Guten Tag

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Guten Tag!
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SA / German Trade

• Imports to SA from Germany increased by 18.5 in
  2007
• 12.3 of all imports, highest of all countries
• Major imports are original automobile component
  parts, motor cars, vessels, medicines, electronic
  goods, telephones
• SA exports to Germany increased by 33.3 in 2007,
  9.4 of all exports, overtaking exports to
  Japan, second only to the USA
• Major exports are platinum, centrifuges, precious
  metals, automobile component parts and seats

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SA / German Trade (D-Statis)

• German imports from SA of 4,5 bn in 2007,
  ranked 28 as a trading partner
• German exports to SA of 7,1 bn in 2007, ranked
  27 as a trading partner

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SA / German Trade (dti)
R 000
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Trade balance has always been in favour of Germany
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German Investment in SA

• Germany is the fourth largest investor in SA in
  terms of value with over 450 German companies
  (subsidiary companies with a German headquarter)
• Major investments are in automotive industry and
  hi-tech manufacturing
• 90,000 to 100,000 employees
• Indirect employment in supplier companies and
  outsourced service companies
• Estimated total investment of between 3,3 and
  4,2 bn, including re-invested profits

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Global meltdown

• Everything we thought we knew about economics
  belongs to another era
• Worst economic crisis since 1929
• Downward revision of global growth from 3.8 in
  April 2008 to 0.5 currently
• Growth outlook for developing countries reduced
  from 6.3 in 2008 to 3.3 in 2009 due to collapse
  in export demand and lower commodity prices
• 2.6 million jobs lost in the USA in 2008
• Year on year exports from China fell by 17 and
  imports by 43 in Jan 2009

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US rescue package

• US 787 bn fiscal stimulus package
• Tax breaks
• Spending on education, health and infrastructure
• Details unclear and concerns about protectionist
  policies with emphasis on Buy American

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Impact on Germany

• Shrinking exports and capital investment
• 2,1 GDP drop in Q4 of 2008, largest since
  reunification of Germany
• Forecast of -2.25 GDP growth in 2009
• Slow down in employment growth unemployment
  rate of 8,3 (3,5 m in Jan 2009)
• Decreased global demand for German goods

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German response

• 50 bn stimulus package
• Investment in rail, roads and schools
• Tax relief initiatives
• 100 bn loan guarantee scheme for struggling
  firms
• 2,500 payment for scrapping vehicles older than
  9 years

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German response

• German support (German Development Institute) for
  position that industrialised countries should
  mobilise a fraction of their financial rescue
  packages to compensate for collateral damage in
  developing countries
• Commitment to AID contributions to developing
  countries

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How is SA affected
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How is SA affected

• Growth of 3.8 in 2008, forecast of 1.2 for 2009
• Lower export earnings
• Weak consumer spending
• Slowing private sector investment
• Unemployment rose by 8 000 to 4,1 m in Q3 of 2008
• The number of not economically active rose by 163
  000 to 13,0 m in Q3 of 2008
• Total unemployment of 23,2 with further job
  losses predicted

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How is SA affected

• Biggest declines in employment for Q3 in finance
  (55 000), manufacturing (51 000), construction
  (36 000), community and social services (32 000),
  mining (32 000)
• Decline in the platinum and gold prices
• Massive decline in world demand for cars
• Improvement in output growth forecast for 2010
• Public infrastructure spending
• Lower interest rates
• 2010 FIFA World Cup
• Recovery in the world economy

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What SA did right

• Sound fiscal policy
• Counter cyclical budgeting budget surpluses
  providing for current crisis
• Decreased cost of debt servicing (in 1996 public
  debt was 48 of GDP and rising, currently 23 of
  GDP)
• Credible monetary policy
• Sound banking system
• Appropriate foreign exchange regulations

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SA response to global crisis

• South African stance that restructuring of global
  trade and incomes must bring greater
  opportunities to the worlds poor
• Negative impacts must not be borne by the poor
  and interventions must create conditions for
  future economic growth and job creation

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Domestic response package

• Public infrastructure investment and leveraging
  in of private investment
• Use of macro economic measures including
  aggressive use of fiscal and monetary policy and
  use of weaker rand to encourage new exports
• Sectoral industrial interventions focused on
  sectors in distress including clothing, textiles,
  mining and automobile industry
• Employment measures to prevent retrenchments and
  support for the Job Creation Fund
• Social measures including training and relief
  programmes

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The SA Budget

• 2009/10 budget of R 834,3 bn
• Projected budget deficit of 3,8 in 2009/10
  decreasing to 1,9 in 2011/12
• Infrastructure spending of R 787 bn over the next
  three years
• Additional spending on services, social grants,
  public works programmes, school nutrition,
  criminal justice system, HIV and Aids treatment,
  industrial development and support to small
  enterprises, rural development

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Some good news

• The International Monetary Fund and World Bank
  Financial System Stability Assessment Report 2008
  expressed confidence in SA financial systems
• Banking system diversified
• Appropriate financial infrastructure
• Effective regulatory framework
• Budget adjustments
• Addressing poverty reduction
• Protection of work opportunities and accelerate
  skills development
• Massive infrastructure investment
• Allocations to address competitiveness, including
  a production subsidy for the new automotive
  production and development programme (R 870m
  over the next 3 years)

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Opportunities

• Sustainability approach to climate problems
• Investment in renewable energy and energy
  efficient equipment, taking advantage of the
  planned supplementary depreciation allowance
• Take advantage of the Clean Development Mechanism
  of the Kyoto Protocol with associated tax
  benefits
• Expansion of projects in terms of the Agreement
  on Cooperation in the Fields of Science, Research
  and Technology
• Expansion of the German-SA Initiative on Advanced
  Manufacturing
• Investment in bio-technology industries flowing
  from research initiatives
• Expansion of collaboration in the field of
  astronomy arising from the SKA bid
• 2010 FIFA World Cup

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• Germany Land of ideas
• South Africa Alive with possibility

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Dankeschön!