement on Trade and Services which entered into force on
1 March 1999.
South Africa also participated
in the deliberations of issues of the various working parties and
committees of the WTO to develop and oversee the multilateral
trading rules necessary to advance economic growth.
Cairns Group
South Africa was formally
accepted into the Cairns Group in February 1998. This group is an
association of agricultural exporting countries whose objective is
to strive for fair and free trade in global agricultural markets.
The group was
established in 1986 and consists of Argentina, Australia, Brazil,
Canada, Chile, Colombia, Fiji, Indonesia, Malaysia, New Zealand,
Paraguay, the Philippines, South Africa, Thailand and Uruguay.
A meeting was held in April
1998 in Sydney, Australia to prepare for the mandated WTO
negotiations on agriculture which will commence late in 1999.
World Economic Forum
The World Economic Forum
(WEF)
is an annual meeting of world economic leaders, held in Davos,
Switzerland, that has become the world’s global business summit. At
the meeting, 1 000 top business leaders, 250 political leaders, 250
of the foremost experts in every domain, and some 250 media leaders
come together to shape the global agenda. The 1999 annual meeting
held from 28 January to 2 February was attended by the then South
African President, Mr Mandela, who addressed the gathering.
One of the most important
issues on the 1998 and 1999 agenda was the economic crisis in Asia.
High-ranking government officials from across the region, leading
economists, bankers and investors debated what kind of regulations
and safeguards should be put into place to avoid a repeat of such a
financial meltdown. The rapid advance of economic globalization
and international efforts to calm the financial
markets, strengthened a certain need for future global institutions.
Export promotion
Several organizations promote
exports and external trade relations in general. The major
government agency involved in export promotion is the Chief
Directorate: Export and Investment Promotion of the Department of
Trade and Industry.
The main functions of the
chief directorate are to develop exports and provide assistance and
services to South African enterprises wishing to enter the global
market-place. Through its network of 41 foreign economic
offices in 36 countries around the world, the Department assists
existing and prospective exporters to obtain valuable market
information, as well as business contacts in all major foreign
markets.
The Department also
coordinates a number of focused sector-specific export development
projects in partnership with certain employers’ associations and
other stakeholders.
The Directorate: Financial
Assistance Schemes is responsible for managing the Export Marketing
and Investment Assistance Scheme (EMIA) and the Export Credit and
Foreign Investment Reinsurance Scheme. The EMIA and Export Credit
schemes are aimed at providing prospective exporters with financial
assistance.
|
South Africa’s main exports
|
|
Description |
1996 |
1997 |
1998* |
| |
(R
million) |
(R
million) |
(R
million) |
|
Precious and
semi-precious stones, gold and other precious metals
and
products thereof |
37 387
|
41 731
|
35 135
|
|
Base metals
and articles thereof (steel, aluminum, copper, nickel etc.)
|
18 547
|
21 357
|
22 684
|
|
Mineral
products (iron ore, coal, salt and others) |
15 303
|
18 392
|
19 024
|
|
Special
classification provisions: Original Equipment Components
|
9 281
|
9 640
|
24
|
|
Products
from chemicals and allied industries |
8 164
|
9 162
|
9 281
|
|
Machinery
and mechanical appliances, electrical equipment and
parts
thereof |
6 551
|
8 530
|
10 271
|
|
Vehicles,
trains, aircraft, ships and associated equipment
|
4 430
|
6 560
|
8 024
|
|
Edible
vegetables, fruits and nuts, cereals, plant oil and products
thereof |
5 107
|
5 563
|
5 592
|
|
Prepared
foodstuffs, beverages, spirits, vinegar and tobacco products
|
4 664
|
5 068
|
5 930
|
|
Pulp of wood
and other fibrous cellulosic material, paper and
paperboard
and articles thereof |
3 793
|
3 633
|
4 148
|
|
Textiles and
textile articles |
2 579
|
3 213
|
3 221
|
* Not yet
audited
Source: Customs and Excise
The EMIA consists of export
marketing research, foreign direct investment research,
outward-selling missions, inward-buying missions, inward-investment
missions, outward investment recruitment missions, and foreign
exhibitions. The EMIA also offers assistance to industry-specific
sectors. The EMIA includes a special dispensation for SME exporters.
An Export Credit Finance
Guarantee Scheme for SMEs has been introduced. The scheme
facilitates finance for SMEs that lack working capital to procure
materials and services for the execution of an export order and/or
financing export trade debtors for a period of up to 180 days. Pre-
and postshipment finance can be obtained for export orders. Finance
is provided by banks and can constitute up to 90 per cent of export
orders. Guarantees are issued by the Credit Guarantee Insurance
Corporation (CGIC) and are reinsured by the Department of Trade and
Industry.
The exporter has to be an independently owned
business whose total assets do not exceed
R5 million or whose labor force does not exceed 200. The loan
application should not exceed R1 million and not be less than R50
000.
The Export
Finance Scheme for Capital Projects is becoming more popular among
financial institutions and contractors. Through this scheme,
exporters of capital projects are able to compete internationally by
offering prospective overseas buyers competitive repayment rates
denominated in US dollar. Such credit facilities are available over
a maximum repayment period of ten years. Africa, and southern Africa
in particular, have proved to be popular markets for South African
exporters of capital projects.
There has also been an
increase in insurance cover extended to South African short-term
exports. Export credit insurance provides an exporter with
insurance protection against financial loss owing to non-receipt of
payment of a legally enforceable debt due and payable by a non-South
African importer to the exporter for goods and services delivered.
Insurance is available through the CGIC with reinsurance provided by
the Department of Trade and Industry.
Undertakings wishing to
import or export goods that are subject to control, may obtain
permits from the Director of Imports and Exports, Private Bag X192,
Pretoria, 0001. Permits must be renewed annually.
Registration with the local
Controller of Customs and Excise is required of all factories
subject to excise duties, as well as all enterprises that import on
a regular basis. Information regarding specifications for existing
or new products, and guidance on quality control is available from
the South African Bureau of Standards.
Excise duty is levied on
certain locally produced goods, of which potable spirits, beer,
cigarettes, tobacco, motor cars and certain petroleum products yield
the highest revenue.
Industrial policy
South Africa’s trade and
industrial policy is in a process of fundamental change, moving away
from a highly protected, inward-looking economy towards an
internationally competitive economy capitalizing on the country’s
competitive and comparative advantages.
As an integral part of the
Government’s Growth, Employment and Redistribution (GEAR) strategy,
the new industrial policy strives to achieve a balance between
greater openness and improvement in local competitiveness whilst
pursuing a process of industrial restructuring aimed at expanding
employment opportunities and productive capacity.
South Africa has made
courageous strides in opening the domestic economy to international
competition, which include
- a market-related and competitive
exchange rate
- no restrictions on the type or extent
of investments available to foreigners or government approval
required
- the strengthening of competition
policy and the development of industrial cluster support programs
- abolishing exchange control for
non-residents and substantial reduction in those applicable
to residents
- a significant reduction in tariff
barriers, ahead of the WTO timetable, resulting in the lowest
(trade weighted) average rate of protection in the SADC region
- a proactive strategy to attract
foreign strategic equity partners into the process of
restructuring state assets
- the introduction of greater labor market flexibility
- the availability of attractive
investment incentives to enhance international competitiveness and
technology transfer with the means to facilitate foreign
direct investment.
One of South Africa’s key
industrial policies remains its commitment to fostering sustainable
industrial development in areas where poverty and unemployment are
at their highest. This objective is operationalised through
the SDIs, which focus high level support on areas where
socio-economic conditions require concentrated government assistance
and where inherent economic potential exists. The SDI programs focus government attention across the various national, provincial
and local government spheres with the goal of ensuring that
investments are fast-tracked and that synergies between various
types of investments are maximized.
Increasingly, South Africa’s
approach to SDIs is based on the objective of operationalising South
Africa’s commitment to the ‘African Renaissance’. As a result, SDIs
are increasingly focused on the southern African region with the
Maputo Development Corridor leading to substantial investments in
both South Africa and Mozambique.
With reference to the
rationale for economic integration in southern Africa, it is based
on the premise that economic integration can yield greater
developmental benefits by the collective rather than the unilateral
use of economic policies.
The following issues can also
be attended to far more effectively through the adoption of a
regional approach:
-
the SADC countries’ attempts to
achieve self-sufficiency, industrialization and modernization of
their economies
-
obtaining increased bargaining power
for SADC countries in international markets
-
the facilitation and mobilization
of
investments, both from local and foreign sources will increase as
a much broader and integrated market can attract the interest of
foreign investors.
The SDI program provides the
private sector with unique opportunities to exploit the potential of
under-utilized areas by identifying public-private partnerships in
bulk and municipal infrastructure and other projects. The SDI
concept may have a variety of focuses, such as:
-
Industrial –
KwaZulu-Natal SDI, Fish
River SDI. By November 1998, the Fish River SDI had inspired nine
new commercial operations which created 500 new jobs. New firms
invested R156 million in the Eastern Cape.
-
Agro-tourism – Lubombo SDI, Wild Coast
SDI.
-
Sectoral mix – Maputo Development
Corridor.
-
Industrial development zones
(IDZs) – Coega, Saldanha and East London.
-
Second Generation SDI: The Gauteng
Special Economic Zone (SEZ) focuses on high technology
manufacturing, information technology, telecommunications, food
processing, cultural, etc.
SDIs: Maputo Development Corridor;
Lubombo SDI; Richards Bay SDI, including Durban and
Pietermaritzburg nodes; Wild Coast SDI; Fish River SDI; West Coast
Investment Initiative (WCII); Platinum SDI; Phalaborwa SDI and
Coast 2 Coast Corridor
SEZs: Gauteng SEZ
IDZs: Coega IDZ, East London IDZ,
Saldanha IDZ and Richards Bay IDZ.
By November 1998, the
existing portfolio of SDIs had identified 630 investment
opportunities valued at R18,7 billion with the capacity to
generate more than 54 000 jobs.
In May 1998, former
President Mandela attended the official launch of the Lubombo SDI.
At the launch, an economic development agreement was signed by Mr
Mandela, his Mozambican counterpart, Joaquim Chissano, and
Swaziland’s King Mswati III. The Lubombo SDI targets eastern
Swaziland, southern Mozambique and the north-eastern areas of
KwaZulu-Natal.
The Government’s IDZ policy
is designed to boost exports and jobs. The Department of Trade and
Industry has developed a draft concept model which was approved by
Cabinet on 17 March 1999. A National Development Zone Authority (NDZA) will be responsible for the regulation, facilitation and
administration of IDZs. It is also envisaged that each IDZ will
have a local NDZA to carry out the regulatory and approval
process. The development and the management of zones will be done
by the private sector. The first IDZ to be earmarked, and one of
the biggest initiatives ever undertaken in South Africa, will be
established at Coega, 30 km north of Port Elizabeth in the Eastern
Cape.
The WCII, covering the west
coast region of the Western Cape, was launched in Saldanha Bay on
25 February 1998. The WCII has about R12 million worth of projects
under construction, with an estimated further R10 billion
worth of projects under consideration.
The program of investment
conferences and launches of major investment initiatives, linked
to the SDI process, will continue in 1999, after which
private-sector developers will take responsibility for
implementation.
By using the instrument of
government procurement, the Government will leverage foreign
investment, export and technology development through the National
Industrial Participation Program (NIPP).
The IDC announced
in July 1998 that it would invest at least R1,5 billion to create
more than 7 000 jobs in the 1998/99 financial year. The IDC is a
statutory body which makes finance available for the establishment
of new manufacturing industries and the expansion, modernization or
relocation of existing industries. Between 1991 and 1997, it had
approved loans totaling R1,2 billion.
At the end of
October 1998, the IDC announced that its new entrepreneurial finance
division would launch five empowerment finance schemes, namely a
low-interest rate empowerment scheme; wholesale finance; takeovers
and acquisitions; consortium finance, and a fish-harvesting scheme.
Some R500 million was budgeted for the schemes. Finance is available
in the form of loans, equity and quasi-equity loans.
National Industrial
Participation Program (NIPP)
Owing to the probability that
a number of large government contracts may be awarded to foreign
suppliers on the basis of competitiveness and appropriate
technology, certain economic consequences could result. The more
critical consequences are job losses, a drain on foreign reserves, a
reduction in industrial and commercial activities, a reluctance to
invest in technology and training by local manufacturers and the
curtailing of research and development activities. The NIPP of the
Department of Trade and Industry was designed to address these
issues.
The principle of Industrial
Participation (IP) became obligatory as from 1 September 1996 on
approval by the Cabinet. On 30 April 1997, the Cabinet fully
endorsed the IP Policy and Guidelines. In essence, this means that
all State and parastatal purchase and lease contracts (goods and
services) signed after this date, exceeding a certain level of
imported content, are subject to an IP obligation. No contract can
be awarded to a tenderer if the latter has not satisfied the IP
requirements.
The IP obligation is
benchmarked on the imported content of the contract. Any contract
having an imported content equal to or exceeding 10 million US
dollar has an IP obligation. The obligation amounts to 30 per
cent of the imported content.
IP arrangements to satisfy the
obligation include investments, subcontracting, export promotion,
licensor production, supply arrangements and research and
development collaboration. A period of seven years has been
identified as the time-frame in which these economic activities have
to be generate
Investment
marketing and facilitation
The national Government,
working in partnership with its provincial and local counterparts,
has developed an investment promotion and facilitation strategy
which is focused on the needs of internationally competitive
companies and their search for new and profitable markets.
This strategy was built on the
foundation of exhaustive and scientific research into international
best practice in the field of investment promotion and extracted the
best examples from world-class agencies in the design of a
coordinated national and regional approach.
The national investment
promotion agency, Investment South Africa, and its partners in all
nine provinces, is the official source of information pertaining to
the regulatory and operating environment affecting the foreign
investor.
The network provides investors
with access to
- a sector and project-specific
marketing strategy linked to any field of operation
- an on-line database focusing on the
regulatory, commercial and operating environment affecting foreign
companies
- links to pre-qualified local
joint-venture partners
- assistance with tailor-made
itineraries for inward investment missions.
Manufacturing
The Chief Directorate:
Manufacturing Development of the Department of Trade and Industry is
responsible for
- supporting increased investment in the
manufacturing sector
- supporting and enhancing the
establishment of new manufacturing entities
- supporting new sustainable and
profitable manufacturing entities.
The chief directorate
administers two incentive programs, namely the Tax Holiday Scheme
(THS) and the Small Medium Manufacturing Development Program
(SMMDP). The THS caters for qualifying investment in excess of R3
million per new project which came into operation after
1 October 1996. Between March 1998 and January 1999, 80
projects, totaling 4 201 investments, were approved.
The SMMDP caters for
qualifying investment up to R3 million per new project. Between
March 1998 and January 1999, 896 projects, totaling 1 858
investments, were approved.
Restructuring of
State assets
Government initiatives for the
restructuring of State assets are coordinated by the Office for
Public Enterprises and are undertaken within the context of the
National Framework Agreement (NFA) between the Government and organized
labor as adopted in January 1996. The NFA and government
policy allows for a high priority to be afforded to the redemption
of State debt, the recapitalization of public enterprises and the
broadening of economic participation.
The main objectives of
restructuring as defined in the Departmental Guidelines, which were
compiled in 1995, are as follows:
-
facilitating economic growth
-
creating wider ownership in the South
African economy
-
mobilizing private-sector capital
-
reducing State debt
-
enhancing competitiveness
-
promoting fair competition
-
financing growth and requirements for
competitiveness.
The Ministry for Public
Enterprises has enhanced the capacity of the directorate dealing
with restructuring by seconding three officials from parastatals
whose sole mandate is privatization. Officials from other
directorates are also helping with the process.
Entities which have been and
still are in the process of restructuring include: Telkom, Sun Air,
the Airports Company of South Africa, Safcol, Alexkor, the South
African Post Office, Abakor, Aventura, SAA, Autonet, Viamax, Connex,
Apron Services, Airchefs and Denel Aerospace.
Competition policy
The Competition Act, 1998 (Act
89 of 1998), is aimed at anti-competition practices, abuse of
dominant positions and the strengthening of merger control. It
replaced the Maintenance and Promotion of Competition Act of 1979.
The Act provides for the establishment of a commission consisting of
an Inspectorate and an Adjudicating Body.
The Act aims to outlaw the
following main areas of business practice:
- Restrictive practices between
businesses, or between businesses, their supplier(s) and
customers, which hinder competition. These include price-fixing,
collusive tendering, restricting output and investment and market
sharing.
- The abuse of a dominant position
which, according to the Act, is defined as a market share of 35
per cent or more.
Small
enterprise
Small businesses in South
Africa absorb almost half the people formally employed in the
private sector and contribute about 37 per cent to the
country’s GDP. There are an estimated 3 million micro-enterprises in
the country.
The White Paper on the
National Strategy for the Development and Promotion of Small
Business in South Africa was published in March 1995. The key
objectives of the Government’s National Strategy for Small Business
are to
- create an enabling environment for
small enterprises
- level the playing-fields between
bigger and small businesses, as well as between rural and urban
businesses
- facilitate greater equalization of
income, wealth and earning opportunities and address the legacy of
apartheid-based disempowerment of black business
- support the advancement of women in
all business sectors
- create long-term jobs
- stimulate sector-focused economic
growth
- strengthen cohesion between small
enterprises
- prepare small business to meet the
challenges of an internationally competitive economy.
At the end of September 1997,
the Department of Trade and Industry announced that an
advisory board and eight task teams had been appointed to review
constraints and legislation affecting small business in South
Africa. The National Small Business Regulatory Review process
started in March 1998 and the board and task teams were expected to
report their findings to the Government in 1999. The review will
specifically address the constraints identified in the White Paper.
Institutional support
framework
The National Small Business
Act, 1996 (Act 102 of 1996), aims at establishing a supportive
environment for small business development. The main pillars of
support are the Center for Small Business Promotion (CSBP), the
State-owned Ntsika Enterprise Promotion Agency (Ntsika) and Khula
Enterprise Finance (Khula Ltd.).
Center for Small Business
Promotion
The mission of the CSBP is to
implement, monitor and evaluate the effectiveness of the National
Small Business Strategy. The aim of the Strategy is to contribute to
job creation, income generation, the redistribution of wealth and
overall economic growth.
The CSBP funds and coordinates
a number of small business support programs through the following
wholesale agencies:
Ntsika
Enterprise Promotion Agency
Ntsika’s mission is to render
non-financial support services to the SMME sector through a broad
range of intermediaries. This is achieved through initiatives in the
areas of management and entrepreneurship development, marketing and
business linkages, policy, research and business development
services and targeted assistance by Ntsika.
The achievements of Ntsika can
be categorized into capacity-building of the retail distribution
network and direct services to SMMEs through these retailers.
It was announced in
January 1998 that Ntsika and the Local Business Service Center Association of South Africa had embarked on an aggressive strategy
to spread its service network.
From 1 April 1998 to 30
January 1999, Ntsika accredited a further 12 Local Business Service Centers
(LBSCs) and supported 40 other potential organizations.
Ntsika now supports a total of 42 LBSCs. In addition,
118 entrepreneurs have been supported by Manufacturing
Assistance Centers, ten Tender Advice Centers have been established
and 413 technical college students were trained in business skills.
In June 1998, a delegation of
20 South African business people from SMEs took part in the European
Commission’s prestigious Europartenariat business partnership program
in the Netherlands. The partnership was aimed at bringing
together 7 000 small and medium-sized firms from over
60 countries. The trip was arranged by the EU and Ntsika.
Khula
Enterprise Finance
Khula is a wholesale agency
which provides financial support to small businesses through
intermediaries. Its financial products include loans, a national
credit guarantee scheme, grants and institutional capacity building.
The achievements of Khula can
be categorized into support to financial intermediaries as retail
distribution networks and direct services to SMMEs. Under the first
category, some 2 800 bank branches have access to the Standard and
Emerging Credit Guarantee schemes. From 1 April 1998 to
30 January 1999, 800 credit guarantees were issued to
entrepreneurs.
By March 1999, 24 retail
financial intermediaries had been assisted under the
capacity-building scheme. The scheme provided seed loans to finance
portfolios and operating expenses funds worth R20 million, and
business loans for lending to SMMEs worth R83 million. Khula also
participates in the provincial equity funds and has spent
R5 million to partly fund joint ventures, expansion and recapitalization.
In September 1998, a
micro-lending scheme, Khula Start, was launched to meet the needs of
small and micro-enterprises, mainly in the rural areas of the
country. Eight groups were identified as micro-lenders in the
Eastern Cape, Northern Province, Northern Cape, Mpumalanga and
KwaZulu-Natal. The scheme caters for groupings of three to ten
people who require an average loan of R4 000 for
business-related projects.
National Empowerment Fund
The National Empowerment Fund
(NEF), formally launched in May 1998, aims to raise more than R4
billion over the next few years for the promotion and growth of
small and medium-sized businesses, with the first R1 billion
becoming available in 1998. The capital will be raised predominantly
via trusts set up from the proceeds of privatization sales.
The fund will buy shares in privatization
utilities from the Government at a discount of up to
20 per cent to resell to previously disadvantaged people.
One of the NEF’s functions is
investor education to ensure awareness of the economic environment
and basic economic literacy. The fund operates on three levels,
initially targeting low-income individual earners and progressing
towards savings clubs and equity finance agreements for SMEs.
Business Partners
Early in October 1998, the
Small Business Development Corporation changed its name to Business
Partners Limited as part of a restructuring process which started
more than two years ago. The restructuring saw the Government reduce
its shareholding from 50 to 20 per cent.
Business Partners also
increased its focus on formal SMEs by introducing new financing and
investment packages to these businesses through equity and related
funding. The base and ceiling on its exposure to any single project
have been increased to R150 000 and R15 million respectively,
reflecting the shift in focus to larger SMEs. The 735 000 m³
property portfolio has also been restructured to ensure that
business premises are made available to SMEs at market-related
rentals. More than 75 per cent of the lettable space is for
industrial use, while the remaining 25 per cent is for commercial
use (mainly retail, but with some office space).
Business Partners has R1,3
billion in shareholders’ equity and operates from a network of 28
offices located in the major cities and towns across South Africa.
It has invested in excess of R3 billion in more than 60 000
businesses over its 18-year participation in the sector. The
portfolio classification by economic activity has 34 per cent
invested in manufacturing, 29 per cent in commercial, and 37 per
cent in service-related businesses.
Business Partners intends
investing R460 million in SMEs in 2000. It estimates that
future growth sectors will be tourism and export-related
manufacturing.
Public Works programs
The Department of Public
Works’ Community Based Public Works Program (CBPWP) has created
more than 1 110 projects, mostly situated in and providing
employment opportunities to communities in the most impoverished
areas. The program is now changing its focus towards creating
assets that will lead to more sustainable job creation and
alleviation of poverty. A comprehensive planning process is in
motion to ensure a realignment of the program in accordance with
increasing challenges and responsibilities.
In October 1998, a rural
anti-poverty project for which R85 million was allocated, was
launched in KwaZulu-Natal. The project is expected to create some 14
000 jobs. It will focus on the three poorest provinces, namely
Northern Province, KwaZulu-Natal and Eastern Cape.
Special attention is given to
violence-torn areas.
The R274 million allocated
towards the end of 1998 has enabled an expansion of the new
approach. Building on the experience gained in the first phase,
plans are well advanced to deliver 35 cluster developments which
will create 19 000 projected jobs over a period of six months.
The CBPWP has also extended
its relations beyond South Africa’s borders. A partnership with the
International Fund for Education and Self Help has resulted in
schools being built in KwaZulu-Natal and the Eastern Cape.
The Construction Industry Development
Program (CIDP)
Mandated by the Cabinet, the
Department has successfully coordinated an intergovernmental policy
initiative aimed at enhancing the role and impact of the
construction industry in South Africa’s physical and economic
development.
Key objectives already realized
include the launch of a Green Paper and the establishment
of interim institutional arrangements which will enable the
effective coordination of a construction industry development program.
The White Paper on Creating
an Enabling Environment for Reconstruction, Growth and
Development in the Construction Industry was released in May
1999.
The White Paper is aimed at
enhanced delivery, greater stability, improved industry performance,
value for money and growth in the emerging construction sector.
Emanating from the White
Paper, a range of policy proposals are being developed to address
industry relations. A policy framework is also being developed on
the establishment of a national register of contractors and for the
constituting of a construction industry development board to drive
the strategy for industry growth and development.
Emerging Contractor Development
Program (ECDP)
The Department has embarked on
the implementation of the 10-Point Plan and the Affirmative
Procurement Program. Whilst these initiatives have helped to
create the necessary environment for emerging contractors, there is
a need to provide coordinated support to emerging contractors.
At the end of August 1998, the
Minister of Public Works announced that the Government would spent
R283,4 million to transform black contractors into prime players to
enable them to take advantage of the contracts available in the
construction industry. The ECDP focuses on developing and
reinforcing the sustainable growth of emerging construction
entities. To achieve this objective, the ECDP has developed an array
of initiatives and enabling support strategies. Key support
strategies already realized, include
-
creation of help desks in six of the
Department of Public Works’ regional offices to provide
information on contract opportunities, training, finance and
credit providers, tendering and quoting procedures
-
development of a database of emerging
contractors to assist, among other things, in the screening and categorization
of contractors, keeping records of work
opportunities awarded to contractors and performance monitoring
-
development, in collaboration with
Ntsika, of the Black Construction Council and the International Labor
Organization (ILO) of the Contracting Entrepreneurial
Training Program.
The ECDP is also developing a
mentorship program to provide support to contractors participating
in the Strategic Project Initiative which was launched by the
Minister of Public Works at the end of August 1998. Projects to the
value of R284,4 million were identified. The main objective of
the initiative is to develop emerging contractors into prime
contractors.
Disposal of strategic State-owned
properties
One of the Department’s
alternative approaches, representing a shift in emphasis from simply
disposing of fixed properties to the highest bidder in an open
tender process, entails the disposal of property assets through the
invitation of development proposals known as the ‘proposal call’
model.
The main objective of the
process is to take advantage of the knowledge of market forces and
creative input of a variety of developers in developing public land.
Other objectives are to ensure that new developments on State-owned
land provide public facilities and amenities, as well as being a
sound investment opportunity for the prospective developer. It was
envisaged that tenders for the development and disposal of these
properties would be invited by mid-1999.
Human resources and
employment
According to the Bill of
Rights, which is contained in the Constitution of South Africa, 1996
(Act 108 0f 1996), everyone has the right to, among other things,
freedom of association, fair labor practices, the right to
negotiate collectively, the right to withhold labor, the right to
protection and the right to education.
Legislation
The Basic Conditions of
Employment Act, 1997 (Act 75 of 1997), came into effect on
1 December 1998 and applies to all workers except for the South
African National Defence Force (SANDF), the South African Secret
Service (SASS) and the National Intelligence Agency (NIA).
There is a transitional period
of 18 months for the Public Service , which means that the
implementation date for the Public Service is May 2000.
The new provisions include the
following:
-
A reduction in the maximum hours of
work from 46 to 45 hours per week.
-
An increase in the rate of overtime
from 133 per cent to 150 per cent.
-
Payment for working Sundays is now
200 per cent if Sunday is not a normal working day; if Sunday
is a normal workday, payment is at 150 per cent.
-
Night work – a premium in pay or
additional time off is prescribed.
-
Maternity leave increases to four
months (but payment is not prescribed).
-
Annual leave increases from two weeks
to three weeks (21 consecutive days).
-
Family responsibility leave: 3 days
paid family responsibility leave to attend to the birth or illness
of children, or death of an immediate family member.
-
Employers have to provide workers with
written Particulars of Employment.
-
The Act includes provisions for
establishing minimum wages and conditions for groups of workers in
vulnerable sectors e.g. domestic, farms, security, clothing, etc.
The Employment Conditions Commission advises the Minister in
setting these.
-
The Act prohibits children under 15
years of age from working. Children between 15 and 18 will
be better protected, and also prohibited from working in certain
jobs, especially in the mining and manufacturing sectors.
Compensation for Occupational Injuries
and Diseases Amendment Act, 1993
The Compensation for
Occupational Injuries and Diseases Act, 1993 (Act 130 of 1993), came
into force in March 1996. In terms of the Act, a Compensation Board
was established which advises the Minister on problems that arise
from the application of the Act, and the nature and extent of
benefits.
The Compensation Fund provides
for financial compensation for workers who, in the course of their
employment, sustain injuries or contract industrial diseases that
result in medical expenses and/or temporary or permanent
disablement. In cases of fatal accidents or death caused by an
occupational disease, compensation is paid to the worker’s
dependants. Compensation and medical expenses are covered by the
Accident Fund.
In terms of the Compensation
for Occupational Injuries and Diseases Amendment Act, 1997 (Act 61
of 1997), decision-making and the 595-strong staff of the
Compensation Fund were placed under the Director-General of the
Department of Labor.
The Amendment Act is intended
to make old legislation compatible with the provisions of the
Unemployment Insurance Act, 1966 (Act 30 of 1966). The Act protects
contributors against the risk of loss of earnings through
unemployment, illness and, in the case of women contributing to the
fund, maternity or the adoption of children under the age of two
years. The Act provides for lump-sum payments to dependants of
deceased contributors. The State, employers and workers contribute
to the fund, which earns interest on investments.
Labor Relations Act, 1995
The Labor Relations Act
(LRA), 1995 (Act 66 of 1995), came into effect on 11 November 1996.
It enables bargaining councils to be established and registered, and
stipulates that the councils should include small and medium-sized
businesses. New rules are provided to extend bargaining council
agreements to non-parties and give councils the power to determine
the issues to be bargained in the various sectors and workplaces.
The LRA facilitates worker
participation and decision-making in the workplace. The LRA
entrenches the right to strike, encourages sectoral and enterprise
bargaining and clarifies the law on unfair dismissals and
information disclosure, and also introduces workplace forums and new
mechanisms for dispute resolution.
The LRA does not apply to
members of the SANDF, the NIA or the SASS. Employees in essential
services have limits placed on their rights to strike.
The Labor Relations Amendment
Act, 1998 (Act 127 of 1998), came into operation on 1 February 1999.
The Act improves the institutional functioning of the Commission for
Conciliation, Mediation and Arbitration (CCMA) and bargaining
councils as well as the closure of the Industrial Court.
The Employment Equity Act, 1998
The Employment Equity Act,
1998 (Act 55 of 1998), was assented to by the President on 16
October 1998. The Act signaled the beginning of the final phase of
transformation in the job market, which began with the
implementation of the LRA. It aims to achieve representivity in
employment and correct past discriminatory employment practices.
The Act compels employers to
adopt employment policies and practices which do not unfairly
discriminate on the basis of race, sex, disability, pregnancy,
marital status, ethnic or social origin, sexual orientation,
opinion, culture, language, religion or belief. Firms with 50 or
more employees, or whose annual turnover is more than that set for a
small business in terms of the National Small Business Act, 1996,
will have to prepare and execute an employment equity plan.
Employers who comply with the provisions will be able to tender for
government contracts. Those guilty of contraventions will face heavy
fines.
Specific requirements of the
Act are that companies prepare a profile of their workforce and a
statement on the categories of their workers and review current
employment practices and policies. The Act will subject employers to
penalties for non-compliance. Large companies will have to report
annually on the progress of their programs to the Department of Labor, and small companies once in two years.
In terms of the Act, the
Government will be required to establish a Commission for Employment
Equity which will be an advisory body to the Minister of Labor.
Skills Development Act,
1998
The Skills Development Act,
1998 (Act 97 of 1998), was gazetted on 2 November 1998. The purpose
of the Act is to
-
develop the skills of the South
African workforce to
-
improve the quality of life of
workers, their prospects of work and labor mobility
-
improve productivity in the workplace
and the competitiveness of employers
-
promote self-employment
-
improve the delivery of social
services
-
increase the levels of investment in
education and training in the labor market and improve the return
on that investment
encourage employers to
-
provide opportunities for new entrants
into the labor market to gain work experience
-
employ persons who find it difficult
to get employment and use the workplace as a learning environment
-
provide workers with the opportunities
to acquire new skills
-
encourage workers to participate in
learner ship and other training programs
-
improve the employment prospects of
persons previously disadvantaged by unfair discrimination to enter
the labor market and to redress those disadvantages through
training and education
-
ensure the quality of education and
training in and for the workplace
assist
-
work seekers to find work
-
retrenched workers to re-enter the
labor market
-
employers to find qualified workers
-
provide and regulate employment
services.
The Skills Development Levies
Act, 1999 (Act 9 of 1999) the financing counterpart to the Skills
Development Act, had to be separately drafted and tabled to comply
with the Constitution which requires that all money Bills must be
tabled by the Minister of Finance. Once fully implemented, these two
pieces of legislation will fully replace the Manpower Training Act,
1981 (Act 56 of 1981), and the Guidance and Placement Act, 1981 (Act
62 of 1981).
Parallel to the Skills
Development Act, 1998, the Minister of Education’s Further Education
and Training Act, 1998 (Act 98 of 1998), was also passed. This
legislation seeks to address issues of relevance and quality of
learning in technical colleges and to lay the basis for the
long-term transformation of the senior secondary school system.
The complementarity between
the two pieces of legislation was designed in joint sessions between
the two responsible departments. In essence, the Skills Development
Act, 1998, is seen to stimulate the demand for skills development in
the labor market from public and private sector employers. The
Further Education and Training Act, 1998, on the other hand, is seen
to improve the ability of learning institutions to respond to the
increased demand in creative ways. The new legislation establishes
the vehicles by means of which these objectives are to be achieved.
These purposes are to be
achieved by:
-
establishing an institutional and
financial framework comprising
-
the National Skills Authority (NSA)
-
the National Skills Fund (NSF)
-
a skills development levy-grant scheme
as contemplated in the Skills Development Levies Bill
-
Sector Education and Training
Authorities (Setas)
-
labor centers
-
the Skills Development Planning Unit
-
encouraging partnerships between the
public and private sectors of the economy to provide education and
training in and for the workplace
-
co-operating with the South African
Qualifications Authority (SAQA).
In the 1997 Annual Report,
detail was provided about the Labor Market Skills Development Program, a
program designed to implement the Skills Development
Act, 1998. The year 1998 saw the signing of the official
Financing Agreement, securing ECU 46 million for this program.
Detailed work plans were completed and it was hoped to
commence implementation in the middle of 1999.
National Skills
Authority
The NSA was launched on 12
April 1999 to implement the Skills Development Act, 1998. Schedule 2
of the Act states that the National Training Board (NTB) will
perform the functions of the NSA until the authority is
formally established.
The NTB has already initiated
a number of projects, the most significant of which is a project
funded by the German Government through the German Technical
Co-operation (GTZ).
The project is exploring the
sectoral demarcation for the establishment of Setas. It is
also looking at the organizational implications of the functions
outlined in the legislation. The outcome of this project will
contribute towards the finalization of the regulations for the
establishment of Setas.
National Skills
Fund
Funds that were allocated to
the NSF in the 1998/99 financial year have been assigned to a number
of pilot projects, that aim to give effect to the Skills Development
Act, 1998. However, donor assistance has again supported the work of
the Department. Danida, the Danish Aid Agency, has supported a
major pilot project on learnerships in KwaZulu-Natal. The
focus of the project has been on the delivery of 250 learnerships in
the tourism and building industries.
Sector Education
and Training Authorities
Steps have been taken to finalize
formal Seta establishment guidelines. However, these steps
have been complemented by a great deal of spontaneous activity in
the private and public sectors. For example, major initiatives
have been taken by the Department of Public Service and
Administration to lay the basis for a Public Service Education and
Training Authority, and actors in local government have initiated a
process intended to create a Local Government Education and Training
Authority. Major progress has also been made in the tourism,
hospitality, mining sectors and others. Key functions to be
performed by Setas are the design and management of learnerships.
The Directorate of the Central Organization of Trade Testing (COTT)
has taken up the challenge of initiating a process of discussion and
development work aimed at preparing guidelines on learnerships.
In addition to the work done
in the KwaZuluNatal pilot project, a number of other projects linked
to the learner ship idea have begun in the plastics, printing and
electrical contracting industry.
Labor centers
Labor centers are Department
of Labor offices at local level. Traditionally they have
principally made pay-outs to Unemployment Insurance Fund applicants.
However, major strides were made in 1998 to boost the
functions associated with the Directorate: Employment Services, and
these functions were further strengthened in 1999.
Staff capacity-building
Assistance from Australian Aid
for Development (AusAid) was provided to support capacity-building
initiatives for employment services practitioners at labor centers and provincial offices. These included the direct training of staff,
as well as training provincial-level staff to train others. This
initiative will be incorporated into a larger wide-wide
initiative to build staff capacity to implement the new functions of
the Skills Development Act, 1998.
Current skills profiles and
training plans for everyone will be developed once actual learning programs
have been designed to assist staff to achieve competence.
Partnerships with external training providers are being established
to ensure learning programs are available wherever and whenever
required.
If the capacity-building program
is successful, it could be extended to external social
partners on Seta boards, Seta staff, and even staff within providers
or in other government or private sector institutions.
The Skills Development
Planning Unit
The unit will be established
within the Department of Labor to guide the development of training
needs analyses at both sectoral and provincial level and then use
this information to
-
recommend priorities (or criteria) to
the NSA and the Minister for the disbursement of funds from the
NSF and set guidelines to be used for the disbursement of grants
-
propose a National Skills Development
Strategy to the NSA for consideration; the NSA will make
recommendations in this regard to the Minister of Labor
-
ensure that all priorities and
strategies take due account of groups previously excluded from
participation in the labor market
-
ensure that training needs analyses
embrace the needs of small and microenterprises.
Co-operation with SAQA
The Minister of Labor is
co-responsible with the Minister of Education for the success of
SAQA.
In 1998, SAQA made major
strides, both in respect of its own staffing and accommodation, and
in the establishment of key institutions such as the 12 National
Standards Bodies, which were duly appointed.
Over and above these roles
relating to formal structures, the Director of the COTT has entered
into a partnership with SAQA to jointly manage a project aimed to
assist Setas to become registered as Education and Training Quality
Assurers.
The outcome of this project
will be the formal accreditation of Setas by SAQA and the successful
delivery of these services by Setas to providers and companies
associated with their sectors.
Trade unions
The right or freedom to
associate manifests itself in, among other things, employer organizations
and trade unions.
Voluntary registration of
employer organizations and trade unions takes place with the
Department of Labor after an applicant organization has applied in
the prescribed manner.
Registration allows the organization
to become party to a bargaining council, a forum in
which formal negotiations are conducted between registered employer organizations
and registered trade unions in a particular industry.
At the end of 1998, there were
474 registered trade unions and membership had increased to 3,8
million. Total membership of all trade unions represented over 37
per cent of those in employment in 1998.
Unregistered unions are
legally obliged to furnish membership particulars to the Department
of Labor.
Trade unions may join to form
federations which must furnish the Department of Labor with their
constitution, office-bearers and membership figures.
The most important trade union
groups or federations are the Federation of Unions of South Africa (Fedusa), the National Council of Trade Unions
(Nactu), and the
Congress of South African Trade Unions (Cosatu) – the largest
federation, with a membership of close to 1,8 million.
In March 1997, Fedsal and the
Federation of Organizations Representing Civil Employees (Force)
merged to form Fedusa, the second largest trade union federation in
the country after Cosatu, and the largest independent federation.
The three largest trade unions
are the National Union of Mineworkers (NUM), the National Union of
Metalworkers of South Africa (Numsa) and the National Education
Health and Allied Workers’ Union (Nehawu). All are Cosatu
affiliates.
Employers also have the right
to associate with employer organizations and register their organizations
with the Department of Labor. At present, there are
242 registered employer organizations and ten federations of
employer organizations.
Collective bargaining has
dominated industrial negotiations during the past few years and
appears to be on the increase. Unregistered trade unions cannot
negotiate via the bargaining council system and are confined to
enterprise collective bargaining. Many registered trade unions
engage in informal collective bargaining because the proceedings are
less rigid, rapid results may be obtained, there is a high degree of
flexibility and a wider range of items may be negotiated. It is
impossible to determine with any degree of accuracy how many plant
level agreements are concluded every year, since most are private
arrangements between management and a particular trade union.
Negotiation remains the most
important method of preventing and resolving labor disputes.
The labor dispensation
introduced in 1995 has, in fact, developed negotiation as the most
important means of power-sharing between employers and trade unions.
In those sectors of the economy where employers and employees are
not organized or sufficiently organized to negotiate minimum wages
and other conditions of service in terms of the LRA, such conditions
are prescribed in wage determinations made by the Minister of Labor upon the recommendation of the Employment Conditions Commission, in
terms of the Basic Conditions of Employment Act of 1997.
Commission for Conciliation, Mediation
and Arbitration
The CCMA, established in
November 1996, is an independent statutory organization, set up in
terms of the LRA to resolve labor disputes.
The commission’s tasks are to
promote sound worker-employer relations; prevent labor disputes
from arising; settle disputes that do arise by conciliation and, if
necessary, arbitration. Two years after its formation, some 144 000
cases have been referred to the commission, with an overall
conciliation settlement rate of 70 per cent. More than 16 000
arbitrations were completed.
Labor Court
The Labor Court has been
operating since November 1996. In 1998, there were 6 056 cases
lodged with the Labor Court and 153 appeals with the Labor Appeal
Court. One of the important functions of the court is to determine
whether a strike or a lockout enjoys protection by the LRA. The
court also adjudicates if the CCMA is unable to resolve disputes
about picketing or when an employee claims to have been unfairly
dismissed.
Strikes
More than 2,8 million work
days were lost as a result of industrial action in the first ten
months of 1998. This was the highest figure since the 1994
elections.
According to a report
commissioned by the ILO/Swiss project, some violence
occurred, with at least 11 people losing their lives and damage to
property. The metal sector accounted for 32 per cent of the days
lost with the retail and services sector at 31 per cent.
According to the report,
strikes were generally caused by economic factors. The number was
expected to rise to about three million days lost by the end of the
year.
Major strike triggers in 1998
were wages at 96,8 per cent, followed by grievance (1,2 per
cent), dismissal related to discipline (1,1 per cent), retrenchments
(0,7 per cent) and union recognition (0,1 per cent). The
majority of strikes took place at national level (90,9 per cent),
followed by Gauteng (4,6 per cent), Western Cape (2,6 per
cent), KwaZulu-Natal (1,1 per cent) and other (0,8 per cent).
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