DIRCO on how the Economic Diplomacy related activities in Africa have contributed to addressing the domestic challenges facing South Africa; with Minister

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International Relations

07 September 2022
Chairperson: Mr S Mahumapelo (ANC)
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Meeting Summary

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In a virtual meeting, the Portfolio Committee received a briefing from the Department of International Relations and Cooperation (DIRCO) on how economic diplomacy-related activities in Africa contributed to addressing the domestic challenges facing South Africa.

The Minister of the Department said that the African Development Bank estimated that about 4.1% growth would be possible in Africa in 2022, which was much lower than the 2021 estimate of 6.9%, which was concerning to the Department. The Committee asked how DIRCO's economic diplomacy efforts were affecting rural communities and townships, a line the Minister indicated was difficult to trace. There was discussion over the need for infrastructure development in the form of roads, rails and ports in the Southern African Development Community (SADC) and continental Africa, as it was directly related to trade relations. The Minister responded that these discussions were being held within SADC, and that there was an appetite for infrastructure development.

The Committee also discussed the implementation of the African Continental Free Trade Agreement (AfCFTA), which was still in its infancy, as explained by the Minister. She expressed concern over the possibility of South Africa being grey-listed, saying it was for this reason that Cabinet had undertaken regulatory steps to prevent it.

There was agreement that there was a need for a meeting with the Department of Trade, Industry and Competition (DTIC), DIRCO and the Committee, as many of the questions raised by Members were also related to the work of the DTIC.

Meeting report

Minister's overview

Dr Naledi Pandor, Minister of International Relations and Cooperation, thanked the Committee for the opportunity to present an assessment of how diplomacy-related activities in Africa had contributed to addressing the domestic challenges facing South Africa.

Africa was an economy with a combined gross domestic product (GDP) of around $3.5 trillion, almost equal to Germany's GDP. The African Development Bank estimated that about 4.1% growth would be possible in Africa in 2022, a number much lower than the 2021 estimate of 6.9%. This fall was partly due to the impact of the Russia-Ukraine conflict on global and African trade.

The fortunes of South African economic diplomacy were dependent on a strong manufacturing and industrial base, global peace and stability, good governance free of corruption and conflict, a thriving agricultural sector, effective mitigation of climate change, and energy security. The first aspiration of Agenda 2063 was the call for a prosperous Africa based on inclusive growth and sustainable development. This was inextricably linked to the South African National Development Plan (NDP), which states that by 2030 South Africa should be a globally competitive economy and a leading member of the international community.

These goals were the drivers of the work that the Department of International Relations and Cooperation (DIRCO) had done, and continues to do. Through the NDP, South Africa aimed to address the challenges of unemployment, inequality and poverty, focusing on creating a strong and inclusive economy. Economic diplomacy was a means of achieving national priorities through diplomatic work that complements the traditional political diplomacy that DIRCO missions perform.

She said that the presentation included a number of key activities implemented according to the annual plans of DIRCO. The Department's work included identifying opportunities, presenting them to South African companies, supporting South African companies to pursue the interests that had been identified, and protecting the interests of South African companies when they were threatened abroad. The assessment focused on activities initiated, those supported and promoted by DIRCO, while attempting to give a sense of the impact of each.

The regional body of the Southern African Developmental Community (SADC) and the continental body, the African Union (AU), also played an important role in creating a conducive environment for trade and investment to create economic growth and employment for the African continent. Earlier this year, the Minister launched the Coordination Mechanism for Economic Diplomacy (COMED). COMED brought together key government departments, state-owned companies and private sector organisations to bridge the past silo mentality, and to improve coordination of economic diplomacy. COMED would become a repository and source of exchanges of information on investment and trade leads under one contact point. This body would assist in ensuring that national interests were adequately marshalled, promoted and protected.

DIRCO on economic diplomacy

Ms Tselane Mokuena, Chief Director for East Africa, DIRCO, said the Department's strategic goals were the pursuit and achievement of national priorities, specifically addressing the triple challenges of poverty, unemployment and inequality through economic diplomacy.

The presentation included the country-specific activities of Kenya, Uganda, Seychelles, Rwanda, Comoros, Mauritius, Ethiopia, Cote d'Ivoire, Senegal, Ghana and Nigeria.

She said the Southern African Development Community (SADC) was guided by the SADC Vision 2050, the Regional Indicative Strategic Development Plan (RISDP) (2020-2030); the Industrialisation Strategy and Roadmap (ISRM) (2015-2063); and the Regional Infrastructure Development Master Plan. The Council of Ministers that was held in March reiterated the importance of industrialisation in uplifting the livelihood of the people of the SADC region.

Notably, the World Health Organization (WHO) facilitated establishing an mRNA vaccine technology transfer hub in South Africa.

The challenges that the DIRCO was facing include:

  • Investment aftercare;
  • Foreign competition;
  • Anti-foreigner sentiment;
  • Difficulties in repatriating profits;
  • Challenges with energy and security;
  • Delayed or non-issuance of visas.

The presentation recommended:

  • The need to strengthen South African business forums;
  • To increase engagement with Chambers of Commerce and government;
  • To coordinate South Africa's approach in countries on the African continent;
  • The development of rapid response mechanisms;
  • To work with newly established coordination mechanisms for economic diplomacy;
  • To strengthen the holding of quarterly sectoral meetings

Discussion

Mr T Mpanza (ANC) asked how DIRCO's efforts were affecting people where they were. South Africa was still suffering from inequality in terms of economic opportunities due to the legacies of colonial apartheid. How did initiatives mentioned in the presentation translate to the grassroots, like township and rural economies and street vendors? Marginalised communities -- those who were in the peripherals of the economic mainstream -- needed to be empowered, otherwise the economic benefits of DIRCO's efforts would be elitist. The phenomena of looting and unrest last year would continue if marginalised communities were not uplifted. The high level of youth unemployment in South Africa was a ticking time bomb. How was DIRCO, through intergovernmental relations from the economic cluster, working to bring tangible benefits to South African communities?

Mr G Hendricks (Al Jama-ah) said that Al Jama-ah was meeting a mission from the United Nations (UN) to discuss the upliftment of those in poverty through various means. He complimented DIRCO for setting the scene for such a meeting to take place. He agreed with Mr Mpanza that all these DIRCO initiatives should  translate into the rural communities and townships. When Mr Hendricks was in Atlasville to address over 200 female Muslim African entrepreneurs, the issue over entry into the halaal market was raised. The halaal market was a few trillion-dollar market, where Africans could play an important role in supplying products.

Al Jama-ah was assisting the community in Groutville that grows peanuts, to manufacture peanut butter. The Groutville community, where Chief Albert Luthuli was buried, would like the product to be exported all over the world. This would be a great tribute to Chief Luthuli. The government had recently given a fishing vessel to Mpame Village -- could the fish caught by this vessel be exported to Mauritius? This would be better than opting for the wholesaler that the presentation had referred to.

On the textile initiative in Ladysmith, he said the facility needed to be in Cape Town, to involve the coloured community from the Cape Flats who had been continuously marginalised. He emphasised that international support was necessary to revive the clothing industry in South Africa, and expressed the need for similar presentations for businesspeople in townships to understand the work of DIRCO and how they could leverage that work. He suggested to the Minister that there must be a special person or mission for small businesses.

The Chairperson explained that that was why the Committee had agreed to have community-based international relations oversight forums to deal with matters like those raised by Mr Hendricks. He re-emphasised the importance of looking at the economy at the micro-level.

Mr W Faber (DA) said that the presentation should have been a joint presentation with the Ministry of Trade and Industry, and suggested that a joint meeting be held at some point. He referred to assisting Kenya with printing, and said that a year ago, South Africa was not able to print licences due to a machine that was in for repairs -- would South Africa be assisting Kenya with the same type of printing? This could potentially be problematic, as South Africa had a backlog.

On SADC exports, there were a number of role-players involved, such as Trade and Industry and Energy. Was South Africa making money, or was it subsidising other countries? He asked why the Brazil-Russia-India-China-SA (BRICS) group had not been mentioned in the presentation, as BRICS surely played a role in economic diplomacy.

Ms T Msane (EFF) said there was not much focus on maintaining the African Continental Free Trade Agreement (AfCFTA) through projects such as the construction of roads, rails and ports by Africans. She asked about the AU's plan to establish a continental pharmaceutical manufacturing company. Africa relied mostly on imports for pharmaceuticals, and hopefully, it had learnt from the vaccine apartheid that had occurred during the pandemic.

She expressed the need for awareness of the damage the anti-foreigner stance was causing to South African trade and relations. A critical point was raised in the presentation over the 120 South African companies currently operating in Nigeria, yet there was a sentiment that Nigerians must go home. She raised another point on the rapid response of the African continent, saying that Africa had a very slow response, not only in the pandemic but also to insurgencies. Insurgencies were rising on the African continent and destabilising African trade, so Africa needed to act in a united manner to curb this. She said the presentation should have included reference to exports like tin, minerals, coffee, pharmaceuticals, scientific and medical products.

Mr B Nkosi (ANC) asked whether he could come into the DIRCO to conduct oversight in an unstructured way, and bring what he learnt back to the Committee. As he was based in Pretoria, this would make the task easier. He asked whether there was prior planning done between DIRCO and other departments involved in bi-national commissions before the agreement was reached on the areas where there was going to be involvement in bilateral relations. How many bilaterals were there on the African continent and how often was the impact of the relations in those countries being assessed? What were the gains South Africa made from the foreign direct investment in those countries?

He said that Google was laying a cable from the north to the south of the continent -- what were the benefits that the Department had assessed of this project as a private sector initiative? Another project was the gas exploration in central and northern Africa to address the gas problems in Europe -- had steps been taken to ensure that Africa as a continent benefited from these projects? He asked how problems that were faced by South African companies in host countries were addressed. Related to this question, how did DIRCO ensure that South African companies did not undermine labour laws in the host countries?

In a meeting between the Committee and the Department of Trade, Industry and Competition (DTIC), the Committee was informed about revamping the rail network within SADC. What was the progress on this project? Was DIRCO in discussion with other departments to look at the economic potential of gas and oil exploration in Mozambique and Namibia, and was it in discussion with the Departments of Public Enterprises, Mineral Resources or Energy, on the possibility of similar explorations of South African territorial waters?

Lastly, he said there was no coordination between DIRCO and economic sector departments concerning investment attraction and driving investment on the continent. Why did these coordination mechanisms not exist? What was the relationship between business and government that drives South Africa Inc in its engagement on the continent? The experience was that government-led initiatives tended to be reported directly through DIRCO or the DTIC, but private sector initiatives were reported only when there were difficulties.

Mr D Bergman (DA) said that Mr Nkosi had asked an important question on oversight. Members of Parliament (MPs) had the power and responsibility of oversight. This was not a duty all MPs took seriously or did properly due to a lack of understanding of duties, laziness or corruption.

Mr Nkosi called a point of order.

The Chairperson intervened to remind Mr Bergman that his points were focused on the issues raised by another Member, not the presentation's.

Mr Nkosi clarified that his question had been directed at DIRCO regarding structured oversight, and was not an opportunity for Mr Bergman to deliver a lesson on his subjective understanding of oversight.

The Chairperson agreed that Mr Bergman should keep to the subject of the presentation. The oversight of the Committee should be discussed by the Committee without the Department present.

Mr Bergman said that Brazil, China, and India had all managed to leverage a lot more from Russia through their membership of BRICS, and what was happening in Ukraine. South Africa had seemingly not managed to derive the same to benefit everyday South Africans. For example, oil or fertiliser that South Africa got from Russia was negotiated through South Africa's membership in BRICS, so he wanted someone from DIRCO to comment on that.

He said intra-Africa trade was vital to Africa, yet it represented only 1.7% of the African GDP. Part of this problem was the lack of infrastructure. Further hindering free trade in Africa was the double border system, which carried added costs through delays and corruption. There was also no continuity across the border gates. He asked the Minister to push her counterparts at the Department of Home Affairs for e-visas for African countries, as visas were currently a hindrance to investment and tourism, while not earning much capital for South Africa. America and Britain also had delays in processing visas, like many other countries, but if South Africa could get it right, it would lead to the attraction of tourism and investment. Referring to Zimbabwean exemption permits (ZEPs), he said if a person was already entrenched in South African society, they should be able to remain in South Africa.

There needed to be greater consistency in how South Africa deals with its SADC counterparts and the AU. For example, if South Africa was called upon to intervene in Rwanda and the DRC, there needed to be a principle of when to engage and when not to.

With the increase in electioneering on the African continent, there was a need for election monitoring from African countries, and South Africa had the potential to lead this on the continent.

He said grey-listing was the biggest risk to South Africa in terms of financing -- how would DIRCO and the Cabinet negate this?

He asserted that South Africa had some of the worst maintained embassies, and many missions were left to their own devices and ultimately had to work in less than ideal environments, which was not good for morale or safety.

Lastly, he mentioned that McDonalds had contacted him, as the company had been threatened for reporting illegal electricity connections at some of its branches, and incidents like these could potentially harm direct foreign investment. Departments needed to come together to protect investment in South Africa in such instances.

The Chairperson said the DIRCO report had mentioned that some SADC members had not yet come on board on matters concerning trade. Had these members been engaged separately to bring them on board? On the quantitative reporting of investments taking place, the Chairperson said it was important to show the participation of women from South Africa in the investments in Africa. He added that it should also indicate whether the investments were assisting in uplifting black people and changing the status of South Africa's economic history.

He thanked the Minister for the report, and said that it would be very helpful in disseminating information on the ground as a part of the Committee's oversight work.

DIRCO's response

Minister Pandor responded to Mr Mpanza that it was difficult to indicate whether the Department's initiatives were actually impacting rural communities and townships. She noted that the conversation was around state-owned companies and essentially private sector actors, and the role of DIRCO was primarily that of facilitation, as it was not a business actor itself. In framing the Economic Reconstruction and Recovery Plan (ERRP), the government had focused on the key priority of agriculture and expanding agricultural production, more specifically, the exports of citrus and other food products. Government had undertaken, through the Department of Agriculture and Rural Development, to provide smallholder farmers with support to export produce. Government planned to support over 2 900 smallholder farmers, and of this number, 1 904 had been supported through implementation of the ERRP. These smallholder farmers had got into value chains of exports of agricultural products into the African market and beyond. This implied that as a smallholder farmer somewhere in the Eastern Cape or Mpumalanga became a part of the value chain, the farmer would employ more farm workers and begin to work with other smallholders to keep up with demand, so more smallholders would begin participating in the value chain. She did not have a measure, but producers in the Eastern Cape had become a part of this product line. These producers had been primarily black, some had been women, and most were from the rural parts of the province.

Regarding the township economies, she said that young people were involved in producing T-shirts and other designer goods that were getting into markets in Africa and Europe. She was not tracking these numbers; the best information on this matter would come from the DTIC. However, she could say that small and medium-sized businesses were benefiting. She paid more attention to South African companies that sought to trade in Africa, and whether those companies were enjoying the access they should.

On the points raised by Mr Hendricks, the Minister said she hoped that other MPs were taking up the opportunities for community development and community projects that were offered by various UN agencies such as the United Nations Children's Fund (UNICEF) that were hosted by the UN coordination office in Pretoria. DIRCO had actively promoted the take-up of halaal products from South Africa, as South Africa had a well-established and competent sector and had assisted in securing significant business contracts by South African companies in the halaal product area. South Africa had become an observer of the Association of Southeast Asian Nations (ASEAN), which would hopefully open up more opportunities in the halaal trade area. She wished the community members who intended to produce peanut butter in Groutville success.

The Minister agreed with Mr Faber that the DTIC may also be considered, but she hoped that the Department had been able to do a credible job in working with other departments. She encouraged a meeting with any portfolio committees that the Chairperson may believe necessary.

On whether South Africa was subsidising other countries, she said that the South African government did not own petroleum, and it may be that companies sold at a lesser rate or that governments in SADC countries provided a higher subsidy than the South African government. Again, the DTIC would be able to explain this more fully.

Minister Pandor said the Department had not been asked to present on BRICS, but there had been previous presentations on BRICS. China remained the largest and significantly growing trading partner of South Africa, Russia far less, and the trade balance with India was shifting in South Africa's favour.

She said that Ms Msane was correct in saying DIRCO did not focus primarily on implementing the AfCFTA. It came into operation in January 2020. Considering the immensity of the agreement, several steps had to be put in place to allow for the effective implementation of the agreement. Among them were the agreements on rules of origin, various offers on tariffs and discussions on non-tariff barriers, all of which were being handled by the Trade and Industry ministers. She could get a report from the DTIC and have the relevant colleagues present it to the Committee.

Regarding infrastructure, there was a plan that should be included when a presentation was done on the AfCFTA. Key areas included infrastructure logistics, a common payment system, customs matters, and revenue management.

On the African Pharma company, she said that at the last meeting of the executive council of the African Union, it had been agreed to operationalise the African Medicines Agency (AMA), which had been a key focus area of the AU for several years. Given that Africa was now producing vaccines, diagnostic and other medical tools, it was an opportune time to bring the AMA into operation. This had been agreed, especially now that the African Centre for Disease Control (CDC) would be an agency of the AU. Because of the different rules around the registration of pharmaceutical products, there was still a lot of work to do to have a common African framework, but the matter of pharmaceuticals and the pharmaceutical industry was a key focus for the African Union.

She agreed with Ms Msane that more work needed to be done on awareness of the anti-African sentiment in South Africa.

Minister Pandor explained that individual nations could not intervene if the country experiencing the insurgency did not agree to a regional or continental intervention. It had taken a long while before agreement was reached over the SADC mission, as countries tended to want to resolve matters themselves.

She said the Department of Home Affairs had been leading the one-stop border initiative. There was still much that needed to be done to have a much more seamless operation regarding the management of immigration and the movement of goods and services across the continent.

While the report had not referred to all products or minerals, it gave a sense of what was being done. For example, South Africa and Ghana had agreed to work together on producing quality chocolates, expand production and share experience and expertise. Another example was the World Health Organisation (WHO) regional hubs in Africa, such as the one in Rwanda, where postgraduate students were being trained to work in pharmaceutical and vaccine production.

Regarding Mr Nkosi's question on oversight, it would be up to the Committee to discuss the matter. She said she would be wary of individuals approaching the Department saying that they were practising oversight, as members of the Department might not be available.

There had been discussion on what areas were viable for agreements, exploration and cooperation for South Africa when entering into a bilateral agreement. She asked Ms Mokuena to assist in providing the number of bilateral agreements.

The Department was excited about the Google cable and the fact that it would begin from South Africa. It was going to be a very important undersea cable connecting Africa and Europe. It would have an important impact on 5G connectivity in Africa and on expanding connectivity for distant communities. Google was partnering with a South African company in implementing this programme, so overall it was very positive for business development in Africa.

She said that DIRCO was aware of the gas demands in Europe, given the conflict between Russia and Ukraine. Algeria already had a connection to Italy and France, but South Africa was not party to the agreements and discussions.

If there were issues in the host countries, discussion might begin at the level of the mission, then move to senior officials in the Department, then to the Minister, and eventually to an engagement between the President and a particular head of state. The Minister assured the Committee that DIRCO provided whatever assistance was possible.

On ensuring respect for labour laws, she said DIRCO made it very clear to South African companies that they were expected to respect local laws. In cases where issues had been brought to DIRCO's attention, they had been addressed, as with the case of Shoprite in Zambia.

Regarding the SADC rail matter, the Minister said that the potential projects had been discussed recently in the Minister's council and between South Africa and Botswana. The matter was to be followed up by the relevant departments, and there was currently an appetite for addressing rail connections within the SADC region.

The Minister referred to the Namibia oil find and the massive gas resources in Mozambique, and commented that in South Africa, there seemed to be a tendency to say the country could not explore possible oil or gas resources. This was worrying, because it meant that South Africa was going to miss out on opportunities to benefit from trading oil, gas and other minerals that may be found offshore. The recent losses in court had compounded this concern. 

She said it was not true that there was no coordination between the DTIC and Treasury. They were the two Ministers she spoke to most, in addition to the Minister of Agriculture and the Minister of Environment and Forestry and Fisheries, so there was definitely constant engagement and coordination.

The presentation mentioned the structured links between DIRCO, the business sector and other access stakeholders. The Minister said that these links were not just within DIRCO, but with other departments as well, to improve the levels of coordination, and had not been established because there was no coordination at all. She would like to see an improvement concerning the provincial international work, and had spoken to some premiers where there was huge international interest. DIRCO would engage with local government through the South African Local Government Association (SALGA).

On the points raised by Mr Bergman, she suggested that he engage with Mr Mantashe (ANC) over the shift from a particular crude oil, and whether it would be a beneficial move for South Africa. She added that South Africa used much more maize than wheat, so there had not been an impetus to seek to leverage more from the BRICS relationship.

Minister Pandor agreed that intra-African trade was far too low, hence the AfCFTA agreement. Infrastructure and logistics needed to be addressed, as they deterred the achievement of greater intra-African trade.

She said that visas were a necessary evil. South Africa's problems around immigration and illegal migrants centred on its poor ability to address some of the visa issues. There was a need to modernise, so there was a push to do so with e-visas, and visas on arrival.

Responding to the alleged hypocrisy of the DIRCO, she expressed disappointment over the use of the word, as that was not a true reflection of herself or the Department. Countries needed to be willing to partner with South Africa for South Africa to provide help.

She said that election monitoring did occur and Africa was performing rather well. Election monitoring had continued throughout COVID-19, and she noted that voter participation had been extremely high.

The Minister expressed concern over the possibility of grey-listing. It was for this reason that regulatory steps were undertaken by the Cabinet.

She noted Mr Bergman's concern over the character of South Africa's chanceries, residences and missions. She assured him that DIRCO had initiated a number of renovations and improved maintenance projects, as communicated in previous reports and presentations.

Regarding the reports of threats to McDonalds, the Minister suggested that the managers and executives report the cases to the police. She added that DIRCO was concerned about the construction mafia gangs that go from site to site in South Africa and stop projects from being implemented, sending a very bad signal around infrastructure investment.

She said a decision had been adopted at the last Ministers Council meeting in the DRC, that all countries that had not signed on to the protocol must be approached by the executive secretary of SADC by the next meeting of the Ministers Council, and that a report should be given on why these countries had not ratified or signed.

She was unable to provide the information on women involved in the investments in Africa. She did, however, report that the one state-owned company that was doing impressive contracting on ports and rail line modernisation, Transnet, was headed by a woman. She hoped that gender and race equity were being addressed through the initiatives mentioned in the presentation.

Ms Mokuena added to the responses of the Minister. She said that there were 41 bilateral engagements on the continent. She assured the Committee that DIRCO and its missions were aware of the fact that whatever was done must translate into a difference in the lives of the South African people, particularly the most disadvantaged. To address this, DIRCO had embedded the issue of the triple challenges in its APPs and Mission Annual Plans (MAPs).

She explained how DIRCO includes small businesses and black businesses to take part in engagements to benefit from the work of DIRCO. Examples included a conference on 14 September in the Eastern Cape, sponsored by the Eastern Cape Development Corporation, where DIRCO had encouraged embassies to bring representatives from their companies that focused on women. Another example was a Transnet conference on 23 September, that would focus on Africa, and DIRCO had invited embassies based in Pretoria to participate.

On how DIRCO ensured that women also participated in the economy, she said that DIRCO helped facilitate a contract that OTT was looking at. This opportunity would translate into jobs, many of which may go to women and youth. Another example was the South African week in Mauritius, where the mission targeted rural women craft makers from Limpopo and Mpumalanga.

On the question from Mr Nkosi on evaluation, she said that DIRCO had built structured bilateral mechanisms, and mid-term reviews between joint commissions. In these reviews, senior officials and ministers could establish the progress on decisions made during the structured bilateral mechanism.

Lastly, on the issue of visas, she added that the Department of Home Affairs was already piloting e-visas in a number of countries.

The Chairperson thanked the Minister and her team for the comprehensive responses and the presentations. On whether individuals of the Committee should do oversight, the convention had been that there would be a discussion between the Chairperson and that particular Member, otherwise the Portfolio Committee would decide as a Committee when oversight would take place. This discussion could be continued in a properly convened meeting.

The meeting was adjourned.

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