US visit ‘important for SA economy’

27 June 2013

United States President Barack Obama’s visit to South Africa will not only help strengthen ties between the two countries but will also serve as an important showcase for the economy, says Trade and Industry Minister Rob Davies.

Briefing journalists in Pretoria on Wednesday, Davies said South Africa would use the opportunity to showcase to external trade partners that the country, and the rest of Africa, had growth prospects that could rope in investments, especially in infrastructure, trade and development.

“The reality is that Africa is turning around … We are looking at partnerships that will strengthen our economy,” Davies said, adding that for this to happen, South Africa had to focus on integrating African countries into the global economy through infrastructure development on the continent.

Obama arrives in South Africa for an official working visit on Friday evening. The visit forms part of a three-country African tour, consisting of South Africa, Senegal and Tanzania.

President Jacob Zuma will hold talks with Obama in Pretoria on Saturday.

US, African relations

The White House said Obama would use his visits to reinforce the importance that the US places on growing ties with countries in sub-Saharan Africa, and would “underscore the President’s commitment to broadening and deepening cooperation between the United States and the people of sub-Saharan Africa to advance regional and global peace and prosperity”.

Davies said the US was a major player from whom South Africa could benefit. The two countries enjoy good trade relations, which Davies acknowledged could be improved upon.

“Our trade has been characterised by a proportion of value-added products coming from South Africa, which makes it of strategic significance to us.”

The United States continues to feature high on the list of South Africa’s trade and investment partners. It is a major export market for South African products and an important source of foreign direct investment.

There are currently about 600 US companies trading in SA, which provide more than 120 000 local jobs while contributing about 30 percent of their profits to local corporate social projects.

South Africa’s total trade with the US was in excess of R130-billion in 2011, with SA enjoying a trade surplus of approximately R18-billion, a 14.4% increase over 2010. South Africa is also the US’s biggest market in Africa, accounting for $7.3-billion of American exports.

African Growth and Opportunity Act

Davies said South Africa would also use the visit to highlight the importance of the extension of the African Growth and Opportunity Act (Agoa).

Agoa, which allows southern African countries to ship certain products to the United States tariff-free, expires in 2015, but African countries are pushing for its extension.

“Our message is that we would like to see a rollover, an extension of the Agoa for a reasonable period of time, along more or less the architecture of Agoa at the moment,” Davies said.

Some in the US congress are questioning whether South Africa should be allowed to continue to be included in Agoa because they think the country is developed. Davies said it would be detrimental for the American market if SA were excluded.

“South Africa has been a beneficiary of Agoa, but we also think that Agoa is a very significant instrument to benefit the US, not least because it is a widely appreciated measure by the US, which builds the US a high degree of goodwill in its relations with other countries on the African continent.”

Around 43% of SA exports, totalling to about $4.6-billion, have entered the US under the Agoa programme and this, according to Davies, has helped support the development of the economy, notably in manufacturing.

Sasol aims to go big in Louisiana

Also speaking at Wednesday’s briefing was Sasol group executive Maurice Radebe, who agreed that Agoa had played a major role in stimulating exports to the US, consolidating the high-tech industry in South Africa and creating local supply chains.

Sasol announced in December that was beginning the front-end engineering and design phase for a gas-to-liquids plant it is planning to build in Lake Charles, southwest Louisiana in the United States.

The project would allow for the beneficiation of US gas reserves by leveraging Sasol’s gas-to-liquids (GTL) experience and technology.

The facility would be the first of its kind in the US, producing four-million tons annually or 96 000 barrels per day of high-quality transportation fuel, including GTL diesel and other chemical products.

Radebe emphasised the positive impact that the project – the largest single manufacturing investment in the history of Louisiana – would have on both countries.

“The benefits of these projects also extend back at home. It is a game-changing partnership and it is a compelling example of how bilateral trade can yield substantial foreign direct investment – which represents a win-win for both the USA and SA economies.”

CEO of the Ford Motor Company and president of the Board of the American Chamber of Commerce, Jeff Nemeth, told Wednesday’s briefing that Obama’s visit would highlight the fact that the US has been a major investor in South Africa over the years.

“The visit shows that the USA sees SA as a major trading partner … The fact that he is travelling here during his tour shows the strategic importance of South Africa,” Nemeth said.

Nemeth also highlighted the importance of Agoa and the benefits it has on South African companies gaining access to American markets.

Given the current economic climate, Nemeth said the African continent was the best place to invest in, as evidenced by the high returns it had given foreign direct investors over the last three years. Taking that into consideration, and the fact that the US was looking for a place to invest money in, Obama’s visit was highly significant, Nemeth said.

Obama’s itinerary

Obama will meet Zuma on Saturday and later hold a “town hall” event with young African leaders at the University of Johannesburg’s Soweto Campus. He will also hold talks with Nkosazana Dlamini Zuma, chairperson of the African Union Commission.

US First Lady Michelle Obama, meanwhile, will have tea with Zuma’s wife, Thobeka Zuma. The Obamas will then attend an official dinner hosted by Zuma.

On Sunday, they will fly to Cape Town to visit the prison museum on Robben Island. Obama will then join retired Archbishop Desmond Tutu for a stop at a community centre focused on healthcare. He will go on to give a speech at the University of Cape Town.