Deputy Chairperson, hon Dangor, that was actually really a very interesting and deep question. I am going to separate out the different elements of it. The first part of your question, as I understand, is about the fact that we are principally exporters of raw material. Oil is raw material. You have only mentioned oil, but I think you probably mean also the other raw materials. In the case of South Africa, we sell platinum, gold, iron and so on.
The very logic of the African Continental Free-Trade Area is about Africans, our economies, adding value, manufacturing from our raw material, so that we don't simply become the exporters of the materials for the factories of other continents. The reason for that is very clear.
Firstly, if you are principally exporters of commodities, you are prisoner to what is called commodity cycle. When prices are high, you do well, you can tax the companies that make good profits and you can spend that on social programmes. However, commodity markets turn and when the cycle turns, countries find enormous fiscal squeezes.
There is another reason. In the modern globalised world that we are, value is derived from manufacturing and from research and development, R&D. Simple digging and growing does not give you an enormous return. An example is being given frequently. Let me take a non-South African example just for a minute, so that we are not only looking at South Africa. West Africa is a very significant producer of cocoa for the world, but it does not really manufacture chocolates. So, it sends its raw cocoa to Belgium and to Switzerland and other countries. That cocoa is transformed into chocolates. The value that you derive from a ton of chocolates is many, many times that of a ton of raw cocoa. So, you can develop a sophisticated economy based on manufacturing and the value addition process. So, we have get that part right.
We think scale. The fact that we now have potentially - if everybody ratifies the agreement - 1,3 billion people and a combined GDP of
over $2 trillion, will potentially give us the scale. In the last question, I can elaborate a little bit on that.
The second part of hon Dangor's question is about finance and there the free-trade agreement has two opportunities for us. The first opportunity is that our finance sector can begin to put packages together for exporters, very much like is done by China in its export drive, but that requires a mindset change. It requires the finance sector to see manufacturers, farmers and others as partners in this big drive in opening up the industrialisation of the continent.
The second part of it is how payments will be made. Europe has the euro. We have 55 countries on the African continent. We have enormous challenges with exchange rate risks. You sell in your local currency. For this or that reason, the currency value changes. By the time the money is remitted to the person who sold the goods, it is at a different value. So, getting payment systems sophisticated and getting simple payment systems that can move money, all of that is the next big leg. I have just come back from a conference now where that was part of the subject of discussion: How can we make the finance systems and infrastructure work on the African continent to support the African Continental Free-Trade drive. Thank you.
Question 175: