Discussion with German Delegation

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ECONOMIC AFFAIRS SELECT COMMITTEE
16 February 2001
DISCUSSION WITH GERMAN DELEGATION

Chairperson: Mr M W Moosa

SUMMARY
A German delegation made a courtesy call to the committee. Discussion focused on possible ways of encouraging Germany to use South Africa as a springboard to penetrate the African market and the Indian Ocean Rim.

MINUTES
Mr Moosa welcomed the twelve men and women delegation from the State Parliament of Lower Saxony, Germany, that was headed by its Speaker, Prof Rolf Wernstedt. He informed them that his Select Committee comprised three portfolios that included Trade and Industry, Mineral Affairs, and Foreign Affairs. He explained that the Select Delegates come from nine provinces which when it was expanded had 28 members. He apologised for the absence of certain members, saying that they were attending other committee meetings and introduced the four members that were present, namely, Mr A E van Niekerk (NNP), Mr A Lucas (ANC), Dr E A Conroy (NNP), and Mr K Durr (ACDP).

Discussion
One member of the delegation wanted to know what scope and means the select committee has of promoting economic activity within its jurisdiction.

The Chairperson said they have few resources and therefore they cannot do much. For instance the committee has one clerk while each political party has a researcher to assist members of the committee. He recalled the time they visited California and discovered that each political party had 45 researchers.

Another member of the German delegation asked if the committee discusses, adopts and amends the budget of the Department of Trade and Industry?

The Chairperson replied that the committee's objective is to have an oversight function over the budgets and programmes of the Departments of Trade and Industry, Mineral Affairs, and Foreign Affairs. Only the plenary bodies, National Assembly and the National Council of Provinces, can adopt the budget, though they have not reached the stage where they can amend it.

Who controls the budget and what are the amounts involved?

The Medium Term Expenditure Framework with a roll-over of three years was explained. The amounts involved are approximately R230 billion. The DTI's budget is R4 billion which includes job creation schemes, the regulation of competition and Investment South Africa that promotes investments from overseas. In addition there are a number of agencies:
- Ntsika is responsible for assisting about 360 NGOs to mentor SMMEs.
- Khula is responsible for providing small-scale financing to SMMEs.
- CSIR is responsible for providing input into production processes both to small and big enterprises in order to improve the standard of production
- South African Bureau of Standards regulates standards for local and international markets.
- Industrial Development Corporation is responsible for large-scale finance and venture capital.
- South African Development Bank is responsible for large scale projects.

What measures were being taken by the Government to reduce the high unemployment rates in this country?

The Chairperson said that the issue of unemployment was a complex issue that depended on fiscus discipline and international investment in South Africa. He hoped the Free Trade Agreement between South Africa and the European Union will create a conducive environment for the South African products to gain access into the EU market through the lowering of tariffs and the removal of quotas.

Dr Conroy (NNP) said that South Africa's biggest disappointment was that it did not succeed in creating an environment for SMMEs to take off the ground. He said the government was working hard on this, and that the opposition was pushing hard for something to be done on this.

Mr A Lucas (ANC) said unemployment was a contentious issue on which political parties did not agree. He said that this financial year the Government has committed R6 billion to deal with the problem of unemployment. Other measures taken by the Government was the restructuring and the privatization of state-owned enterprises such as Telkom to meet global standards. The private sector was being encouraged to stimulate the economy in order to be globally competitive.

Mr K Durr (ACDP) told the German delegation that South Africa was looking for a window for its products in Europe and their presence here could help achieve that end. The ACDP thinks that government over regulates and must privatize quickly. He however commended the government for lowering both the state expenditure and inflation to its present levels. Both reserves and manufacturing exports were at an all time high but that government can do more. On that score he felt that Germany could use South Africa as a springboard to penetrate the African markets since South Africa has a highly developed infrastructure. He also pointed out that 90 percent of exports and imports are ferried by sea meaning that with the wonderful ports that South Africa has, it could easily service the Indian Ocean Rim - the next exciting market in the world.

Prof Wernstedt noted Mr Durr's comments were interesting because Europe has been trying to use South Africa as a springboard to penetrate the East and West markets of the Southern Hemisphere. Interestingly enough Europe was discussing the Indian Ocean Rim but had not made a decision about the next step to take.

Mr van Niekerk asked about the delegation's interest in the Eastern Cape. Secondly, whether they have any expertise in promoting SMMEs?

The Germans said the official agreements between the Eastern Cape and Lower Saxony over the past five years have been fruitful. They have agreed to compare their parliamentary procedures and delegates from the Eastern Cape will be visiting Lower Saxony shortly. They have a representative stationed in the Eastern Cape for the promotion of relations between the two provinces. The SMME assistance they gave to that sector was in the form of providing credit, training, export research. The amount of that support was sixty million Deutschmarks (R200 million) per annum.

Mr van Niekerk asked if they give them credit or subside them?

The answer was that it is a system of surety.

The Chairperson said South Africa was a developing country with first world pockets and areas of underdevelopment. The WTO regarded South Africa as a first world country. Countries like the United States, Britain and Germany regarded it as developing while Africa treated it as a developed country. Such are the contradictions facing South Africa. Thus it is wanting a new round with WTO to be called Development Round for that very purpose. He hoped Lower Saxony would push the German delegation at WTO to push for that Round. He said that as an industrialized country on the continent, South Africa had to deal not only with poverty within the country but also with that of its neighbours. Conflicts in Africa were created both from inside and outside the continent (such as the US and French involvements) and he requested Germany to assist them in sorting out that mess.

Mr Durr (ACDP) noted that Germany rebuilt its society from ruins and that as recently as a decade ago they faced instability from the East. South Africa is more or less in the same position and there are many opportunities for it. South Africa is a hope for Africa; its challenges are similar to Germany's.

The Germans in principle agreed that the challenges were similar but noted that South Africa's problems of disparity were much more stark than they were in Germany.

The meeting was adjourned.

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