Hon Chairperson, I was tempted to ask the previous speaker if we were going to write a test on all the information she imparted. Luckily we don't have to.
South Africa should not only strive to consolidate our hard-won democracy, but also to establish an ethical framework for the 21st century within which we operate globally. Such a framework should distinguish between right and wrong in the present-day interdependent world, where power has become a widespread phenomenon. In a time of cynicism, South Africa is an example of hope triumphing over fear and tolerance triumphing over prejudice. Emerging from a bitterly divided past, we have made a widely admired transition from authoritarian rule to becoming a beacon of human rights.
Yet, as inspirational as we may be, and while our local social and economical challenges persist, it is important to note that the global landscape has been transformed. Conditions have been recast by the events of the Arab Spring and South Africa has to consider its response to the changed world.
It is in this light that we should also carefully analyse our strategies with regard to our global, political and economic partnerships. I believe this is particularly true in respect of our role regarding the Cotonou Partnership Agreement of the European Union, EU, with the countries of the African, Caribbean and Pacific, ACP, regions. South Africa and most of the ACP countries will have to weigh up its role in terms of these agreements and also the role that the EU plays in promoting the benefits that should be accruing to the constituent ACP countries and their regions.
I have stated before in other fora that I am still the new kid on the block in terms of Parliament's role in respect of these agreements, but during the last visit of our representatives to the ACP-EU meetings in Brussels, and especially at the meetings of the three joint structures that the House Chairperson earlier referred to, it was quite noticeable that very few EU Members of Parliament were in attendance. This matter was raised by a number of speakers from the ACP countries, but only poor excuses were presented in reply.
If the Speaker were here today, he would recall that during the visit that he led to the EU earlier this year, at the meeting with Mr Louis Michel, a Minister of State and the European Commissioner for Development Policy and Relations with ACP countries, I posed this very conundrum to him. His response was that very often meetings of the ACP-EU coincided with some other important EU business, which results in the poor attendance by EU MPs. This is obviously a matter that the technical and logistics teams of the ACP will have to look at. However, it is also quite evident that some EU representatives consider themselves to be in the role of Big Brother when it comes to terms of negotiation.
The other speakers of our forum will be alluding to more technical details, much like the Chairperson before me had done, so I will avoid delving too much into that field. However, I would like to highlight a number of important aspects. When the Cotonou Partnership Agreement was signed in 2000, there were high hopes that it would invigorate political dialogue, as well as dialogue between non-state actors, and in this way promote a more effective platform for development. But the significant changes that have since taken place within the institution of the EU, especially after the Lisbon Treaty of 2009, have undermined these hopes and even the unity of the ACP.
The EU has since sought so-called comprehensive, deep-integration free- trade agreements that go beyond what was foreseen by the Cotonou Partnership Agreement, causing delays in the conclusion of trade partnership agreements. ACP countries have consequently raised concerns that the EU's new approach is a one-size-fits-all, paying too little attention to individual challenges faced by each individual ACP member state.
At the same time serious concerns have been raised about the extent of administrative, institutional, legal and even constitutional reforms that would be required if ACP countries were to agree to the EU's revised approach to trade.
Another precondition, as was mentioned before, to this trade agreement is regional grouping, but there are very few ACP regions that are at that stage in their development. In fact, it is believed that most ACP countries are not at the right stage in their development to be able to even benefit fully from the trade agreements offered. Many ACP countries lack the requisite infrastructure and technological capacity required.
It is therefore feared that these economic partnership agreements - or EPAs, as they are called - may harm local producers by offering more advanced EU exporters unlimited access to their markets too quickly. All of these fears are deepened by the EU's threat to withdraw preferential market access from ACP countries if they do not ratify EPAs by the end of next year.
So, South Africa will have to weigh up its options very carefully, particularly with regard to the value of the Cotonou Partnership Agreement's economic partnership agreements and how they world benefit ACP regions. There is a growing feeling that the erstwhile Lom Agreement was less complicated and more favourable to ACP countries.
As far as South Africa itself is concerned, it must be borne in mind that we have little or nothing to gain from economic partnership agreements between the EU and regions or groups of SADC countries such as the Southern African Development Community, Sadec, because South Africa has entered into its own EPA directly with the EU.
In conclusion, it must therefore be noted that the Cotonou Partnership Agreement in its present form comes to an end during the year 2020, which is highly significant, because that will be just one year after the DA will have succeeded in taking over the government of this country, and we will have to make a decision about this agreement. [Interjections.] At this stage I cannot confirm what our decision will be, but I can categorically confirm that, under the DA government, it will be the right one. [Applause.]
Chairperson, I will have a slightly different stance in this debate. The question is not whether the situation in Europe will or has affected us. The real question is how bad it's going to be and what we can do about it. In 2008 South African exports plummeted by 35%, constituting a lag in GDP growth, and resulting in a shedding of jobs, and businesses closing their doors. We are still battling today to recover from that recession in Europe in 2009 and suddenly Europe stumbles again. So, unfortunately, if Europe falters, we are in trouble.
The European Union is no longer our largest trading partner - China is - but the EU remains an important one. They still buy more than 30% of all South African manufactured exports, so their downturn is being felt on our local shores. The Reserve Bank announced this afternoon that the South African current account recorded its largest deficit in four years because exports fell because of subdued external demand.
So what should we do? Look North? West? No, East, says Abdullah Varachia, when he recommends in The Sunday Independent on Sunday that South Africa should look no further than Singapore. Singapore could hold clues for us as a nation on how to overcome challenges unexpectedly dumped on us. Central to this is, how do you manage your education system, and how do you treat the best and brightest students you have? You spot them early and then you nurture them. Singapore has empowered them to study at the best universities all over the world. When they come back at the age of 26 or 27, they must first work in the private sector for six years and only then can they progress to the civil service and parastatals. After an investment of about 12 years, you get the best-run civil service in the world.
One important ingredient for all nations, if they want to excel, is to make sure that their various institutions function well. We have seen a failure of major institutions in the performance of their functions at the Marikana tragedy. The Reserve Bank also warned today that labour unrest in the mining sector might cause a further slump in economic growth. So, what can we do? Laws and institutions cannot be used to entrench the interests of the few, so what we must do is ensure that we run institutions properly, look after our professional and young people and then they will look after the jobless and the poor.
Chairman, what can we do? As I was listening to the hon Hajaig's presentation about the many trade agreements, the image of a castle of cards came to mind, a castle of cards that is going to be blown away by worldwide, ever-increasing, seemingly unstoppable financial crises, which, as the hon Koornhof was pointing out, are affecting us and will affect us in an ever-increasing manner.
I don't know how it will all play out, but I do have a sense of the type of world that will emerge. It will be a world with poor countries and rich countries. President Obama told us a few days ago of his formula to keep America rich. He spoke about a knowledge-based society - a society that makes a living out of its capability to produce ever-increasing innovation, new ideas, new products and new technologies.
Where do we stand? The hon Hajaig spoke about trade with respect to food products and commodities. Africa is constantly being relegated to being the commodity source for the world. That is not where we want to be. We must rise to the challenge of becoming a knowledge-based society, but for that we need ideas. We need leadership, of which, unfortunately, not enough is being provided in this House, and it will surely not come from this debate.
Our relationship with the European Union ...
Hon House Chairperson, on a point of order: This House has officials, presiding officers and Whips of parties. Now, when the hon member says "leadership is not being provided", who is he talking about? By whom? Otherwise we'll be misleading the public. [Interjections.] By whom?
Hon Chair, that's not a point of order! [Interjections.]
He's just using time for a point of disorder and it's taken up several of my seconds, which I want back! [Interjections.]
Order! Continue, hon member.
Well, it will not come from your leadership and the type of intervention you make. This is a serious debate and this is how we treat this debate! We are at the crossroads and we need to have more than the two minutes allocated to me, more than an empty House and more than this graveyard session to really decide in which direction we are going to move, because I'm telling you, commodities and food will not create a knowledge-based society! [Time expired.] [Applause.]
Hon Chairperson and hon members, the financial meltdown in Europe poses a serious threat to South Africa's economic growth. The threat emanates from the fact that we export a good chunk of our manufactured goods to Europe. South Africa's economic growth will suffer severely if the Eurozone crisis is allowed to sink to levels similar to those of the crisis of 2008.
For instance, as hon Koornhof has said before me, after the financial crisis of 2008 South African exports to the European Union dropped by 35%, from E16,3 billion in 2008 to E10,4 billion in 2009. This badly affected our economic growth. Economic growth for that period fell from 5,1% in the first quarter of 2008 to -2,7% in the third quarter of 2009. Obviously, this led to massive job losses in all sectors of our economy.
But there is hope. Our trade patterns have changed considerably over the years. Chapter 2 of the 2012 Budget Review confirms this trend as follows:
A rising share of the exports to China (from an average of 4,2% between 2005 and 2008 to 13% in 2011) and to the SADC region has been accompanied by a decline in exports to the European Union, from 33% in 2005 to 21,6% in 2011.
At the present moment the European Union is no longer South Africa's largest trading partner. China overtook that region after the 2008 financial downturn. The change in trade patterns presents an opportunity to South African companies to export their products to African countries. [Time expired.]
Chairperson and hon members, like other developing countries, South Africa receives official development assistance and as a result the European financial crisis has affected us and the rest of Africa.
Although Africa is endowed with natural resources, it is known for its poverty, diseases and the many other negative things, such as a lack of infrastructure, which destroyed it in many different ways.
The EU committed to provide about 0,7% of its collective gross national income, but it has decreased in the past two years because of the Eurozone crisis. The impact is felt in Africa because EU member states are the biggest donors. This crisis affected developing and least developed countries, which are heavily dependent on the EU as an important source of foreign aid. According to our data, the EU increased official development assistance to Africa by only E5,04 billion, which was far short of its target of E15,58 billion.
The impact on South Africa is that the exposure of the South African financial sector to the Eurozone crisis currently continues to be limited, but we are not sure of the extent to which it will affect us going forward.
Official development assistance has conditions. Jeffrey Sachs states, "The poor know what to do, but they are too poor to do it." They need aid that will relieve them from poverty and economic dependence to economic development effectiveness. The official development assistance comes with conditions, also from the EU. This is a donor-recipient approach, with the imposition of priorities by donor countries. The agreements are entered into through desperation by developing countries. This leads to their accepting conditions that would be impossible to meet and lead to further suffering.
There are commitments to be honoured, but there is evidence that Africa has honoured commitments that were not honoured by the EU. The power differentials between the donor and the aid-receiving countries in turn influence development because the powerful make and implement the rules.
We can take this opportunity to look at the potential we have and what we can do in the interest of our country and the continent so that we link ourselves as a continent and a region.
South Africa has good policies that need to be implemented for economic transformation of the country and for regional investment. This will establish Africa with a common agenda, ensuring unity and sustainability, and avoid fragmentation.
We have the New Growth Path, that takes global factors and their local impact into account. South Africa can achieve more by developing cohesiveness and an equitable economy. Through this it takes into account the availability of resources by aligning public allocations with different departments.
We also have the National Development Plan that has systems to respond to the needs of our people. The diagnostic report has identified the main nine challenges that will enable us to write a different story for Africa.
As a continent, we should strengthen our mechanisms that can reduce the levels of dependency on official development assistance by some countries. A knowledge base is available through innovation, the exchange of ideas and the available experience. Science and technology need to be expanded and to address the abundance of resources we have through research and development.
Capacity-building can be addressed through the official development assistance that is still available, as capable leadership is needed with regard to indigenous knowledge. This will also address official development assistance commitments on the continent by the countries on the continent. They know their priorities and needs better than people imported from abroad who give us this aid to address our needs. We know our developmental agenda, hon members.
The peer review mechanism is one of the tools that can assist the different countries to do self-assessment and will also improve the integrity and transform the management and administration of the different African countries.
Hon member, your time has expired.
Africa has several forums, one of which is a common aid policy at a global level based on our needs. [Interjections.] [Applause.]
House Chairperson, the ACDP shares the concerns about the continuing risks posed by the banking and sovereign debt crisis in the European Union and the extent to which that will impact on economic growth in South Africa. Many of our problems in South Africa are related to inequality, unemployment and a lack of economic growth. So, we do see the impact that this has.
The Reserve Bank, for example, in its Monetary Policy Committee meeting on 19 July 2012, warned that the outlook for the global economy has worsened, with mounting evidence of a broad-based global slowdown. It went on to say that the lack of meaningful progress towards a resolution of the Eurozone crisis continues to be a source of global instability and risk, despite initiatives to stabilise the banking sector.
Lower exports of South African merchandise to the Eurozone have and continue to have a direct effect on the country, with the Industrial Development Corporation estimating that if domestic growth contracts by R5,9 billion, 118 700 jobs will be lost. That is on the assumption that exports sales to the Euro area will be 5% lower than in 2011. That is clearly a matter of grave concern.
Tomorrow, interestingly enough, Germany's constitutional court will rule on the legality of the Eurozone's permanent financial rescue fund. It is expected to follow and allow the European Stability Mechanism, but with very strict fiscal discipline and tough conditions for new bailouts.
The fact remains that the Eurozone financial meltdown has a significant impact, and we will probably only know the exact impact next month, with the Medium-Term Budget Policy Statement. However, to conclude, perhaps the most insightful comment came from the Reuters news agency, which said:
As Europe considers a leap towards close integration to try to save the Euro single currency, it resembles the biblical Tower of Babel - unable to complete an ambitious project because the residents don't speak the same political and economic language.
It is not insignificant that the European parliament in Strasbourg is designed on the very Tower of Babel. It makes you think, doesn't it?
Hon House Chairperson, today, as part of this debate, we are remembering and commemorating the victims of the US Twin Towers, or 9/11 attacks. Tomorrow we are also commemorating the 35th anniversary of the assassination of Steve Bantu Biko and the 10th anniversary of the death of Siphiwe Zuma, a friend, comrade and former President of SA Student Congress, who died on 11 September 2002.
The global economic crisis hit financial markets in Wall Street in late 2007 into 2008. Due to the interconnectedness of the global economy and its financialisation, the European Union and the entire world suffered knocks to their economies, leading to a contraction, the introduction of austerity measures, a decline in demand as household incomes fell, thus affecting exports from developing countries such as ours, and a decline in foreign direct investment.
This has subsequently led to one economy after another in the Eurozone falling or getting deeper into crisis, with debt levels of countries such as Portugal, Ireland, Italy, Greece and Spain rising to more than 60% of their GDP. Many of the EU countries depended on several bailouts from stronger EU economies, such as Germany and France, to meet their debt commitments and repay some of the government bonds that were sold in order to raise money when the recession first hit in 2007 and 2008.
Countries such as Greece began to ask important questions about their financial sovereignty in relation to their commitment to the EU. As a massive number of jobs were lost, holders of mortgage bonds defaulted and had their houses and cars, financed through the banks, repossessed. They experienced massive defaults on their credit cards with the banks. The European Union Central Bank encouraged those in crisis to introduce austerity measures in order to restore credibility.
The same applied to our own economy, where we have seen more than R50 billion in credit. Despite reassurances from the Reserve Bank and the Minister of Finance that this debt of R50 billion will not put a major dent in our economy, we should also be concerned.
This has also had a severe impact on many of the Sub-Saharan economies due to their dependence on FDI, their dependency on export of raw materials to the EU zone, and the major costs that the financial market bust had on basic foodstuffs, that found their way into our economies.
According to the United Nations' Economic Commission for Africa's economic report on Africa, released in March 2012 at the meeting of Finance Ministers in Ethiopia: Africa may experience a decline in FDI from both the EU and other parts of the world in the short term because of the sovereign debt crisis and resultant slowdown in global growth.
The report further says:
Trade is expected to be the most prominent channel of the debt crisis' impact on Africa. In 2010, Africa's merchandise exports to the EU represented 10,3% of its GDP and 36,2% of its total exports.
Of our country, the United Nations Economic Commission for Africa report declares that South Africa, whose greater integration with the global markets makes it more vulnerable to external shocks, recovered rather slowly, growing by only 3,1% in 2011, up from 2,8% in 2010. Export levels in 2010 and 2011 declined from a huge 7% to the present 1,4% on the entire continent, while South Africa's exports to the EU, one of the largest, declined from 36% to 26%.
Our Minister - the leadership that hon Oriani-Ambrosini was talking about as being absent, but which we can feel at all times - is quoted in Business Live as saying:
... the EU crisis affected trade and the stability of the financial sector, currencies and capital markets of emerging-market economies. The effect on capital flows was a real area of concern and at this stage no global institution has come with an adequate answer on how the impact on volatile currencies and capital flows can be better managed.
We think that this illustrates the fact that if not for the stern leadership that has been shown by our government, we would not have survived this particular crisis. Of course, the effects have resulted in more than 1 million jobs being lost, which has had an effect on aggregate demand and productivity levels in our country. I must emphasise that the very same 1 million jobs that were lost were lost in the period when the crisis initially hit in 2007 and 2008.
In fact, even in the presence of this crisis, the leadership that was elected in 2009, with the ANC at the helm, received more than 60% of the electorate's support because of that leadership. This is in clear opposition to all the other political parties' claiming there is no leadership, yet they received less support, especially the party that hon Oriani-Ambrosini belongs to. [Interjections.]
Over and above this, our economy has been failing to produce the hugely needed jobs because the crisis had already created stagnant economic growth and job creation had therefore been affected.
In this year's state of the nation address, President Jacob Zuma announced measures that government would put in place to create the more than 5 million jobs needed through infrastructure development, which would lead to massive economic growth rates and further insulate our country from the crisis in the EU.
It is important, hon members, that we use the Africa, Caribbean and Pacific States - European Union, ACP-EU, as a platform to lobby European leaders to act urgently in dealing with the crisis.
The reason we must use that platform to deal with the crisis is precisely that it was not caused by the failure of leadership on the African continent or in South Africa, but by the failure of leadership in the European Union, where the economy became mainly a casino economy; where money was used to make money, as the capitalist economy dictates, instead of being used for production purposes. Alternatively, trade was prioritised over and above everything else, even production. Also, making money out of finance was prioritised. That's the kind of crisis that we are faced with; that we need to deal with; that has had consequences all over the world, but in Africa in particular. That is why our African economies have been affected by the low demand in the European Union for export goods from Africa. It is because of their dependence on official development aid, as some of my colleagues have indicated; their dependence on budgetary support; and their dependence on foreign direct investment, which is declining fast.
What this means is that the various packages, which have been introduced by government not only as a response to the crisis, but also as a means to stimulate our economy in order to create more jobs, need our collective support. They do not need us to be scoring political points, but they need the leadership of this Parliament and of this government to ensure that we realise job creation for all. [Applause.]
Debate concluded.