The National Planning Commission recently hosted a seminar on economic development with the lead input given by Justin Yifu Lin, The Chief Economist at the World Bank. He reminded us that planning successful economic development requires a detailed analysis of the endowments that you have – endowments being the natural resources, human resources, technology and capital – and build from there. This approach must be distinguished from the frequent choice of policymakers, to start with the endowment that you wished you had.
In South Africa, we start from a base of considerable mineral wealth and relatively well-developed financial markets, but serious challenges of human capital with a significant proportion of our people unemployed, and with very low skills levels, as a consequence of our past. In addition, our natural resource base is under strain. Water is a good example, already we use 30% of the total available, and at 40% we will reach the limits of what we can feasibly and sustainably be used because the supply is so variable and unpredictable that we cannot economically use more.
We know that although this is not fatal, it might constrain our opportunities. It actually is not a factor of constraint on doing many of the things that we want to do anyway, such as building a thriving and sustainable knowledge economy that would still provide a good quality of life for all of our people. I want to emphasise though, that I am not suggesting the abandonment of the economic sectors we presently engage in, but our ability to flourish demands greater diversification. Anybody who doubts this approach should merely have to look at Singapore which has just one-tenth of the per capita water that we have available, but whose economic performance we can only envy – and that includes the export of water and environmental technology and services! Singapore appreciates that their sovereignty is closely intertwined with their ability to be water self-sufficient. The story of the shift to “Singapore New Water” is one that speaks both of national cause and national leadership.
In other parts of the Southern and East African regions, countries have demonstrated the ability to transcend these challenges in designing their developmental paths. In many cases, development plans incorporate land and water resources, as well as large numbers of relatively unskilled, poor people and decided that agricultural development will remain a focus for development, even as other sectors grow.
But as we imagine different futures for our different countries, we should also have the courage to imagine ourselves working together as a single region.
If we do that, we find that the balance of our endowments looks a little different. If we combine our access to capital as a region, with the diversity of human resources that we have, the independence dividend that is now maturing in the region, with our extensive natural resources (including water, whose utilisation rate would fall down to 5% or less if we include DRC), a completely different set of opportunities would arise. And while we would still have large numbers of relatively unskilled people, they would have far wider opportunities than if we simply worked as individual countries.
And that’s what you are here to do today and tomorrow, to imagine a future where we worked together as a region.
What could we do and what would we need to do differently to make it possible?
We need to finds ways of looking at our resources as shared. We need to ask what we could do in our countries as specialists rather than generalists.
Agriculture provides many examples of this. So every country in southern and eastern Africa grows some maize. But what comparative advantage does each have?
Certainly, in South Africa, along the Xhariep (Orange) River, we can grow grapes under drip irrigation that get to the European and US market just in time for Christmas when prices are highest.
Now that’s a good use for our limited water resource rather than growing maize in the hope that a poor rainy season will make irrigated maize profitable.
Many other countries (and I think of Tanzania, Kenya and Ethiopia, amongst others) have used their land availability, water and access to dependable logistics to grow flowers and vegetables for the European markets that yield significantly higher financial returns per drop of water than many other crops.
In Mozambique (and Angola and Zambia) which have the sun and the water and the land, instead of just tens of thousands of hectares of cane, they could grow hundreds of thousands of hectares on land that is hardly used today – if the markets for the products which are not just sugar but should also be energy, both the electricity generated from the baggasse as well ethanols, and chemicals, derived from processing sugar and alcohol were readily available.
And these markets will have to be big enough to justify big investments that almost certainly, even for South Africa, will mean regional than national markets. Africa has so much to do to catch up in intra-regional trade. It is quite staggering to recognise that almost 50% of all Intra-African trade occurs in the SADC region, and then the bulk of that comprises exports from South Africa. This is the measure of the development deficit that we should use frequently as a wake-up call.
I want to digress here to introduce a subject that will dominate our conversations over the next few years, climate change. The context provided by the efforts since COP15 in Copenhagen is very important. There the Heads of State agreed to a “new and additional” resource of $100 Billion per annum from 2020, and to $30 Billion of “Fast Start” to the end of 2012. The UN Secretary General convened an Advisory Group on Finance that compiled a report that indicated that raising the required $100 Billion per annum will be ‘feasible but challenging’. COP16 endorsed this report and agreed on a Transition Committee to resolve the modalities of the Green Climate Fund and report by Durban. This will entail much more work than at first meets the eye. It will be necessary to repeatedly argue for how the funds will be raised before debating on the distribution of an empty
The Green Fund will be of paramount importance to the issues that you will discuss here – given climate change and rainfall variability, it will be important for African countries to be able to raise concessional resources from green fund. Climate proofing will be an important activity to be funded, but Africa will need to be able to bid for resources for bankable projects, in an environment that will become increasingly competitive.
But how can we make these things happen? If we want to link our countries, our infrastructure – both physical and institutional – has to be up to scratch. We will not prosper as a region if vehicles have to spend a week at a border post to pass from one country to another. We cannot cooperate effectively in agriculture if we do not have the transport and storage facilities to buffer the variability of climate and to meet global standards in highly competitive and frequently protectionist markets.
Yet we must explain to our leaders and to our communities that better connections between us can be highly productive and profitable for all of us. In the water business, I am, told that one plus one can equal three! If you connect two river systems together, because drought is unlikely to impact on both to the same extent at the same time, you can often take more water more reliably than before the rivers were connected. The same principle needs to be applied more widely, in building linkages between our countries and economies.
But let’s not underestimate the challenges. Within a single country, it is often difficult to get different sectors to work together cooperatively. And the challenges of working across boundaries are even greater. The cooperation we recognise as important, and in the interest of which we have all signed a myriad of treaties and protocols, remains elusive. The preamble to so many texts is premised on the need to increase intra-regional trade and develop cross-border infrastructure to that end; we explain in some detail the objectives of trade facilitation towards a freer movement of people and goods – but our delivery on these noble objectives remains sub-optimal. My hunch is that we see the retention of all of the accoutrements of sovereignty, often bestowed by a departing colonial power, as more important than finding the means to raise the living standards of our people. Since cross-border cooperation requires supra-national decision-making, we relegate it down the list of priorities.
Similarly, we must encourage the business sector to think regionally. Too many businesses are just too small to survive, and they will not survive if they hang to old ways. Changing these attitudes is an integral part of the mandate to raise living standards across the continent.
So whether it is in agriculture or energy or related areas, we need to look at these opportunities differently, we need to talk about shared benefits (a language I learnt from my former colleague, Kader Asmal, when he was South Africa’s Minister of Water Affairs, discussing the arrangements for the next phase of the Lesotho Highlands Project). The goal there was that everybody concerned, including the few hundred people whose land was submerged by the new dams, should be better off than they were before. And that is what we achieved.
The opportunities on our continent are significant and increasingly recognised by investors across the globe. It must be that the best way to optimise the value of the multiple opportunities we have is by ensuring that we build strong and resilient regional economies. We need to grow consumers and producers; we need the scale that the region offers to invest in infrastructure – roads, port, rail and ICT; we need to act smartly on the planning and utilisation of key natural resources such as sunshine and water. We also must cooperate in the development of our human capital – investment in education and skills will drive our ability to innovate and become competitive.
But, in the spirit of the Planning Commission which I now head, we recognise that what is critical is to engage with our colleagues, across communities, between business and government and civil society, across sectors of activity and across national boundaries; we need to engage and build a common vision of where we are trying to go and how we are going to get there.
In the process, we also have to build trust, trust that we are committed to working together for mutual benefit, not simply trying to profit by exploiting our neighbours for our personal gain.
Bringing people together, to talk about these issues, to develop common approaches to achieving a common vision is at least as important a part of planning as the nuts and bolts of project identification and analysis, resource allocation and implementation.
So if you can make a small start along that long road, then this meeting will have been useful and I wish you well.
Source: The Presidency
Issued by: The Presidency
23 May 2011