South Africa: A Land Of Opportunity

  • Dr Lockwood Smith
International Trade

New Zealand/South Africa Business Council
Massey University

Professor VanderWalt, Chairman of the South Africa/New Zealand Business Council; Your Excellency, Dr Bhadra Ranchod, High Commissioner for South Africa; Gregory Fortuin, Honorary Consul for South Africa in Wellington; Ladies and Gentlemen.

South Africa is a remarkable country.

Over the course of a few short years it has changed from a system that disempowered over 90 percent of its population to a truly democratic society offering great promise and potential.

The transition to open democracy required internal adjustments that touched every thread of South Africa's social fabric. To the amazement of the world, these difficult adjustments occurred reasonably smoothly, and with little civil disruption.

Internationally, South Africa now represents a model - an example of how moral imperatives can lead to fundamental change against apparently insurmountable odds.

But South Africa still faces many challenges.

It faces a new period of change with the retirement of one of this century's great leaders, Nelson Mandela.

It must also work through difficult issues as it seeks to develop new policies to address unemployment, law and order, housing and skills development.

South Africa has many friends internationally, and together, we're committed to helping South Africa consolidate its place as a modern, full democracy.

New Zealand of course has a historical relationship with South Africa, but it hasn't been without its periods of controversy.

The challenge for us as a country is to build a modern relationship with South Africa.

If you ask the average Kiwi what our relationship with South Africa is all about, inevitably the response will focus on rugby and cricket.

I'm not suggesting we change this - traditional sporting rivalry has been an important part of the relationship.

But we need to emphasise the excellent cooperation we already enjoy on a range of multilateral issues and more importantly, build a new dimension - a dynamic, mutually beneficial trade and economic relationship.

We've already made a useful start. In 1994, total trade between New Zealand and South Africa was just $107.8 million.

Over the past four years total trade has steadily increased by an encouraging 62 percent, and there is nothing to suggest this will decline.

Our main exports to South Africa are, as you'd expect, in the primary sector - dairy, meat, fruit and veggies.

Exports or manufactured goods have grown and attractive future trade prospects lie in the food and beverage sectors, high tech products, housing, agricultural equipment, and services, particularly in the area of public sector reform.

But in order to enjoy the benefits of growth in these sectors, there are barriers that must be overcome.

Firstly, we need to improve transport links, both air and sea, between our two countries. Exporters on both sides of the vast Indian Ocean need to have confidence that they can get their goods to each others markets in a timely fashion.

Second, South Africa is not yet an open economy with a free trading environment - our businesspeople face many impediments to exporting goods. As Trade Minister, I'm often told that market access is the major issue limiting our exports to South Africa.

South Africa's response of course, is that until trade begins to increase significantly, they cannot afford to reduce their tariffs and other measures to protect their local industries.

This classic 'chicken and egg' argument is one I often face as Trade Minister, but it's an argument that has fundamental flaws.

I'm not meaning to single out South Africa here - I face the same argument in many markets around the world. But we must move beyond this idea that barriers to trade are in same way good for us - that they help local businesses to be more competitive.

In fact, trade barriers reduce competitiveness, increase costs for consumers and ultimately limit the capacity to build stronger, sustainable economic relationships between countries.

Thirdly, we must remind South Africa that their relatively rigid regime for controlling currency flows continues to deter New Zealand companies from investing in South Africa.

Currency controls undermine openness and transparency. For example, I've heard reports of South African companies requesting "double invoices" and other illegal measures from New Zealand exporters as a way around the currency control regime.

This is not a sound foundation for a sustainable trade relationship between our two countries and I hope that over time, South Africa will re-examine the rationale for its currency controls.

Finally, we have to address the perceptions of crime that often colour New Zealanders' attitude towards doing business in South Africa.

Unfortunately, burning cars make great news footage and that possibly makes the situation seem worse than it is.

But we have to move beyond this, and it's here that the media can make a positive contribution to building the modern relationship between New Zealand and South Africa.

Business people need good information in order to make sound investment decisions.

They need accurate reporting of economic developments.

And we'd all benefit from enlightened analysis of Mbeki's prospective leadership and the relationship between political developments and economic prospects for South Africa.

In spite of these uncertainties, I remain optimistic about South Africa.

It is a land of opportunity offering enormous potential for New Zealand exporters.

My "business" is trade and economic policy, and we're working with South Africa on many fronts to encourage them to address the impediments that I've outlined here today.

And although change won't occur overnight, the long-term prospects are encouraging.

Trade Minister Irwin is an extremely thoughtful and internationally respected Minister.

The South African Board of Tariffs and Trade is currently reviewing tariff levels for dairy, meat and other agricultural products, and Agriculture Minister Derek Hanekom is a valued member of the Cairns Group.

South Africa is also supportive of a new round of comprehensive multilateral negotiations through the World Trade Organisation.

Like New Zealand, South Africa has much to gain from the opportunity to put trade in agriculture on the same footing as trade in other goods and services in the international arena through the WTO.

And it's also making progress in its own right. South Africa's recent Free Trade Agreement with the European Union will see barriers to trade in agriculture reduced and eventually removed.

I'm hopeful that New Zealand will have the opportunity to discuss similar access for our agricultural goods in the medium term.

After all, if South Africa sees benefit in accepting the EU's heavily subsidised product, then surely there must be additional benefit in accepting New Zealand's non-subsidised product.

The establishment of the New Zealand/South Africa Relations Commission is another positive development in the modern relationship between our two countries.

The Commission held its inaugural meeting in Pretoria last year. New Zealand and South Africa considered all of the impediments to a stronger relationship and I'm pleased to report that South Africa responded positively, and undertook to address the impediments more thoroughly in the course of their policy development process.

More importantly, both countries recognised each other's market potential. This is significant because like New Zealand, South Africa needs trade.

If South Africa is to achieve its aspiration of improving living standards within its newly integrated society, it will need to focus on generating economic growth.

They're on the right track. South Africa is committed to export-led growth, and it aims to improve the competitiveness of its industry.

But that's just one half of the equation. In order to generate aggregate growth and upskill its newly integrated black communities, South Africa will eventually have to open its markets - to import new technology and skills, and expose its industry to new ideas and true competition.

South Africa's economy is in an important stage of its development, and as I've outlined today, it has some way to go before we will enjoy the benefits of a mutually beneficial economic and trading relationship.

But for those of you considering new markets, I encourage you to look at South Africa.

It's a market with huge potential, and the record of the past four years shows that opportunities already exist for New Zealand business.

Let's not allow those opportunities to go unrealised through ignorance, or an unwillingness to pursue them.