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20 August 2005

Honourable Premier
Members of the Executive Council
Colleagues from the Provincial Legislature
Senior Managers from both the public and private sectors
Distinguished Guests
Ladies and Gentlemen:

Programme Director, I feel greatly honoured to be afforded this opportunity to speak at this landmark event in the history of the Free State Province.

INTRODUCTION

When the African National Congress (ANC) took power it inherited an economy shaped by colonial dispossession and apartheid, which resulted in huge inequality and increasing poverty, raising unemployment and unsustainable government debt. Despite this legacy the ANC-led government has made great progress. It has ensured:

* High level of confidence, certainty and stability
* Low government debt and inflation
* Substantial growth in exports of manufacture goods, especially in the auto industry and mineral other than gold, and generally raising productivity and improved skills
* A sharper regional and continental focus
* Increased empowerment opportunities for black people, women and poor
* Labour market reforms that have greatly improved labour relations historically the accumulation strategy of capital in South Africa has been based on cheap labour, secured through the deployment of cohesion and repression.

It became clear over the years that our strategies and tactics with regards to the economy have yield important results. While still not high enough, the growth of the economy has moved to a high trajectory. Even thought there is a debate on whether the economy is creating more jobs, we expect structural improvement to continue in the coming years. At the same time low government debt and good management of our budget has enabled us to shift towards a more expansionary macro-economic stands. Government should massively increase its own investment in the economy over the coming years, which will further propel our growth and development. In his weekly publication on ANC Today Volume 4, no. 45 the President said: "We acknowledge the need to foster a culture of private enterprise and strengthen the institutions of a market economy. We therefore commit our government to promote the development of a socially responsible private sector and encourage its participation in the development process. We intend to continue our efforts to create the kind of environment that attracts foreign direct investment including the appropriate incentive measures.

To support these efforts we call on the European Union to provide the necessary resources and give incentives to their private sector to ensure that investment is directed to African, Caribbean and Pacific countries, especially by guaranteeing foreign investment”.

In addressing the challenges inherent in our economy requires a choice in favour of a broadly accepted developmental approach. This approach should underpin sustained reform and transformation of major sectors globally and the Free State Province in particular.

Such an approach will only rest in our correct understanding of the successful efforts to defeat poverty and underdevelopment, which is portrait by the last half of the twentieth century. In all the cases our central component of success depends on the ability of government to act as a “developmental state”. This will mean that we should direct all capacity at every level of the state and mobilise direct social, economic and political resources where they are needed most.

However government alone cannot resolve these challenges hence a requirement between the public and private sector is pivotal for creating work and fighting poverty. Building this partnership requires discussion and mobilisation for economy and a level headed approach. Therefore we must seek to reach consensus on our developmental approach with society in general.

SOUTH AFRICA’S: “TWO ECONOMIES”

Programme Director:

South Africa is part of the world it is fully integrated within the global economy. As a South Africa is a player in the global economy it competing with best economies in the world. At the same time a large part our population of our country is in the second in the underdeveloped sector, which is the second economy that cannot escape the trap of poverty and underdevelopment, which cannot rely on the market.

It is a fact that in South Africa two economies persists in one country. The first is an advanced, sophisticated economy based on skilled labour which is becoming more globally competitive. The second is mainly an informal, marginalised and unskilled economy, populated by an unemployed and those unemployable in the formal sector. Despite an impressive gains made in the first economy over the last decade, the benefits of growth have yet to reach the second economy. With the enormity of the challenges arising from the social transition, the second economy risks falling further behind if the are no decisive government intervention.

As we have said the first and the second economies in our country are separated from each other by a structural fault.

The second economy emerged during the long period of colonialism and apartheid as a result of the deliberate imposition of socio-economic and political exclusion of the African majority by a racist state that was aimed at enriching the white minority at the cost of exploited black majority. Consequently the second economy is today caught in a poverty trapped situation. It is unable to generate the internal savings that would enable it to achieve the high rates of investment it needs. Accordingly on its own is unable to attain the rates that would ultimately end the growth conditions of underdevelopment.

The second economy is linked to the first economy by the extent to which it can still supply the cheap, unskilled labour this economy may require.

Programme Director:

The second economy survives on money transfers sent by family members who have been able to secure regular or occasional employment within the first economy as well as social grants and elements of the social wage provide by the democratic state. It is also linked to the first economy by the goods and equipments it purchases with the inadequate resources at its deposal. These resources also make it possible for the second economy to maintain an informal economic sector.

Such positive trigger-down effects as would result from high earnings of family members who benefit from growth in the first economy, as well as individual and social transfers by the state, would not be sufficient to raise the standard of living in the second economy or close the ever widening wealth and development gap between the two economies.

MERGING TWO ECONOMIES

Programme Director:

We however since 1994 developed systems both as a result of the comprehensive transformation of public policy and its implementation through legislation, government programmes and services as well as from the actions of those in civil society who have worked tirelessly for growth and development. Several important conditions for improved economic performance are in place, namely;

* Macro-economic stability
* Decent labour standards and institutions for social dialogue
* Sound public finances management
* A robust legal and financial infrastructure
* Well developed transport
* Communication and logistical networks
* An open trading environment
* Surplus energy capacity
* Raising quality in the schooling system and a set of dynamic higher education and research institutions.

This illustrates that the pace of investment, job creation, productive assets distribution and institutional development remain inadequate to overcome the legacy of disadvantage and marginalisation that keeps millions South Africans.

We need a strong society, inclusive economy where everyone has the chance to play their full part, where nobody is left out through permanent unemployment or inadequate education.
Because if we do not, then not only will we suffer the consequences, which characterises a weak society, but our economy will also miss out on the potential contributions of those who have been left out. So it should be central to all of us, that we build a strong society alongside our strong economy.

This is exactly the purpose of the Free State Provincial Growth and Development Strategy, which will assist us all to respond to this urgent call. The challenge facing us as developing economy dictates a fundamental change in approach within all sector of society, particularly established business. There should be continuous efforts to mobilise our citizens to arrive and understand the national consensus with regard to the priorities of economic transformation and the roles and as well as obligations for all development role-players to achieve the said objectives.

GROWTH AND DEVELOPMENT: ISSUES OF IMPORTANCE

* Industrial development:
The ultimate objective is to develop an economic climate which will stimulate the expansion and development of other industries, namely, the promotion of industries with strong forward and backward linkages.

* Spatial development planning
The importance of the spatial development planning is to advocate a focus on areas with development potential urging local authorities to demonstrate their competitive advantages in order to receive support from other spheres of government. The Province have identified centre such as Bloemfontein, Kroonstad, Sasolburg and Harrismith, since government investment in infrastructure and development programme to reinforce the dominant trends defining the present and future space economy. This will also be taken to other areas through Integrated Development Plans (IDPs).

* Globalisation
We cannot ignore or avoid the process of globalisation. South Africa’s economic transformation depends on its relationship with the world economy for about 50% of its GDP. Globalisation presents both opportunities and threats to us. As government we are negotiating the best possible deals in order to maximise the overall benefits to our people.

We have to improve management of the process of globalisation, both on the domestic scene and at the international level. Regional co-operation must seize the opportunities offered by globalisation. These call for complementary efforts in terms of project development and implementation. Comparative and competitive advantages have to be utilised effectively in favour of a province and ultimately the country as a whole.

* Technology Development
To be competitive in the world economy, one has to adopt improved production approaches and technology and keep ahead of the latest changes.
In our endeavour to employer our people and introduce them to advance technology, we are identifying opportunities for joint ventures with local and foreign companies on a continual base

The importance of technology development is evident from the fact that it can led to more effect use of resources, higher value added and the ability to respond more effectively to changes in the market conditions.

The rapid expansion of world trade is creating possibilities for us to bust our economic growth by increasing our exports as well as achieving diversification and value adding and enhance reducing our dependence on primary sectors.

* Human Resources Development / Capacity building
Countries which now lead the world in productivity and quality have virtually no natural resources. They have gained their competitive urge through their people; they have invested heavily in education and training and are reaping rewards.

It is a practical lesson for us to develop our work force and involve them more fully in the business of organisation for which they work.
This is the only way that we ca improve on productivity and become globally competitive.

* SMME Development
Increasingly we see the encouragement of establishing small business (SMMEs) as the key to turning around the realities of our most disadvantaged areas. We have the tendency to think of disadvantaged areas as problem areas. But the fact is that there is great enterprise potential and entrepreneurial spirit in those areas. All we need is to switch our thinking around to the opportunities instead of just the problems. The potential gas often been overlooked and has remained untapped altogether or has remained outside

Government considers it as important to facilitate access to sustainable economic activity for all South African’s through higher levels of investment, increased access to international markets, and to create a fare, competitive and efficient market for businesses as well as consumers. We can have al entrepreneurs we what, but if the economic environment I not conducive for business start-ups and exposition not much will be achieved

* Women’s participation
The role of women in the economy should be recognised and promotes as they play an important role in economic development. Strategies for the advancement of economic growth should be sensitive to women empowerment. Skills development initiatives also need to be directed towards addressing this critical issue.

CHARACTERISATION OF THE FREE STATE PROVINCE

Programme Director:
Allow me to refresh the minds of the delegation about the basic fact on the Free State Province as revealed by the Premier during the launch of the Free State Provincial Growth and Development Strategy (FSPGDS) in May 2005. According the FSPGDS executive summary, the following basic facts on the Free State Province where made, the Province takes 10,6% of South Africa’s area, 6,4% of the national population and 4,9% of the country’s Gross Domestic Product (GDP), the Free State is relatively large in physical area but small in population size and GDP contribution.

The FSPGDS document further reveal the current weak position of the Province as characterised by the relatively low income level and high unemployment. According the document “high unemployment rate of 38, 9% (SA 40, 8%) and close to 49% of the population living in poverty”. Based on the following statistics it is evident that the provincial economy if faced with enormous challenges that needs an urgent attention.

The FSPGDS identified the following primary development objectives in dealing with economic challenges that faces the Province, they are

* Stimulate economic development
* Develop and enhance infrastructure for economic growth and social development
* Reduce poverty through human and social development
* Ensure a safe and secure environment for all people of the province
* Promote effective and efficient government and administration.

In order to address these objectives, the underlying challenges need to be addressed:

* Transformation of the game industry
* Land reform
* Beneficiation programmes
* Free State logistical hub
* SMME development
* Public-private partnerships
* Equity programme (Batho-Pele)

CONCLUSION

Programme Director, finalisation of the process of repositioning of the Free State Development Corporation (FDC) will surely entrench the Province’s commitment of bridging the gap between the first and second economy by making funds available to develop SMME and that the element of sustainability is maintained to ensure that we bridge the gap between the two economies.

Building linkages between the First and Second the Economy is crucial.

These linkages include providing quality education and health care to the poor, providing access to credit to small-scale businesses, investing in infrastructure that lowers transport costs and extends basic services and consolidating a social security safety net. This strategy, taking into account the historical context, is a realistic and workable strategy that will succeed if implemented effectively.

Today’s summit poses a vital moment for provincial development for delegates to come up with propose concrete solution, of which the outcome must be characterised by the urgency that poverty, inequality and unemployment demands. We must set realistic targets to break the ever growing cycle of poverty and meet the demands for economic redistribution.

I thank you.

Issued by: Department of Tourism, Environmental and Economic Affairs, Provincial Government
20 August 2005