NATIONAL ASSEMBLY
QUESTION FOR WRITTEN REPLY
QUESTION NO.: 32
DATE OF PUBLICATION: 15 FEBRUARY 2012
32. Mr K A Sinclair (COPE-NC) to ask the Minister of Economic
Development:
Whether his department has established short to medium term plans for
the country regarding capacity building as it is one of the four major
goals of economic development as pronounced by his department in their
New Growth Plan; if not, why not; if so, what are the relevant details
with regard to (a) growing local investor confidence which is
currently at 99.1, (b) attracting increased foreign investment and (c)
building a more positive business investor confidence index (BCI)
which will be better than the average of 100.4 in 2011?
CW34E
Reply
1. Investment in South Africa was extremely low in the period leading
up to 1994, falling to 15% of the GDP in 1993. Investment relative to
GDP climbed from 1994 to 2008, peaking in late 2008 at just under 25%
of the GDP â the highest investment rate since 1983. The global
economic downturn saw a substantial drop, however, back to 19% of the
GDP in the first quarter of 2011.
The most recent data, however, points to some recovery. By the third
quarter of 2011, which is the latest available data, total investment
had climbed 4% in real terms, with both private and parastatal
investment rising over 5%.
The upscaling in public investment managed by the Presidential
Infrastructure Co-ordinating Commission and detailed in the recent
State of the Nation Address and the Budget will certainly crowd in
significant private and parastatal investment, accelerating the
recovery in the investment rate.
2. Capacity improvements involve some combination of
⢠Improving competencies through education, skills development and
mentoring.
⢠Improving institutional systems, for instance for decision-making,
marketing or industrial finance.
⢠Strengthening logistical and other infrastructure.
The Department works with other public entities, including the
Industrial Development Corporation, to ensure both planning and
implementation are in place.
These are set out in detail in the various Strategic Plans and Annual
Reports of departments and public corporations, which are tabled in
parliament. In particular, the IPAP includes plans for industrial
sectors; the DMR is working on beneficiation plans for core sectors of
mining; the tourism strategy is being implemented; DAFF is
implementing plans for both commercial and smallholder agriculture;
EDD is working with the HRD Council to align education and training
with the New Growth Path; the IDC has a range of investment plans in
place regarding its areas of mandate; and the PICC is finalising
implementation of strategic infrastructure projects.
Government has a number of education and training programmes for key
stakeholders. EDD itself has amongst others programmes to support
training for co-operatives social enterprise, in collaboration with
the University of Johannesburg; local government, in partnership with
Wits University; organised labour and business at provincial level,
dealing with opportunities arising out of the New Growth Path; and,
with the DPME, national and provincial departments on assessing the
employment impact of their activities.
The challenge around foreign investment into South Africa is not the
level but the kind. Since 1994, South Africa has received unusually
high levels of portfolio capital inflows into the stock and bond
markets. According to World Bank data, these inflows averaged 2,4% of
the GDP from 1994 to 2010, compared to an average of 0,5% for other
middle-income economies as a group. In contrast, foreign direct
investment in South Africa has remained relatively low, at 1,5% of GDP
from 1994 to 2010 compared to 2,9% for other middle-income economies.
Our strategic aim is to increase foreign direct investment in new
industrial capacity, which brings greater benefits in the form of
technology transfer and access to markets, rather than takeovers of
South African companies or portfolio inflows. Central to achieving
this aim is to maintain counter-cyclical economic strategies and
improve infrastructure and other economic systems. That said, the
inflow of portfolio capital in itself tends to lead to an overvalued
currency, which in turn can deter both foreign direct investment and
local investment.
3. We expect the measures adopted by the PICC, which have been broadly
welcomed by business, to support investor confidence.