WEEK TWO: CHAPTER TWO: (22-26 Feb 2015)

South African State Presidents State of the Nation

Economic Issues

A resilient and fast growing economy is at the heart of our radical economic transformation agenda
and our National Development Plan. The prices of gold, platinum, coal and other minerals that we sell
to the rest of the world have dropped significantly and continue to be low. The economies of two of
our partners in BRICS: Brazil and Russia - are expected to contract this year. The third, China, will not
register the kind of robust growth that it is known for.Because our economy is relatively small and open,
it is affected by all of these developments. Our economy is also affected by domestic factors such as
the electricity constraints and industrial relations which are sometimes unstable. The IMF and the
World Bank predict that the South African economy will grow by less than one per cent this year. The
lower economic growth outcomes and outlook suggest that revenue collection will be lower than
previously expected. Importantly, our country seems to be at risk of losing its investment grade status
from ratings agencies. If that happens, it will become more expensive for us to borrow money from
abroad to finance our programmes of building a better life for all especially the poor. The situation
requires an effective turnaround plan from us. It is about doing things differently and also acting on
what may not have been acted upon quickly before. I will share a few points that we believe would
make a difference. First, our country remains an attractive investment destination. It may face
challenges, but its positive attributes far outweigh those challenges. We must continue to market the
country as a preferred destination for investments. This requires a common narrative from all of us as
business, labour and government. If there are any disagreements or problems between us, we should
solve them before they escalate. This is necessary for the common good of our country. We have had
fruitful meetings with business, including the high level meeting with CEOs on Tuesday this week. We
have heard the suggestions from business community on how we can turn the situation around and
put the economy back on a growth path. We have heard the points about the need to create the correct
investment support infrastructure. Government is developing a One Stop Shop/Invest SA initiative to
signal that South Africa is truly open for business. We will fast-track the implementation of this service,
in partnership with the private sector. Such an initiative requires that government removes the red
tape and reviews any legislative and regulatory blockages. We have established an Inter-Ministerial
Committee on Investment Promotion which will ensure the success of investment promotion
initiatives. Compatriots, we have heard the concerns raised about the performance of state owned
enterprises and companies. Many of our SOCs are performing well.
Tourism Sector

We must take advantage of the exchange rate as well as the recent changes of visa regulations, to
boost inbound tourism. SA Tourism will invest one hundred million rand a year to promote domestic
tourism, encouraging South Africans to tour their country. We have heard concerns from companies
about delays in obtaining visas for skilled personnel from abroad. While we prefer that employers
prioritise local workers, our migration policy must also make it possible to import scarce skills. The draft
migration policy will be presented to Cabinet during the course of 2016. We have heard the appeals for
policy certainty in the mining sector, especially with regards to the Mineral and Petroleum Resources
Development Bill. The Bill was referred back to Parliament last year. We await Parliament to conclude
the processing, which we trust will be done expeditiously.

Infrastructure

Progress has been made to stabilise the electricity supply. There has been no load shedding since
August last year which has brought relief for both households and industry alike. Government has
invested eighty three billion rand (R83 billion) in Eskom which has enabled the utility to continue
investing in Medupi and Kusile, while continuing with a diligent maintenance programme. Additional
units from Ingula power station will be connected in 2017, even though some of them will begin
synchronisation this year. The multiple bid windows of the Renewable Independent Power Producer
Programme have attracted an investment of one hundred and ninety four billion rand. This initiative is
a concrete example of how government can partner with the private sector to provide practical
solutions to an immediate challenge that faces our country. In 2016, government will select the
preferred bidders for the coal independent power producer. Request for Proposals will also be issued
for the first windows of gas to power bids. The nuclear energy expansion programme remains part of
the future energy mix. Our plan is to introduce nine thousand six hundred megawatts of nuclear energy
in the next decade, in addition to running Koeberg Nuclear Power Plant. We will test the market to
ascertain the true cost of building modern nuclear plants. Let me emphasise that we will only procure
nuclear on a scale and pace that our country can afford.

Global partnerships

The African continent remains central to our foreign policy engagements. South Africa continued to
support peace and security and regional economic integration through participation in the African
Union and the Southern African Development Community initiatives. We continued to assist sister
countries in resolving their issues for example in Lesotho and South Sudan. The South African National
Defence Force represented the country bravely and remarkably well in peacekeeping missions on the
continent. We are truly proud of our soldiers. They will be showcasing their capability in Port Elizabeth
from the 13th to the 21st of February, the celebration of Armed Forces Day. The Agreement by BRICS
nations on the New Development Bank or BRICS Bank came into force and the bank is envisaged to
approve its inaugural projects in April this year. We participated in the India-Africa Summit as well as
the Forum on Cooperation between Africa and China as we strengthened these important partnerships.
China announced investments of fifty billion US dollars of which South Africa will receive ten billion US
dollars for infrastructure, industrialisation and skills development. On North-South cooperation, we
continued our engagements with the European Union as a bloc which is our largest trading partner and
foreign investor. Over 2000 EU companies operate within South Africa creating over three hundred and
fifty thousand jobs. South Africas relations with the USA and Canada continue to strengthen, especially
 in the areas of economy, health, education, energy, water, safety and security, capacity building and
the empowerment of women.
Source: www.news24.co.za

QUESTIONS

1. The South African State President mentioned that we must take advantage of the exchange rate
as well as the recent changes of visa regulations, to boost inbound tourism.
a. Describe the exchange rate and further explain how changes in exchange rate affect the
economy within a South African context (2)
b. Name the type of environment that Visa regulations are categorized under (1)
c. Identify and define one more economic variable the State President mentioned and further
indicate what the president said about that variables (3)
2. Eskom managed to stabilize electricity supply in South Africa, name the environment and variable
that Eskom represent (2)
3. Explain why the South African National Defence Force assist in peacekeeping missions in countries
such as Lesotho and Sudan (3)
4. The president mentioned that South African economy will grow by less than one per cent this
year, describe the implications of a downsizing economy to a business? (3)
5. Describe the implications of the trade agreement made between China and South Africa and
South Africa and other countries to businesses (3)
6. The economies of two of our partners in BRICS: Brazil and Russia - are expected to contract this
year. Explain the implication of the above statement (3)

TOTAL: 20 MARKS