CSIS Africa Program – Spotlight on South Africa

AS DELIVERED Remarks by Ambassador Gaspard

CSIS Headquarters, Washington DC

September 28, 2016

Thank you so very much, Jennifer.  Good morning everyone.  Good morning to everyone who’s here in this room and to those who are watching on the live stream.  Jennifer put a tremendous amount of pressure on me today when she told me that this was the inauguration of what’s intended to be a long and in-depth look across the African continent, and the mere fact that she termed this a keynote, just seems to me to add an air of profundity that you will not find any evidence of in my remarks this morning.  I can assure you of that.  But it really is quite an honor and a pleasure to be here, to see many, many friends in this audience and to be amongst the distinguished panelists who you’ll hear from a little bit later today.

It’s exciting to be with individuals who are not only experts across a range of fields but who care deeply about a country and a region to which I have a passionate and longstanding affinity.  A note of appreciation to CSIS for your special focus on Africa and particularly your elevation of South Africa at this critical juncture.

To put it simply, South Africa matters.  It matters to the continent and to the world.  It matters to those of us who understand that the growth in GDP and opportunity that we all celebrate across sub-Saharan Africa can only be sustained if South Africa progresses as it’s responsible for almost a quarter of that GDP and for significant amounts of foreign direct investment in the region.  But it also and most especially matters to all of us who have a fealty for justice and equality on the spinning globe.  South Africa will long occupy a special space in our political imaginations with a history that compels us to expand our moral horizons.  But this great experiment will collapse under the weight of its own myths if economic malaise deepens.  It is this tension that acts as our urgent convener here this morning.

When I consider the scholarship of your panelists, Jennifer, I have to say that I feel like the opening act for Beyoncé.  There’s little that I could add to the fireworks and I recognize that this crowd didn’t show up for my feeble voice but rather for their expertise.  My only ambition is to hopefully provide a little bit of a helpful frame before the showstoppers arrive on stage and perhaps I’ll manage to give you a sense of what we see as some of the challenges and opportunities in our bilateral relationship.  And, I might even manage to sound one or two provocative notes, if I’m allowed.

So your agenda projects an examination of South Africa’s political and economic landscape but to those I’d like to add the business of transformation.  It’s really impossible to have a proper accounting of politics and finance in South Africa without an interrogation of the ongoing attempts to help integrate the masses of previously disadvantaged individuals.  Electoral outcomes and the crisis in unemployment must always be read with a special appreciation of that foundational challenge.  That seems so incredibly obvious to me when I say it but I find too many instances where that isn’t factored into the analysis.

You can’t really have a proper conversation about economic trends in South Africa and where the politics are headed if you don’t appreciate that over the last few years the percentage of black CEOs in top firms in South Africa has gone from 15 per cent down to 10 per cent.  And across the board, if you look at the top 40 companies in the country and you look at the 350 individuals who are part of executive management of those top 40 companies, less than 19 per cent of them are black South Africans.  You really have to understand what that means in an economy where 75 per cent of the economically active people in the country are black but they have that kind of paucity of representation at the corporate boardroom.  And for too many young South Africans who are demonstrating and protesting now while still being aspirant, it’s difficult for them to step back and not think that there may have been a political transformation in 1994 but not a proper economic one that really inserts them into the mainstream of the economy.

So that’s the existential crisis that persists in South Africa and if we don’t get at that, then we’re not really talking about this country in its infinite dimension.  So, “It becomes more necessary to see the truth as it is if you realize that the only vehicles for change are these people who have lost their personality.  In time we shall be in a position to bestow on South Africa the greatest possible gift, a more human face.” So pronounced Stephen Biko four decades ago in the height of struggle.

We see that more human face today in strong and vital institutions that serve as a bulwark against graft.  We see it in communities transformed through the basic provision of housing, electricity and health services; and we see is most essentially in the tens of thousands of young people in South Africa who have been able to take advantage of access to an education that throws open the world.  However, that more human face is pulled on at the edges by crippling poverty and a persistent inequality that pose the greatest threats in the immediate and to the long-term stability of the country.  The poverty rate hovers slightly above 50 per cent.  There are 7.5 million South Africans who are unemployed, 19 million adults in that remarkable republic without a matric or a high school equivalency.

Without growth, South Africa’s social contract might unravel.  Growth is currently less than one per cent.  To put that in perspective, in the period from 1994 after Nelson Mandela was sworn in to today, the average growth rate in the country has been about 3.5 per cent.  In the 20 years before 1994, the growth rate was at 1.5 per cent and there were no real jobs grown in the economy from sometime in the mid-seventies to 1994.  So right now, today, South Africa is enduring growth rates that are on par with the height of the challenges during apartheid, during the height of the sanctions that were imposed on the country.  That’s a profound thing to have to wrap your brain around.

The challenge is that while everyone wants growth, it isn’t clear that everyone wants change.  But, we need to see some changes on the policy front to achieve inclusive growth that’s urban, private sector driven, targets the information economy and ultimately, of course, creates jobs.  As you are well aware, the challenges in the economy coupled with disgruntlement with service delivery at the district level and outrage at acts of corruption, produced municipal election results that have altered the political landscape in South Africa in key metros.  The ANC suffered its worst result at the ballot box since apartheid.  The decline to 54 per cent share nationwide led to losses of its control in Johannesburg, in Tshwane and in Nelson Mandela Bay.  The election also revealed an increased ANC dependence on rural voters at a time of steady urbanization and a reliance on the party’s ability to push up its margins in the stronghold of KwaZulu-Natal.  The resulting coalitions of opposition parties, most notably the seemingly incongruent pairing of the Democratic Alliance and the left wing Economic Freedom Fighters will bear close watching as South Africa lurches towards what will be a heavily contested national election in 2019.

Some of us have often wondered whether or not the ANC could maintain its big tent of neoliberals and communists and labor party leaders and maintain one whole party.  I marvel at how the coalition of the DA and the EFF will hold together for the next round of elections.  Fascinating.  For a political junkie like me, it’s prime time.

The municipal campaigns were litigated with a heavy infusion of racially charged rhetoric and one suspects that might only increase when the stakes are as high as national control.  Here it is terribly important to note the role that instability on university campuses is also playing in the animation of the politics of the moment.  The #FeesMustFall campaign has dominated social media and has been the central organizing principle for young intellectuals in the country.  It’s inspired older generations of South Africans who embrace it as the next logical iteration of the quest for equality but it also has been disquieting in some spaces where violent disruption has been the default organizing tool.  The direction of this movement is difficult to forecast but as it makes common cause with the masses of young people on the margins of the economy who don’t have a clear path to higher education.  It has the potential to see broader unrest or a more probing examination of the promise of opportunity two decades after Mandela’s inauguration.

Think about this, if you will, for a moment.  South Africa has a population of 10.2 million young people between the ages of 15 and 24 years old.  Of that 10.2 million, a full third are no longer in school, have never ever held a job, and have not received any vocational training.  So when you look at the challenge on university campuses of young people who have some kind of pathway in education but are constrained by the inability to pay — and then the challenge of young folks who are on the outside looking in and don’t see a way that they can be incorporated into the mainstream economy — you can see why there is tremendous concern amongst policy leaders, business leaders, and civil society leaders in the country about what happens with that cohort.  Particularly given that this is absent growth.

Any segue in this discussion from politics to the economy must pass through the surreal landscape of the somewhat bizarre intermittent threat of arrest hanging over the respected Finance Minister Pravin Gordhan.  It’s kind-of like the elephant in the room that you’ve really got to talk about.  This is a development that threatens to crowd out in-country discussions of some of the bold actions needed to strengthen the economy through the reform of institutions.

South Africans are legitimately concerned about the health of state enterprises.  They want to see that government tenders are not awarded to unqualified bidders with inside connections.  They want to see that state owned enterprises are run as businesses and not destructive personal fiefdoms.  The steady drumbeat of major court rulings against government leaders and those running SOEs impacts South Africa’s creditworthiness and attractiveness relative to other markets which is why we would encourage South African leaders to stay on the tough path of reform spelled out in the latest budget, spelled out by Minister Gordhan, and spelled out by President Zuma at a press conference that he had on September 16th with government, business and labor leaders.

As the U.S. considers a way forward with South Africa, understanding the potential power of South Africa’s strengths and the causes of its weaknesses will be essential.  We all know the saying that there’s nothing wrong with South Africa that can’t be repaired by all that’s right in South Africa.  The country still really has an abundance of riches when you consider its physical infrastructure and when you consider the capacity of young people in that country who, when given the tools that they need, are able to out-compete and out-innovate anybody else on this planet.  I have seen it time and time again.

Let me share, if I could, a few statistics to back some of this up.  Africa has about one billion people and an economy of $2.4 trillion.  I just want to note, as President Obama did at the US-Africa Business Forum, that despite the incredible progress that’s been made in the last decade-and-a-half or so, right now the entire GDP of the entire continent is still only the equivalent of the GDP of France.  A really, really striking number there.

South Africa’s 55 million people, which represents 5.5 per cent of the African population, contribute $360 billion economically.  Foreign direct investment to Africa is about $55 billion per year and South Africa garners about $7 billion of that or roughly around 13 per cent.  South Africa’s financial services sector backed by a sound regulatory and legal framework is sophisticated, boasting dozens of domestic and foreign institutions providing a full range of services, commercial, retail and merchant banking, mortgage lending, insurance and investment.  Simply put, Africa again cannot succeed without South Africa.  That is not to say that South Africa’s success will guarantee Africa’s prosperity but it certainly seems to be a necessary condition.

I keep coming back to this because I just worry that too often my friends in Washington D.C.  are excited to talk about other pockets of activity and kinetic energy on the continent and don’t spend enough time focused on what I see as just the critical and vital space that South Africa plays both in the economy and for regional peace and security.

That’s why we prioritize our partnership with South Africa.  President Obama has sought to transform the relationship between the U.S. and Africa to one of equal partners.  He has said “I see Africa as a fundamental part of our interconnected world, partners with America on behalf of the future we want for all of our children.  That partnership must be grounded in mutual responsibility and mutual respect.” And, as you’ve heard the President say on many occasions, most recently last week at that business forum: South Africans and Africans are not looking for aid right now but they are looking for trade, economic development that will help nations to empower themselves.

This absolutely holds true for South Africa in this moment and in what we like to call at our embassy our “partnership for prosperity,” acknowledging that in the 21st century we need to work together to further our mutual prosperity.  I keep saying in conversations with policy leaders in South Africa that we’re no longer in a space where – despite the rhetoric in some quarters – we can build walls around our countries, put a moat and pull up the drawbridge.  We are really dependent on success in Pretoria for success in Main Street in Cleveland, OH.

Our trade volumes total about $21 billion per year in goods and services, about R300 billion.  Our trading profile is balanced with imports and exports roughly equal and wide-ranging over hundreds of products.  While other countries mainly purchase raw, unprocessed commodities, the U.S. buys cars, agri-processed litchis and high-quality wines from South Africa.  They’re really good too.  Trade and services is also absolutely vibrant in tourism, in education, in technology.  Services are the bedrock of both of our economies and our trade and services is only going to grow stronger.

I hope and I know that my friends in South Africa in the disparate economic ministries will focus on the incredible strengths that South Africa has and will exploit those strengths as we look at regional trade facilitation across borders on the continent.  Our profile supports vital industries in both countries allowing regional value chains to thrive.  It provides good, high-paying jobs on both sides and raises the standard of living in both countries.

We’re especially proud of the role that AGOA plays in South Africa and I know that you are all familiar with the protracted negotiations which made certain South Africa would be included in the unprecedented 10-year renewal of AGOA.   We are pleased that we were able to settle the chicken wars in South Africa.

AGOA is a uniquely American contribution to the development of the continent.  It allows fre access to our markets making Africa a more competitive place to do business.  As Minister of Trade and Industry Rob Davies has frequently pointed out, South Africa has made the best possible use of the tariff lines in AGOA, sending a wide variety of manufactured goods and high value agricultural products to our country.  We’re working with South Africa right now, today – and we were just in conversations between our U.S.T.R. and with Minister Davies 48 hours ago –to add new products to their export basket and new producers of products to what they already export.

I’m really proud that as a result of our recent negotiations, we’ve been able to make an interesting shift with the importation of U.S. meats to South Africa to include those previously historically disadvantaged importers as the key to moving the product in the country.  That’s going to have a real impact on the ground in an industry that basically remains untransformed in the country.  So this is absolutely critical.  It’s a moment where we use this one lever we had in our trade negotiations to foster real transformation.

We’re engaged with the South African government and private sector to define what our investment relationship will become after AGOA expires as we work together to create prosperity in our markets.  We have to remember that 10 years will go by in a flash and if we don’t do the hard work now over the course of the next three, four, five years to design what the off-ramp will look like for AGOA, then we will have disadvantaged both of our markets.

Our robust trade relationship is founded on a strong bilateral investment partnership.  For example, the Ford Motor Company is looking at more investment, more products and more jobs in South Africa.  It’s investing $175 million right now in new investment in the economy.  The contributions of this iconic company since 2010 include the production of Rangers in Gauteng for export to over 148 markets and automotive parts in the Eastern Cape.  In April, Ford opened production lines for building the Everest sports utility vehicle in Pretoria.  The Everest program will supply cars throughout sub-Saharan Africa enhancing South Africa’s trade links with partners across the continent.

Ford’s investments are measured more than in dollars spent.  It’s also measured by the number of jobs created, the skills and training provided to South African workers, the time Ford has spent developing suppliers and building up small enterprise and the donations to education and community life.

I am in the habit of really cheerleading and promoting the roughly 600 American companies that are invested in South Africa with an aggregate GDP of about 10% of the economy there but I’m in the habit of promoting Ford and GE and IBM and Google not just because they’re doing a good job of managing their bottom line in the country but because they are contributing again to the project of transformation.  It’s absolutely exciting for me when I go out to a General Electric plant, I see the locomotives that GE is building in conjunction with young South Africans and I see an innovation incubator where young South African engineers are studying, are learning and are having skills transferred in a way that will allow them to be the industry leaders that the continent needs in the second half of the 21st century.  That’s why I am an unapologetic cheerleader for our companies in South Africa.

So why are U.S. companies so eager to invest in the country?  Mostly because it’s the doorway to the rest of the continent.  Creating opportunities in South Africa allows goods and services to flow into the African market supplying millions of consumers with the products they need whilst also helping African companies reach out to the rest of the world.

While this trade and investment partnership has become a central feature, our relationship is based on a wide variety shared interests as well.  The U.S.  and South Africa have a deep and broad relationship that goes well beyond the government conference rooms in Pretoria and touches people’s lives in direct and profound ways.  For instance, in the past few months we’ve worked very closely with South African counterparts to support their response to the crippling drought in the region.  This cooperation was seen in the coordination of humanitarian food shipments through South African ports and distributed regionally, seed bank and seed distribution projects to get farmers back on their feet and contributing to the regional food supply and assistance on water quality, supply and management.

We’re also partnering closely with South Africa to mitigate and adapt to the potentially severe impacts of climate change so future droughts are less destructive and easier to manage.  We collaborate closely on countering wildlife trafficking, assisting not only at the national level by providing training, equipment and cooperation to the provinces and individual wildlife parks.  Poaching animals for horn and ivory is a multibillion dollar transnational criminal enterprise and disturbing destruction not only to natural resources but to the tourism economy nationally, to local and provincial governments and destructive on the ability of communities to have real agency in their own fate.

Our partnership with South Africa on the response to HIV and AIDS has been absolutely revolutionary, bipartisan, and unwavering.  Through the President’s Emergency Plan for AIDS Relief or PEPFAR, the U.S. government has provided more than $5.1 billion to support South Africa in the last 12 years towards the eradication of HIV and AIDS.  It’s the largest health initiative ever enacted by one country to address a particular disease.  Together, the U.S. and South Africa have been able to reduce HIV transmission and TB significantly over the past decade.

But South Africa’s young people are still at risk, especially its young women who are up to eight times more likely to be HIV positive than young men of their same age cohort.  Through our newly launched DREAMS initiative, we’re now focusing more on the social drivers that continue to make young women vulnerable to HIV.  When you consider that this week alone there will be 2,400 new HIV transmissions amongst young women in South Africa, you understand what impact that has on social development, the economic impact it has on lives that are marginalized, lives that are ultimately lost and the impact that it has on governments that need to continue to put upwards of six million people on antiretrovirals.  It’s just not sustainable if we don’t do something to curb the curve of new transmissions and I’m proud of the new program that we’ve built and designed with young South African women themselves serving at the forefront, serving as ambassadors in this program and taking real leadership over their lives.

I could go on and on and on all day about our areas of cooperation.  In the energy sector we’re working with South African partners on practical and technical steps to help alleviate shortages so we don’t have the kind of rolling blackouts that we had in South Africa two years ago.  A very brief anecdote.  There is a neighborhood in Johannesburg, a revitalized neighborhood called Maboneng where a lot of my young hipster friends hang out.  My daughter in particular was fond of dragging me to Maboneng to go to her favorite South African dressmaker in the community.  I remember last year during the blackouts going out to Maboneng, going to visit with this young dressmaker.  We went to her shop.  The lights were completely nonexistent.  She was sitting in the dark by herself and the four women whom she always had working with her on the sewing machines were nowhere to be seen.  I asked her what was going on.  She said “We’re having rolling blackouts, so I had to let go of these four women.” So when I think about that impact and you multiply it across communities, you understand why our ability to have reliable sources of energy and electricity in these communities will make all the difference in the world to engendering the kind of growth rates that South Africa needs to continue to employ people and make social progress.

So I could go on.  I could talk to you about the partnerships in the energy sector.  I could talk about what we’re doing in law enforcement, what we’re doing with South Africans in education and literacy but you would quickly grow bored.  Suffice it to say that irrespective of the challenges that exist sometimes in the government-to-government relationships, we manage to work through those challenges to make good progress.

I am keen to note to all of you that there was a Pew Research study a few short years ago that showed that roughly 74 percent of South Africans have a positive view of the United States.  That’s important to note and to remember when you look at some of the headlines about some of the challenges and the tensions that can sometimes crop up and some of the interesting accusations that come from some quarters around our intent.

So despite the challenges I described, you can see there are a number of vital areas where we’re working together for mutual prosperity and where we’re making real gains but I also know we can do better and we can do more.  We can do a lot more.  AGOA is an essential element of our trade relationship but it can only achieve but so much.  The U.S. sees the need for a mature, balanced and mutually beneficial trade relationship and from recent talks with DTI, we are confident that South Africa sees the need as well.

We do all agree on the goal: a South Africa that’s inclusive, transformative and with a strong economy that ensures prosperity for all.  A broadly shared prosperity.  While the bulk of the work has to be done domestically, external actors such as the individuals who are in the room today have to have a seat at the table as well.  To do this we need to find a way to bury suspicions of the past, to build trust that will allow us to work as partners and of course this will secure the bright future that young people aspire to.

Our partnership for prosperity is inclusive of all areas of cooperation and useful as a platform to spur economic growth.  This partnership will lead to job creation, increased bilateral investment, more energy production, greener energy jobs and more efficient healthcare programs.  Ideally we would be able to wrap all of our shared concerns into an economic partnership agreement but those who’ve worked in Washington on Capitol Hill or those who’ve been in diplomacy know that it takes an incredibly long time to work through the simplest things let alone complex and complicated trade negotiations.

What I’d like to propose in the shorter term is a series of smaller agreements that set out our sectors of cooperation and outline reasonable, achievable goals for moving forward together.  These smaller agreements would focus on a range of topics important to both sides, interests like protecting and using intellectual property, protecting labor rights, trade facilitation, bilateral investment issues and fostering trade in services.  In my mind we’d work on each agreement separately figuring out the best ways to collaborate and address concerns to make those agreements absolutely transparent and mutually beneficial and while separate, these agreements would all be building towards the ultimate goal in our partnership.

I would like to call our joint efforts to finalize the group of agreements a “strategic economic partnership” or a STEP (only because we just don’t have enough acronyms in Washington D.C.).  That name has a little bit of cachet to it since these small agreements would be steps made by our governments with the strategic objective of building a more robust partnership.  For this to work, we’re going to need a groundswell of support.  We need your support.  Companies need to engage with both governments and advocate for more transparent regulations, more clear policies and commitments to developing these agreements.

I was having a conversation with executives from Caterpillar just last week and they’ve been on the cusp of signing an agreement in South Africa, but it’s been delayed because of the moving goals around the BBBEE policies in the country.  I’ve had conversations with other executives who are looking to move electrical products into the country, things that require a plug and because of new regulations, we’ve gone from 30-day approvals for those products to move-in to 500 days.  And of course that means that companies and products just have to go searching in other markets, which again is not good and helpful ultimately for South Africa and its growth.

In closing, I want to refer yet again to the press conference that President Zuma had.  I guess it’s two weeks ago now, around September 16th.  In that press conference where he convened business, labor and government leaders, President Zuma ticked off a number of priorities to help transform the investment environment in South Africa and push up growth.  I was struck by one of the points that the president made or one of the agenda items that he lifted up.  The President suggested that in order for progress to be made, a youth employment program that will aim to place one million young people in paid internships in the private sector over a three-year period with the cost to be borne by the private sector and supported by a negotiated package of government incentives would be needed.  I was struck by that in so many ways.  I think of course that President Zuma is spot on, on the need to develop opportunity for young people in the country.  I know my friends in the South African government won’t mind my saying this but I was struck by the lack of detail around the plan at this point in crisis.  I was struck by what seems to me an inability to have a proper conversation about the alignment of skills that actually exist amongst young people in the country, the kind of training that could and should be made available and the jobs that are still yet wanting in so many companies in the country.  There’s a lack of alignment there, a lack of a thread that runs through all of that, that really needs to be examined and tossed over and there really has to be an MRI performed around these training programs and opportunities for young people.

I’ve gone through the percentages with you.  I’ve gone through the numbers.  I will tell you that when I talk to young people in our Mandela Washington Program, when I talk to the young women who are our DREAMS ambassadors, when they tell me that they are the generation of leaders that the country has been looking for and waiting for, I couldn’t agree with them more.  But I have to say to all of you today that while I remain wildly optimistic about the ability of our friends to get it right, I share just some real anxiety about what things look like over the course of the next few years.

But since I am in DC on the occasion of the opening of the new African American Museum which I toured a few days ago, I have to be reminded of our own challenges here at home, the ways that we’ve managed to work through them on the economic front and on the pursuit for equal access and that just gives me a particular confidence that we’ll all get there together.  So thank you so very much for enduring my rambles this morning.