New Deputy Finance Minister Mcebisi Jonas took time away from official proceedings to connect with us on CNBC Africa’s Power Lunch today. It is an especially proud occasion for the newest member of the cabinet as he hails from the province so knows all too well what a boost the R600m Chinese investment will give the stuttering Coega Harbour development in the Eastern Cape. As President Jacob Zuma mentioned in his speech (carried below the transcript) FAW’s investment could be exceptionally well timed. The Trans African Highway Project will open eight major routes across the continent – supporting trade, the movement of goods and, of course, requiring a multiple of the commercial vehicles currently in service. – AH Â Â
ALEC HOGG: Welcome back to Power Lunch. Today, President Jacob Zuma will launch the first Automotive Works South Africa assembly plant (FAW) a Chinese company, in the Eastern Cape. South Africa’s Deputy Minister of Finance, Mcebisi Jonas who’s actually from the area – from Uitenhage – is on the line to us from the Coega operation. Mr Minister, thank you for joining us today. The Chinese are arriving, we see.
MCEBISI JONAS:Â Thank you very much, Alec.
ALEC HOGG: I’m just saying; the Chinese are coming into the country. The rest of the world might be downgrading us, but it looks like the Chinese are quite happy to invest in South Africa.
MCEBISI JONAS: Yes, it is exciting, given the current scenario and our negative growth of point-six percent, this is really a boost. In many ways, it’s showing confidence in our economy.
ALEC HOGG: What is interesting about this Mr Minister is it’s a potential springboard for FAW into the rest of Africa. Is that – particularly from the Eastern Cape’s perspective – what you are trying to promote?
MCEBISI JONAS: I think that’s probably at the core of their strategy, to use South Africa as a springboard for their growth into Africa. Obviously, locating in Coega, close to the PE hub/port, which is an automotive port in the country – it gives them an edge in that regard.
ALEC HOGG: It’s a magnificent facility at Coega. I’ve gone around and looked at it. It just seems to be taking a while to get going. Do you have any other investors that are lining up?
MCEBISI JONAS: If you look at where Coega is now and where it was five years ago, we have indeed, advanced quite tremendously. In addition, the legal and operational framework has changed. We are now…we have been giving incentives for special economic growth, which enhances our chance to attract more investment into the country as well.
ALEC HOGG: Yes, those incentives are very important, aren’t they, if you consider that the rest of the world is using them aggressively and we need to fall into line. As far as the Chinese are concerned, we heard earlier in the program today about the Brics Development Bank possibly being based in Shanghai. Is that a big boost for us here in South Africa – in that we’ll have another institution that we could get infrastructural finance from?
MCEBISI JONAS: I’m trying to run away from the noise. Can you repeat the question?
ALEC HOGG:Â Sure. The Brics Development Bank: is that another institution that we might be able to tap into for our infrastructure program, here in South Africa?
MCEBISI JONAS: Well, it does offer a new opportunity, but of course, you have a number of other instruments already in existence: the African Development Bank and our own Development Bank – DBSA – are changing the legislation. They’re moving into Africa to actually promote infrastructure development. With the growth in Africa and the advancement in our own manufacturing sector, which is growing, it offers South Africa a very nice opportunity to create logistics hubs across Africa, and actually promote inter-African trade.
ALEC HOGG: Yes, we seem to be not quite taking this into account yet – the Chinese influence into our country for the longer term. Mr Minister, what about visas? We know that visas are very tough to get hold of. We’ve had people in this studio complaining that it’s hard to bring people into the country. Do the Chinese have any special dispensation, given that they’re such a close ally?
MCEBISI JONAS: Alec, I know that this recently became a very controversial issue, but the reality of the matter is that if you compare the South African system with the rest of the world, we are not any different. In fact, I think we are pretty much aligned with countries elsewhere in the world. The biggest challenge is not so much the process, as it’s about efficiency. The more efficient we are in issuing visas the better, irrespective of the steps one has to go through. If you look at Home Affairs, the pace of development and advancement in terms of capacity – we are unlikely to have any problems.
ALEC HOGG: Well, we’re taking a few steps forward, that’s for sure. Enjoy the day today. It’s a red-letter day for your part of the world, Minister. The Deputy Minister of Finance – Mcebisi Jonas and the day the Chinese funded FAW (or the Chinese state-owned FAW) motor operation is putting in R600m, into Coega. As I mentioned in the program, it’s taken a little while to get going, but that’s a big investment and good luck to them as we go into the future.
Edited text of President Jacob Zuma’s speech:Â
The economy is an apex priority in our country during this term of government. We have decided to place the economy on the centre stage because we believe that sustainable economic growth is possible if we seek meaningful partnerships locally and worldwide. Growth is also possible if we, as government, actively support our partners in the private sector to create a positive environment for business to thrive. We are therefore looking forward to fruitful partnerships in the next five years.
We have set a growth target of five percent by the year 2019. We view this occasion today as a key contribution towards attaining that goal.
FAW has been in our market for 20 years providing passenger and commercial vehicles. However, your decision to locate the production facility in Coega is a most welcome vote of confidence in Nelson Mandela Bay and in the Eastern Cape Province. The investment of R600 million into the economy will create much needed jobs and promote an improvement in the lives of many people in this area.
This investment also augurs well for South Africa’s position within the global automotive manufacturing network and proves once again that we have an attractive operating environment to host global multinational companies.
In addition, as a member country of BRICS, we are encouraged by this investment as it demonstrates the practical benefits of this strategic forum. We will this weekend travel to Brazil to attend the sixth BRICS forum, and will do so pleased with the tangible benefits of that innovative relationship.
We trust that the potential of this new beginning will be shown with this facility realising and even surpassing its target of 5000 trucks in the first phase, as well as other passenger and light vehicles.
I also thank the China-Africa Development Fund for supporting this initiative.
We remain very committed to developing and growing the automotive sector in our country. Over the last 20 years we have employed the Motor Industry Development Programme, and more recently the Automotive Production Development Programme, as the focal industrial policy instruments to transform our automotive industry.
The aim was to migrate our industry from a small assembly base to a globally competitive one producing vehicles for both domestic and international markets. Our intention is to create an environment that will enable the domestic industry to significantly grow production volumes.
In this regard, our Vision 2020 strategy for the industry refers to the doubling of local vehicle production and broadening and deepening of component manufacture by the year 2020. To further advance this goal, we have completed preparatory work towards establishing an Investment Support Programme for the medium and heavy commercial vehicles. This instrument will assist us to position South Africa as a destination of choice for the assembly of medium and heavy commercial vehicles.
To further support the expansion of business activities and productivity in the country, our biggest focus over the next five years will be on building a sustainable energy mix including coal, solar, wind, nuclear and shale gas. Energy security will further enhance our country’s global competitiveness.
May I also, indicate, ladies and gentlemen, that FAW has chosen the right continent in which to invest at this point in world economic history. The African continent is home to some of the fastest growing economies in the world and there remains greater potential for further growth, particularly in the transport of goods as trade volumes increase. The entire African continent is also embarking on an intensive infrastructure development aimed at also encouraging inter-Africa trade through improved connectivity.
The Regional Economic Communities, namely the Southern African Development Community, COMESA and the East African Community are in negotiations to achieve a Free Trade Area. The project will bring together 26 countries with a combined population of 600 million and an overall GDP of approximately 2 trillion US dollars.
Such a massive market augurs well for global companies such as FAW.
To further support intra-regional trade within the continent, a Trans African Highway programme has been established to link Africa’s capitals on eight major routes. Once this highway has been completed, we expect to see a major boost in inter-country trade and provision for landlocked countries to access harbours.
Also envisaged is the creation of much needed direct routes between capitals of the continent and to promote the economic and social integration of Africa. In return, the increase in trade will contribute towards a growing demand for heavy commercial vehicles thus expanding markets for FAW and other companies in this sector.
Given all these opportunities, and in line with the National Development Plan and the New Growth Path, our Government is investing heavily in local and continental infrastructure development in the medium to long term.
We are therefore living during an era of great promise in the continent economically. We will continue to provide support to the South African private sector and global companies based in our country, so that they can take advantage of opportunities and help us to promote job creation and a better life for our people.
As we meet to celebrate this occasion, we are also all aware of the worker strike in the metal industry sector. We do not believe there is cause for alarm regarding worker action at any point. South Africa has a progressive labour relations framework. Both worker and employer rights are entrenched in the Constitution and all parties know how to go about resolving any disputes that arise, using the country’s effective and efficient labour relations and dispute resolution mechanisms.
In this regard, Government is providing support through the Ministry of Labour and its structures. We wish the parties well as they discuss their issues, and trust that they will reach a mutually beneficial agreement without much delay. The metal industries sector needs to go back to full production as soon as possible.
While respecting the constitutional and hard-won worker rights, let me emphasise that government will always act against those who use violence and intimidation to advance their cause. We have enough instruments in our labour relations machinery to resolve labour disputes. There is no need to resort to violence. We condemn all acts of violence that have been reported thus far.
