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[Music]
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[Music]
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we're speaking today with Ibrahim rasul
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who is South Africa's ambassador to the
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United States thank you for joining us
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today oh thanks very much it's a great
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pleasure Mr rul has been A Member of
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Parliament a special adviser to the
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state president of the Republic he's
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been a premier of the Western Cape
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Province and has served in numerous top
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cabinet positions including heading up
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Finance Economic Development Health and
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Welfare he was also deeply involved in
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the anti-apartheid movement from the
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time he was in high school and spent
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time in prison and under house arrest in
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connection with those activities so
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quite a varied background thanks for
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joining us again uh I want to start our
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discussion by speaking about the South
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African economy uh it's performed fairly
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strongly uh post Global financial crisis
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as has sub Sahara Africa in general um
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and I wonder if you could talk about um
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why it's done so well and what the
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Outlook is for the next couple of
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years no I think that um the South
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African economy has performed far better
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than many of the oecd countries and
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largely I I think it's because our
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banking system has been a very robust
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and strong banking system it had a
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strong regulatory environment it did not
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lend money did not have and so I think
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that we felt some of the aftershocks
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from having been fairly integrated into
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Western economies but we did not go into
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free fall and so our growth rate came
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down from about 5% on average down to
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just about 3% and slightly low it's not
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where we want to be but I think that um
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where we could have been um we are
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fairly happy that we have settled at
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about 3% and rebuilding from from that
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point we did have problems with
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unemployment especially as Western
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countries including American
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corporations
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so we we had those aftershocks but we
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did not suffer the main
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recession um it it sounds as if your
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economy may have reacted uh in some ways
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similar to the way that let's say
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Canada's economy reacted where again the
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banking system was not involved in as
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many of of the kinds of Investments as
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let's say the European Banks and the
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American Banks were so they were
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somewhat isolated and then there's
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perhaps another parallel which is that
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um they were then well positioned to
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benefit from from a great demand in
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Commodities oil and and but also
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minerals and so forth could you could
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you talk about that a little bit Yeah
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know I think that um particularly um we
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maintained a flow of exports of in South
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Africa's case mineral production um
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agricultural products and a range of
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other um products that we have like
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Automotive components um and fairly
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sophisticated um transaction issues that
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South Africa has slowly but surely built
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up since aparted and we found ourselves
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in a space where there was a greater
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demand for those kind of goods and um
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certainly I think um that has created a
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robust underpinning to our economy and
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we're happy to see that that has endured
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all the vicissitudes of the post 2008
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period the World Bank um projections for
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ecomic growth for sub Sahara Africa in
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general are are very strong over the
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next two years somewhere between 5 and 6
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and a half% I believe u climbing as as
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you get towards the end of that two-year
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period uh for South Africa it's also
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pretty strong uh I think three and a
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half to 5% but slightly down from sub
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Sahara as as a whole if you if you take
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South Africa out of the subsaharan
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growth effort um sub Sahara Africa is
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growing largely I think on the back of
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of oil and other Commodities um being
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sold to to largely to China but other
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parts of Asia which have of course done
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better through through the crisis uh do
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you see South
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Africa Rising up up to the level of
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growth that the subsaharan African
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region has reached in general just a
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couple of points behind which might
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surprise some people um but um but I
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think that the country has a lot of
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plans for attracting foreign direct
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investment and so forth yeah no the
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difference between say South Africa and
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many other count in subsaharan Africa is
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that we have a far more Diversified
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economy a far more industrialized
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economy we manufacture a lot more things
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with our raw materials and that's what
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we try to get onto a market and there
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we're heading into great competition
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because suddenly excess production in
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the United States creates a glut there's
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a price um differential that then takes
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place and so South Africa has to be at
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its competitive best with its products
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onto the global market whereas um
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selling oil to the world economy selling
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cash crops to the world economy selling
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gas to the world economy can have a
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massive spike in your growth rates and
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um give you a sense of Greater GDP but I
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think that if we were to choose South
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Africa would choose its diversified
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manufacturing base um a lot more over
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just a single product like gold as we
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had before relied on that as a main
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export we now are fairly happy that
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we've Diversified of that base and are
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servicing a world economy the difficulty
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is that in servicing that world economy
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with manufactured goods you run into
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heavy competitive headwinds from your
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traditional industrial Powers while
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while Global demand is still at at a
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fairly low AB at least I think that that
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for we we are seeing that that is
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probably the Crux of the global economic
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problem it is that aggregate demand is
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down and that is why South Africa's
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trade and investment strategy is
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Shifting far more towards Africa because
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for the whole world Africa represents a
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Last
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Frontier of a market in which there's a
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burgeoning middle class it's requiring
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um Commodities it's a consumer it's a
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growing consumer market and so South
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Africa's um diversify in its
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traditional destinations for for trade
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into Africa itself and that's the advice
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that we're for example giving to the
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United States to get out of a
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protectionist mindset to get out of a
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closed economy mindset to get out of
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Siege mentality and to see the
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burgeoning African Market as the
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Salvation even or the point at which
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they can Kickstart the US economy back
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into life 300 million people requiring
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both capital goods and white goods
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that's where the US should be focusing
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its attention towards that's where it
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should be investing in to develop the
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productive capacity that's why it should
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not even consider um ending um the
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African growth and opportunities act
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because the more liquidity it creates
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back in Africa the more it fuels this
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middle class's demand for goods and
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that's the way we believe um you
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overcome the Crux of the problem which
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is a decline in aggregate demand in the
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world for people who aren't paying close
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attention they they might be surprised
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to learn for example that in subsaharan
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Africa there were 40,000 cell phones
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sold last year so talk about a
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burgeoning middle class I mean that's
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that that's a perfect measure right
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there I mean 40,000 cell phones 40
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million 40 million would be what is sold
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in a day that's what
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I I think 40 million is is just the
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power of the technological capabil that
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I think Africa is beginning to Hon us um
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you talked about this this um
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competitiveness that that you're facing
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growing competitiveness have you
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struggled can you tell me a little bit
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about what's the recent history of
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currency uh differential between say the
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US and and your currency or or or with
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the Euro for
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example I think that we've had a fairly
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comfortable relationship with the US
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currency the dollar Rand um exchange
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rate when we were in the order of 7 and
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a half Rand to the dollar the weakening
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of the
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dollar has strengthened the Rand and
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that has increased the competitive
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headwinds against us because suddenly
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we're having to export things into the
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world economy at a stronger Rand rate
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whereas our competitive Advantage was
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that we were not too strong and not too
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weak in relation to the dollar so dollar
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weakness has been a
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a a a a problem for economies like South
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Africa I think Australia faces it um
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currently it affects your exports it
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affects the cost of your goods and
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ultimately your competitiveness but it
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is not a problem of our making right I
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mean Brazil's been very outspoken
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complaining about that as some some
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other countries
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um the you were as a premier of the
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Western Cape Province um as I understand
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it um in large part responsible for
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luring in some 1 billion US in foreign
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direct investment uh what was the
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strategy you had there that worked so
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well can is that model can it be is it
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being replicated in South Africa in
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general and again can it be replicated
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throughout um subsaharan Africa I think
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the strategy is very simple you've got
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to pick winning sectors in your
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economy and then you've got to
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understand what are the competitive
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advantages Within those sectors that
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you're selling and who are the buyers we
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found for example that in agriculture
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the buyers were going to be your Arab
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economies your middle eastern economies
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where food security is a major issue on
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the other hand we realized that in the
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film sector we were producing films with
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worldclass facilities in Cape Town we
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were producing films 40%
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cheaper than in a standard Hollywood
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production all we needed to do was to
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persuade a group of actors and producers
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and filmmakers to take the longall
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flight to Cape Town and once they
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reached there they discovered scenery
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that have never before been seen on film
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and so it's really been about
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using winning sectors identifying
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competitive advantages and then having a
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marketing strategy led by the premier
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order the governor himself in order to
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lend The credibility of government
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handholding through the process of
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investment and the other one that was
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also property development because we
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realized that property values um in
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South Africa and particularly in Cape
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Town yielded 30% returns year on year on
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your property investment as opposed to a
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global average of 6% even even in a post
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recession period your yields are between
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12 and 15% now that's not the story of
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Cape Town that's the story of Africa the
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average rate of return on investments in
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Africa is 8% the global average is 3%
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and the US average is
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2% now we realize that in the United
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States there's a lot of unproductive
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Capital waiting for better days they're
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not wanting to put it where the yield is
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2% return
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there are cultural and other impediments
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in the US mind that prevents them from
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crossing the Atlantic Pond and finding
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8% rates of return now I think that
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between myself between my hosts the
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subsaharan African Chamber of Commerce
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our duty is to build courage because the
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business case is
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apparent we simply have to build courage
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and hold hands and take us investors
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over to Africa particularly sub sarn
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Africa match Partnerships with them so
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that they share risks and be able to
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help them identify the right kind of
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investment that's the approach that
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we've taken with public entities like
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the export import Bank of the United
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States that is now investing heavily in
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Building 100 um locomotives for South
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Africa in funding a conventional um
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Power Station energy station um with our
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public utility escom $6 billion US going
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into that but the result is that for
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example on the rail building the
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locomotives there would have been
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General Electric plants that would have
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had to close lay off workers slow down
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production Along Comes Africa puts an
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order of 100 locomotives the money is
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put forward by exm Bank not only does
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that money return with interest
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it keeps the US industry sticking over
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that's the virtual cycle that's the
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logic that we're using now investors of
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course associate higher return with
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higher risk uh which is makes perfect
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sense um so what are the myths about
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risk in investing in South Africa or
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let's say Africa and which challenges or
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risks are real and how can they be
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managed I think firstly you're dealing
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with fairly relative terms because we
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are dealing with fairly good returns in
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Africa it's not excessively high it's
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just that in the US it's a low now
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that's the first thing that we've got to
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change in the perception the second
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thing we've got to understand is and and
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you don't have to believe me you've got
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to read the McKenzie report the McKenzie
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report says whatever risks you have to
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invest in to overcome in Africa is
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mitigated within the first year's return
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so if you have to put in extra security
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because you're not feeling safe if you
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have to put in extra insurance because
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you're not clear about it if you have to
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put in extra banking um um Shore UPS
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because you're you're uncertain whatever
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you've put in you more than get back in
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your first year of returns that's the
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that's the important thing but political
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risk and risks of violence have reduced
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enormous
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if we were having this conversation 4
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years ago you would have been justified
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in showing me 16 conflict zones across
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Africa you would be hard pressed to find
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to fill up the fingers of one hand today
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that's because Africa is reaping the
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dividends of democracy it's
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understanding that when you have
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democracy the returns financially and
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economically are
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enormous
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secondly in the past three years you've
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had about 50 safe elections we can point
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to the one in Kenya that went wrong we
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can point to the one in the Coto that
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went wrong but the fact is that that was
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dirty girl four years ago today you're
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speaking about um safe elections
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president's retiring people in Ghana the
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split in the election was
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5149 the incumbent president who got
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49
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retired that's
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toer um for for for for for Africa so I
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think you you've got a diminishing
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political risk you've got democracy
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dividends coming up but most importantly
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we are building durable
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institutions of democracy the rule of
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law and most importantly financial and
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Economic Institutions that I think give
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predictability to certain situations and
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that's the reason that today you've got
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20
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if not more over 20 homegrown
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multinational corporations across Africa
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with an average
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each um of profit of about3 billion US
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per anom now that is a partnership
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before you'd have to come in on your own
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take all the risk on the chin now you've
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got at over 20 multinationals with whom
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you can partner share the risk with
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share the input cost with you don't have
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to do it on your own and that I think is
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the story of Africa and it's told by the
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McKinzie report it's told by Steven
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radlet and stalled by JP Morgan and many
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others those corporations that are out
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there and available for Partnerships
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many of them are actually right in South
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Africa is that correct I think I think
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that that is probably for the next
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decade still going to be the case that
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they're going to use the strong platform
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that South Africa offers because it's
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got an enduring democracy it's got a
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justiciable rule of law it's got a
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global 247 banking system um it's got
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the infrastructure it's got the massive
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infrastructure it's got the
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telecomunications connectivity it's got
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Fiber Optic Cables running from both
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sides of the country um across Africa
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and the world and so many countries will
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many companies will locate um their head
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officers in South Africa to take
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advantage of it and then from their
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springboard into subsaharan Africa so
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that's uh that's a good argument for
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attracting investment there's um we're
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all familiar with the brick countries
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Brazil Russia India China the fast
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growing large Emerging Market countries
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there's a new group behind them
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sometimes called the settes and um of
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which South Africa is one and that
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includes Colombia Indonesia Vietnam
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Egypt turkey and and South Africa all
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very different different regions of the
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world and so forth um considered up in
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commers there's others this is this is
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one grouping how would you say South
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Africa is different from those and and
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what
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advantages might South Africa offer over
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say
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Indonesia I think it surprised many that
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South Africa took up membership in
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bricks because we didn't share India
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China and Brazil's GDP and growth rates
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um of that kind but the emerging
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economies in bricks understood that if
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they wanted to make any Headway in the
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world they needed a strong reliable
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African partner so not withstanding the
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differential in GDP growth South Africa
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became a member of of bricks with ketes
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we are probably in GDP levels um far
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more on par with other countries in that
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emerging economies um not very extreme
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um genico efficience between us fairly
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average U per cap cap income we share
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that we're trying to make transitions
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from agrarian economy to Industrial
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economies from extractive economies to
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to to to to knowledge based economies
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that's what I think we have um in common
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with us I also think that countries in
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KET um fulfill very strategic
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geopolitical roles like turkey for
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example as a bridge between Europe Asia
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and the Middle East South Africa plays
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much the same kind of role as a full
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crumb
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um for subsaharan um Africa Indonesia
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plays that in Southeast Asia and so
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forth so I think that there are ways in
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which we have far more similarities um
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in mind and what I think we need is
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really to aggregate because in the
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global world that we're living in
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National economies mean nothing you've
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got to find
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Partners um that share basic
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characteristics with you if you are
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going to be able to turn your sales to
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take the best best advantage of global
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opportunities and Ward of the worst
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aspects of globalization um in the world
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today there's also many cultural um
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benefits that come from being in cetes I
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think if you look at Turkey Indonesia
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South Africa
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struggling with how do you manage
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democracy that has to also deal with
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legacies in Turkey of heavy secularism
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if not secular fundamentalism um
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Indonesia history of c and bloody South
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Africa is history of apartate so you're
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also dealing not only with economic
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globalization you're dealing with a
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globalization of identity as well and
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identity politics and in the US we
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should know what the dangers are of
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ignoring identity politics because you
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can't get mired in wars that you think
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you can get out of very quickly if you
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don't understand fundamentally that
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globalization is a double edged sword
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and I think that that's really why we
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find ourselves in those kind of
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Partnerships there are some challenges
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that um that Outsiders considering
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Investments would look at you've had a
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series of difficult strikes and and
00:22:14
labor issues um so how would you how
00:22:18
would you address you know that issue
00:22:20
someone's thinking of investing and say
00:22:22
oh but you have this lab labor Strife or
00:22:25
or maybe there's some other challenges
00:22:26
that stand out that they would would
00:22:28
need to be modified about what what
00:22:31
would you tell them on that issue and
00:22:33
what other issues would you think um
00:22:35
would be important for them to
00:22:37
understand specifically yeah I think
00:22:40
that if you take our Labor Relations for
00:22:42
example and that is why I think with
00:22:45
ketes we have far more e in common
00:22:48
because we are all emerging democracies
00:22:52
unlike say for example in in in bricks
00:22:55
where not all of us share some
00:22:56
democratic underpinnings oh it's a
00:22:59
purely economic Arrangement but in KET
00:23:02
we're trying to deal with the push and
00:23:05
pull of democracy you want to have
00:23:09
productive economic growth but you also
00:23:11
need healthy mechanisms of sharing the
00:23:14
country's resources in order not to have
00:23:17
tensions between competing groups that
00:23:20
create a new form of instability within
00:23:23
emerging
00:23:25
democracies and so you may not face the
00:23:27
cause that you used to face before you
00:23:29
may not face The Civil Wars that you
00:23:31
used to face before but social disquiet
00:23:33
and social inequality becomes the
00:23:35
biggest danger that the KET countries
00:23:38
would really have to put their minds
00:23:40
together on how to manage it what we
00:23:42
would want to understand is
00:23:46
that it's being
00:23:48
institutionalized in South Africa you've
00:23:51
got a bargaining season we know it opens
00:23:53
in June and it closes by by August
00:23:56
that's when all the unions line up to
00:23:59
negotiate the next
00:24:00
increases and it has its Sound and Fury
00:24:03
but at the end of the day it's all
00:24:05
institutionalized you can manage it and
00:24:08
the ability to manage and to build in
00:24:12
the tensions in society in a
00:24:14
constructive way is probably one of the
00:24:17
biggest lessons that I think those
00:24:20
emerging democracies will teach even the
00:24:22
established ones because it will find
00:24:25
antisocial forms in your in your in your
00:24:29
established democracy like Britain
00:24:32
suddenly out of the blue you have these
00:24:34
riots and the British government is
00:24:36
taken by surprise because it has taken
00:24:39
for granted many aspects of its
00:24:40
democracy and has not kept its finger on
00:24:43
the pulse of social inequality growing
00:24:46
and identity inequality growing within
00:24:49
British societies so they will now have
00:24:52
to find ways to institutionalize it
00:24:54
rather than be caught by surprise and I
00:24:56
think that this is what what Africa is
00:24:59
trying to do in much the same way that
00:25:00
we've tried to solve the Kenia problem
00:25:03
how do you deal with competing El
00:25:05
electoral claims um and and and I think
00:25:08
that the delicious problems of North
00:25:11
Africa and the Middle East where people
00:25:13
want democracy are shunning U the
00:25:16
undesirable elements of fundamentalism
00:25:19
but also are saying that the current
00:25:21
regimes are unsustainable I think it's
00:25:23
how we respond
00:25:25
to these tensions and how do we in
00:25:28
institutionalize them but give them
00:25:31
vent interesting um could you also
00:25:35
explain how the uh the broad based black
00:25:37
economic empowerment effort is
00:25:40
progressing you know you can discuss
00:25:44
economic empowerment or empowerment in
00:25:47
very technical terms in legal terms or
00:25:51
in moral
00:25:53
terms I'd want to put it a lot more
00:25:55
scientifically it's like osmosis
00:25:59
where you have to have a
00:26:01
movement
00:26:03
of matter from areas of high
00:26:06
concentration to areas of low
00:26:08
concentration until the organism is in
00:26:12
equilibrium the objective is to find
00:26:14
equilibrium in your
00:26:16
Society you cannot sustain in South
00:26:18
Africa High concentration of wealth in a
00:26:22
minority that is colorcoded and high
00:26:24
concentrations of poverty in a majority
00:26:26
that is colorcoded you've got to create
00:26:29
active mechanisms for osmosis to take
00:26:32
place in order to build in equilibrium
00:26:35
into South African society now if we
00:26:37
understand that then everything else is
00:26:39
a matter of
00:26:40
methodology and black economic
00:26:43
empowerment is simply a matter of saying
00:26:46
how do we take
00:26:48
Mining and Ward of the clamor for
00:26:51
nationalization by getting greater
00:26:53
ownership transferred to black people
00:26:56
and when we speak about greater
00:26:58
ownership we're not speaking about 50%
00:27:00
we're not speaking about 100% we're
00:27:02
speaking about
00:27:04
26% when we speak about management we
00:27:06
speak about 26% when we speak about
00:27:09
employment Equity we're speaking about
00:27:11
using National demographics and so the
00:27:13
point that I making is that these are
00:27:15
mechanisms to create the flow of Osmosis
00:27:19
in order to bring
00:27:21
equilibrium now we understand therefore
00:27:24
that we can't make our
00:27:26
problem the US company problem and so we
00:27:30
create the exceptions to the rule that
00:27:33
your partners who are South African
00:27:36
would have to comply with that but we
00:27:38
can't simply say let's put a break on
00:27:42
for example inward investment to South
00:27:45
Africa by making
00:27:47
onerous osmotic processes their problem
00:27:50
as well and I think that we we're we we
00:27:53
we're getting the debate out of
00:27:55
ideological terrain and into practice
00:27:58
iCal terrain and even investors who come
00:28:01
there from countries like the United
00:28:03
States later understand that the
00:28:07
stability of the company depends on how
00:28:11
you spread ownership and how you create
00:28:14
um participation in the structures of
00:28:17
that
00:28:17
company thank you um one last question
00:28:21
uh you your country hosted the World Cup
00:28:24
in 2010 uh what were the permanent
00:28:27
benefits of that and uh what were some
00:28:29
of the lessons you
00:28:30
learned you know sometimes when you have
00:28:33
a set of competing
00:28:35
priorities school system that isn't
00:28:38
Optimum a health system that is
00:28:40
screaming a road system that is creaking
00:28:43
um public servants that want more pay
00:28:45
infrastructure that is not on par
00:28:48
Railway systems that require ports that
00:28:50
need to be built and so forth you
00:28:52
actually need a focus and for South
00:28:55
Africa more than the romance of World
00:28:58
Cup 2010 was that it provided us with a
00:29:01
focus and with a guillotin it had to
00:29:04
happen by 2010 and so everyone looks at
00:29:07
the
00:29:08
stadiums and the truth of the matter is
00:29:11
only two new stadiums were built the
00:29:13
other eight were
00:29:16
upgraded but most
00:29:19
importantly it said that if you wanted a
00:29:22
rapid rail system you've got to get it
00:29:25
done by 2010 and today we have a rapid
00:29:28
rail system in the most populous part of
00:29:30
South Africa if you wanted to redo your
00:29:34
road systems and get them wider get them
00:29:37
and get them longer and
00:29:40
connected to the rest of Africa 2010 was
00:29:42
the deadline if you wanted your airports
00:29:46
modernized 2010 was the deadline and all
00:29:49
our airports are modernized today and
00:29:51
they look better than Dallas
00:29:52
International um and if you
00:29:56
wanted your port done in order to bring
00:30:00
in passenger
00:30:01
liners which would act as floating
00:30:03
hotels 2010 was the deadline if you
00:30:06
wanted to bring your hotel
00:30:09
infrastructure from the 20th century
00:30:11
into the 21st century 2010 was the we've
00:30:15
achieved all of that those are permanent
00:30:17
gains but most importantly on a
00:30:21
continent which to the rest of the world
00:30:24
they can't distinguish Zimbabwe from
00:30:26
South Africa somal from Congo Kenya from
00:30:31
Egypt it was a GE geography
00:30:34
lesson it was a mindblowing experience
00:30:39
the most visitors who came there were
00:30:40
citizens of the United States they spent
00:30:43
the most they stayed the longest and
00:30:45
they enjoyed themselves thoroughly they
00:30:47
came with a low threshold how to beat
00:30:50
off people who will mug you how to hoard
00:30:52
of elephants in the road Etc they came
00:30:54
with all of those misconceptions in
00:30:56
their head they had the most wonderful
00:30:59
experience they're aren even the world's
00:31:00
uh biggest soccer fans they're not but
00:31:03
the team did well we were torn in South
00:31:06
Africa when they played Ghana in The
00:31:09
Knockout rounds because our Instinct was
00:31:12
that an African team needed to go ahead
00:31:13
so it was bana bagana versus Obama Obama
00:31:18
and um it was such a Pity when the US
00:31:21
were eliminated because then the Visa
00:31:24
indicators of spend in the country began
00:31:27
to drop so um the romance of an African
00:31:30
team going forward versus the money
00:31:32
spent by the US fans was a tremendous
00:31:35
one but I think it was a mind openening
00:31:37
experience for
00:31:39
people thank you very much for joining
00:31:41
us today no thanks very much very much
00:31:44
great discussion thanks to subs and
00:31:46
African chamber for arranging this this
00:31:48
is great
00:31:52
[Music]
