Q What elements of your new budget plan announced in February are designed to calm the fears of international investors after the recent power crisis and sudden economic downturn in South Africa?
A The main thrust of our new budget is to sustain the 4% growth rate of this current financial year, which from 2003 to 2007 had been 5%. A combination of reasons may explain the declining growth rate. The major economies of the world – led by the US – are sliding into recession so the global environment is changing. We are also affected by increasing food and oil prices. And there are the power challenges that we have had to confront, which have also had an impact.
As for reassuring foreign investors, this budget brings a sizeable investment in infrastructure to improve the efficiency of our logistics chain. Major state corporations will be investing in areas such as rail, for instance, and beginning to improve our harbours and ports, which is exactly the type of investment that should start to bring down the cost of doing business here.
We have lowered corporation tax by 1%, indicating that the country is continuously creating a conducive environment for doing business. We have also announced a R60bn ($7.69bn) investment over three years, dedicated to increasing our national energy company Eskom’s capacity to improve South Africa’s power generation.
Q Do you think the power cuts were evidence that the economy was growing too quickly?
A To some extent, yes. The economy has been expanding for quite some time and that has been increasing pressure in terms of demand for electricity. Another element contributing to the shortages is that a number of municipalities have not contributed adequately to maintaining their power infrastructure.
All growing economies tend to suffer from the same power challenges. Africa does, however, have the potential to improve its power generation enormously. The potential is demonstrated by projects such as Congo’s hydroelectric power plant redevelopment, which has the potential to be connected to a continent-wide electricity grid. If that happens, Africa will not only be able to meet its own power supply needs but may even begin to export power.
Q What can South Africa, in its current economic state, offer foreign investors?
A We have the biggest economy on the continent with the infrastructure to match. The country has availability of liquidity and its own internationally-recognised stock exchange.
We also offer investors an entry point into the wider African market through our developed infrastructure, such as rail links, ports and harbours.
South Africa has always been a trade route into Africa so we have people here who understand the workings of international trade, with our own companies having a significant footprint throughout the rest of the African continent.
We are also major trading partners with Europe and have historical links in the form of traditions and institutions, which means that we understand the law and regulations – there is a lot of communality between us, which provides a good basis for trade links.
Q You had presidential elections last year. How do you see your own role developing under an African National Congress (ANC) party led by president Jacob Zuma?
A The ANC is South Africa’s ruling party with an electoral majority of 70%. The new leadership is not a reflection of policy changes and does not change anything except for the leadership position.
We have had a policy framework since we came into power in 1994 and it will remain consistent under President Zuma’s leadership. We have a five-year term, which ends in 2009, when the process of democracy means the people choose whether to vote for a new regime – only then will policy changes take place.
2004 Republic of South Africa, Deputy minister of finance
1994 Executive Council for Finance and Economic Affairs, Gauteng Province, Member
1975 African National Congress, Member