Bobby+Godsell+with+Phumzile+Mlambo-Ngcuka,+Sunday+Times

Sunday Times, Johannesburg, 02 April 2006
=In conversation with ...=

//**Bobby Godsell**, chief executive of AngloGold Ashanti, talks to **Deputy President Phumzile Mlambo-Ngcuka** about the potential of the Accelerated and Shared Growth Initiative for South Africa (Asgisa) to stimulate the economy and share the resulting benefits.//




 * Bobby Godsell:What are the major impediments to accelerated growth?**

Phumzile Mlambo-Ngcuka: There are a number of constraints that must be addressed if we are to move to a new level of growth and share it. Some of these factors can be influenced more directly than others. Our relatively small domestic markets and distance from major global markets are things we can’t change immediately. But the size of the domestic market should grow as we bring more and more people out of the second economy. This is an example of the way accelerated growth can support shared growth.

In addition, we know that there are constraints arising from the relative volatility of the currency, the cost of some infrastructure, the shortage of suitably skilled people and the disjointed settlement patterns inherited from apartheid. We also know that there are barriers to entry and competition in some sectors of the economy, a regulatory environment that is in some cases a burden on small and medium enterprises and there are deficiencies in state organisation and capacity.


 * Q:What can be done about these constraints?**

A: We think that these should be addressed under state leadership and by direct state action, together with specific commitments and contributions by our social partners. There are six areas that we believe can be addressed:
 * Maintaining the macroconomic fundamentals;
 * Accelerating infrastructure development;
 * Targeting investment in sectors with high potential;
 * Improving education and skills;
 * Enhancing public administration; and
 * Addressing the challenges of the second economy directly in a manner that will alleviate the plight of the poor and help drive growth.


 * Q:What do you see as the key macroeconomic issues? The exchange rate is a recurring topic in my business.**

A: On the macroeconomic issues we will retain the policy of a floating exchange rate while continuing to explore opportunities to reduce volatility and ensure the accumulation of foreign exchange reserves. We remain committed to inflation targeting and we will ensure that we constantly improve the government’s expenditure management while maintaining the balance in spending among the competing needs of welfare, social services and economic services. Building on the excellent work done so far, we will also continue to drive for better budgeting and lower taxes wherever possible.


 * Q:What do we need to do to accelerate infrastructure spending? Have we got the capacity to do more?**

A: The government itself plans to spend over R320-billion on infrastructure development over the next three years. There are very exciting capital investment plans on the drawing boards of Eskom, Transnet, the water authorities and Airports Company South Africa, as well as by provincial and local authorities.

To achieve these goals we need to re-establish confidence that there will be growing demand for goods and services. We need better information sharing, a collaborative supplier forum, longer-term strategic relationships and specific support measures that will, for example, encourage black economic empowerment (BEE) entrants into manufacturing. And yes, we need both improved skills and better operating systems.


 * Q: How will we develop these skills?**

A: Many proposals have been developed and we will work with our social partners in particular on an initiative to attract and develop the priority skills required for accelerated growth. I have already discussed this with the relevant departments and we are working with business and labour to address this issue.

Asgisa will also improve the quality of education and improve throughput, at the further education and training colleges and other tertiary institutions, to prepare young people for work more rapidly and ensure that the national skills development strategy works more effectively to support more economic activity.


 * Q: You have referred to high-potential sectors. What do you plan to do?**

A: As far as sector investments are concerned, we have identified those with immediate potential for joint interventions by all the social partners. These include business process outsourcing and tourism, among others. Secondly, there are sectors that lend themselves to the achievement of both the accelerated and sharing objectives of this initiative. For example, growing and processing energy crops into bio-fuels has the potential to create jobs, to have a high impact on second economy communities and to address a strategic industrial need. Thirdly, there are medium-term priorities where work has started but will take time to develop — such as improving beneficiation opportunities in the chemicals sector.


 * Q: Meeting the needs of the second economy must present a serious challenge.**

A: As far as the second economy is concerned, our efforts will concentrate on those communities and households that have received little direct benefit from economic growth. Even though they may have better access to social transfer payments and social services, they do not have access to better jobs and wages. It is vital for our national objectives that the growth generated should also improve the lives of the poorest South Africans.

We aim to secure sustainable livelihoods for people in poor communities and to focus particularly on youth, women and people with disabilities. Our aim is not just to make this second economy more comfortable, but to make it possible for people to graduate to the first economy. We will focus on small and medium enterprises and on sectors such as waste collection, fresh produce, street trading and traditional medicine and accelerate the expansion of the Expanded Public Works Programme in particular.

Some commentators who have not understood Asgisa think that the “second economy elements” are just an add-on, a political decoration. This is not true. The goal of addressing and ultimately eliminating the second economy cuts through all of our strategies, including the macroeconomic strategy, the infrastructure programmes and the sector strategies.


 * Q: Are there particular things we can do to speed up administration?**

A: Besides improving our own capacity, we are considering the introduction of a regulatory impact assessment system to address potentially negative consequences of laws and regulations that constrain employment creation. We also aim to speed up the development of the legislative framework on land use and management, which should be informed by the national spatial development perspective recently adopted by the Cabinet.


 * Q: You have clearly given the constraints a lot of thought. What do you think the main accelerators of growth should be?**

A: We know that investment drives growth and we need to increase fixed capital investment from about 16% of gross domestic product (GDP) to 25% of GDP by 2014. We think one of the triggers for that will be accelerated direct investment in infrastructure by the government, as already described. Of course, continued private investment will be a major driver of growth. Our immediate objective is to increase what has been a declining level of state investment over recent years, but we believe that that will “crowd in” private investment.

What is not always realised is that the removal of the constraints I have described and, in particular, the second economy interventions that seek to draw people out of poverty, are themselves drivers of growth. So as our programmes to accelerate infrastructure investment, prioritise key sectors, improve education and skills and public administration and draw people out of poverty take hold, these will encourage greater investment as markets expand, the skills of our people are improved and confidence is built.


 * Q: Asgisa lays an emphasis on partnership. How do you think these partnerships could be structured?**

A: One of the cornerstones of Asgisa is to get the social partners jointly to commit energy and resources to the achievement of these national objectives. There are a number of areas in which this is already taking place and the Business Trust is an important part of the process of partnership building. We have already agreed on partnerships in priority sectors. In the tourism sector we have been able to take our tourism offering to a new level over the past five years through the Business Trust. This laid the foundation for increased growth in the future.

A similar partnership has been structured in the business process outsourcing arena recently. These partnerships are not limited to the first economy. There is a new partnership for the expansion of the Public Works Programme in which the Business Trust and its companies are working closely with the Department of Public Works. And, at the most recent Big Business Working Group meeting, it was agreed that new partnerships would be forged to attract priority skills and to accelerate infrastructure development.

These all provide examples of how the social partners can work together to achieve the objectives we have set.


 * Q: These are ambitious plans. Some people are sceptical about our ability to implement them. Others fear that there is a trade-off between accelerating and sharing. What do you say to them?**

A: There are always trade-offs, but here we know that faster growth is required to meet our social objectives and, as we meet our poverty-reduction targets, markets will expand and growth will be enhanced. We know from the experience of other countries that reducing extreme inequalities has a long-term positive effect on economic growth. Properly managed these two thrusts can be mutually reinforcing. We aim to make it so.

We know that implementation is a challenge. While this initiative is government-led, our social partners must know that implementation depends as much on them as on the government. We also know that rapid implementation requires high-level skills and efficient systems. We are committed to securing these. The partnerships to which I have referred give me confidence. By working together we can achieve the objectives we have set.


 * This interview appears in the current issue of the Business Trust quarterly report


 * From: http://www.sundaytimes.co.za/articles/article-business.aspx?ID=ST6A175501**

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