Trade relations between South Africa and the United States have traditionally been strong, and with innovation at the helm, a more prosperous economic future could be on the cards, as US Ambassador, Patrick Gaspard explains.
According to the Department of Foreign Affairs, business and personal links between South Africa and the United States (US) have been burgeoning and a strong, long-term SA-US working partnership has developed after 1994.
At the heart of a flourishing South Africa, we find a key ingredient to business success and an important driver and stimulator of economic growth — innovation. Among the guests attending the Accenture Innovation Conference at the Johannesburg Country Club last month, was US ambassador to South Africa, Patrick Gaspard, who spoke frankly to Opportunity about SA-US trade and how innovation can drive future economic growth.
As Gaspard points out, the United States and South Africa have a healthy trade relationship, valued at roughly $16 billion (approximately R190 billion) per year in goods and $5 billion (approximately R60 billion) in services. According to him, trade and investment has been pretty steady recently. The global financial crisis had a large effect on world trade, but Gaspard says we are seeing the trade balance come back to where it had been previously.
Gaspard encouragingly points out that “American companies like to invest in South Africa. You are seen as a reliable place to invest and a gateway to opening up the rest of Africa to American business.” Recently however, he says, there have been some policies debated by the government that are causing concern. An example he mentions here is President Jacob Zuma’s comments on land reform. He also says they are concerned about the Private Security Bill and the Mineral and Petroleum Resources Bill, as well as elements in the Department of Trade and Industry’s draft Intellectual Property Policy.
Elaborating further on possible barriers that could affect SA-US trade, Gaspard says an important issue right now is the renewal of the African Growth and Opportunity Act (AGOA), which is currently before Congress and must be decided by September. He also says, “One of the new concerns we have is the recently adopted Economic Partnership Agreement between the Southern African Development Community (SADC) and the European Union. This grants preferential duty free access to many European goods while American goods face hefty customs duties. Given the unilateral market access that South Africa gets into the US under AGOA, this does not seem equitable. Moreover, this preferential treatment for Europe could affect South Africa’s eligibility for AGOA.”
Gaspard says it is well known that trade and investment, both imports and exports, stimulate local economies. He says trade is a growing part of the global economy and it creates and leads to better relationships between countries.
Looking at imports and exports between South Africa and the US, he says automobiles are one of the main items that the United States imports from South Africa, which is a major benefit from AGOA. “Before the start of AGOA, South Africa really didn’t export cars anywhere, and now your auto manufacturing industry is valued at about $5 billion per year and supports thousands of jobs. But we also import minerals, gold, wine and a host of other items from South Africa,” Gaspard says.
In terms of investment opportunities in America, Gaspard highlights that South Africa’s largest investment at the moment is SASOL’s project in Louisiana on energy production. In terms of the investment opportunities in South Africa, he highlights the innovation sector of the economy and says it is undervalued and a great opportunity for American investors.
“This sector [innovation] is one of our strengths, so it makes for a great partnership. We would like to help expand your internet and communications infrastructure, assist small businesses to develop information technologies and help your manufacturing sector meet standards required to join global value chain production. We also have a lot of investment and trade in consumer products, automotive manufacturing, renewable energy, and transportation,” he told Opportunity.
Elaborating on the concept of innovation, Gaspard says to him it is the intersection of a good idea with the opportunity to implement it. He makes reference to South Africa’s youngest patent filer Ludwick Marishane’s DryBath®, but says innovation can also be a process, such as advances in manufacturing and logistics that are happening all the time. “In a place such as South Africa it means the chance for development to leapfrog years of time and effort, and bring real, sustainable solutions to the everyday problems that many people face in their lives,” he says.
According to Gaspard, innovation can help trade and investment between South Africa and the US. He refers to recent gains in the US economy and how innovation helped to develop new industries and processes. He says today information flows so quickly that entrepreneurs pick up on new ideas instantly, looking for market openings in their own country for ideas they find all over the world. “It is up to us to make sure we have the right frameworks in place on the policy and regulatory side to ensure that those who are willing to put money into projects are not stymied by regulations.
“Innovation makes our economy much more resilient, and generates the most growth and new jobs. In our case it minimised the depths of the recession and hastened our recovery. In the past five years we have created 11 million new jobs in the US, and many of the jobs are in sectors that are in new industries, with new technologies. Instead of traditional manufacturing, we are manufacturing airplanes and wind turbines from carbon fibre,” he says.
The 26-year old Siyabulela Xuza from Mthatha in the Eastern Cape, South Africa, recently had a minor planet next to Jupiter named after him, following his development of a new rocket fuel for NASA while studying at Harvard School of Engineering and Applied Sciences. After being presented with this example and asked about the role that our youth play in driving innovation, Gaspard says the potential is limitless.
“I think while the bonds between our two countries are strong and growing, this is less about two countries than the technologies that are shared by us to collaborate and drive innovation. Because the expense of communication has come down so much, and because the internet and cell phones put knowledge in almost everybody’s hands, it has become much easier to work together across borders and oceans to develop new ideas and new ways of thinking. That is what is helping drive innovation, and these two are examples of what can happen when all the pieces are in place,” he says.
Improvements in infrastructure
Speculating on where the future of innovation for the continent lies, Gaspard says the future for innovation in South Africa is developing technologies that have a significant effect on people’s lives. He mentions improvements in infrastructure and logistics that bring basic services to those who go without on a day to day basis as crucial for the development of the continent.
“That is why I am so enthused by those who are bringing usable technologies to help improve the quality of life. Imagine the feeling to have access to medicines and improved health care through off-grid electricity generation? To have light to allow students to study via lamplight rather than paraffin? Africa can be a springboard to so much because once an idea is developed, it can be replicated across thousands of towns and villages, each providing feedback to improve the process or technology, or adding on to it in a local way, innovating along the way,” he says.
Gaspard concludes by saying that, “we can always learn from one another. I think that the way South Africa weathered the global economic crises is a case in point, since you fared better than most countries. There are some trade issues that need to be resolved, such as the customs duties on US imports, and some pending legislation and government policies that we think should be reconsidered. Our countries have a good relationship, and we want to make it better. As President Obama said, we want to engage while at the same time levelling the playing field for US companies doing business in South Africa.”