Speech by the

Introduction

It's a pleasure to talk to you today, because it's my first chance as Minister for Trade to set out two things. First, how the Government sees business opportunities in Southern Africa; and, second, how the Government will work with the business community to seize those opportunities.

Southern Africa - A Watershed Era

But before I focus on those opportunities in detail, I want to take a look at the historic changes that have been taking place in Southern Africa, that will effect the quality of our business opportunities.

Southern Africa is no longer a region defined by conflict and international isolation.

In fact, peace and democracy are breaking out all over. The bitter civil conflicts of the past are ending. With one or two exceptions, there is an increasing awareness that the key to social stability and the removal of political uncertainty lies in strategies that encourage economic growth, and which result in improved standards of living for all.

Let me now focus on the economic specifics of South Africa.

South Africa - Getting the Fundamentals Right

The economic fundamentals of South Africa are very positive.

It has abundant minerals and other natural resources, and a low level of foreign debt. Its physical infrastructure is business-friendly - good transportation, telecommunications and ports. Its legal and commercial framework supports internationally-accepted business practices and standards. And finally, a free press provides high-quality access to information.

But South Africa faces major challenges.

The Government acknowledges the need to make the economy more efficient by opening it to international competition. It is relaxing financial controls and it has cut back trade barriers further than its new membership in the World Trade Organisation requires. It has removed almost all quotas, and is steadily reducing and simplifying its tariffs.

The illusion that protectionism safeguards jobs is now a myth of the past. Like Australia, South Africa recognises that trade and investment liberalisation is a win-win process.

Fundamental restructuring is taking place. Investment incentives, improved infrastructure, and a more flexible labour market are designed to attract both overseas and domestic investment.

Balancing these objectives needs tenacious leadership - and that is what we are seeing.

South Africa is getting the fundamentals right, and most commentators expect GDP growth of 3.3 per cent this year and 2.6 per cent in 1997. Present plans are to reach 6 per cent by 2000.

The other side of the coin is that the Australian Government, too, has to get the fundamentals right so as to allow Australian business to increase its competitiveness.

Australia - Macroeconomic Responsibility and Microeconomic Reform

And that's why Tuesday's Budget was so important.

The Government's first budget is the centrepiece of the Coalition's commitment to return to responsible macroeconomic policies and to reinvigorate microeconomic reform.

The Government's goal is to boost Australia's productivity so as to make our exports more competitive and to contribute to higher living standards.

On the macroeconomic side, there is no alternative to getting the budget back into surplus by cutting expenditure. If we don't get the fiscal framework right, interest rates and your cost of capital will stay higher than most of our competitors.

While we are cutting back some areas of short-term funding, we intend to return to you a much longer term gain: the capacity to achieve dynamic growth, improve exports, expand investment, and create jobs.

For example, we are refocussing the Export Market Development Grant ( EMDG) Scheme to assist small to medium export businesses.

We have improved access to Austrade's services through a programme of regionalisation, that in turn will expose Austrade to broader channels of consultation with industry.

Consultation will also be further enhanced by the establishment of industry advisory networks that draw on the experiences of export businesses in a breadth of industry and services sectors

The microeconomic side, too, is about productivity growth over the long term. The Government is committed to establishing a more flexible labour market. Importantly, we have undertaken to remove the unfair dismissal laws.

We will also improve efficiency in infrastructure services like the waterfront, aviation, communications and energy.

The national competition policy reforms agreed by Australian governments in April 1995 will support the microeconomic reform strategy.

We are already pursuing a full agenda on competition policy, including the Wallis inquiry into financial regulation, reviews by all governments of regulatory impediments, and a stocktake of microeconomic reform by the Productivity Commission.

Australia and South Africa - Trade and Investment Opportunities

The reform processes in Australia and South Africa will work together as incentives to stimulate business interest, and the potential is immense.

From a small base, South Africa is the fastest growing of our 35 top trading partners. Australian firms have doubled their market share in four years, and small and medium enterprises - like many of your membership - are in the forefront.

Australian exports reached $660 million in 1995, four times higher than five years before.

South Africa is doing well, too, with exports of $365 million last year - five times the 1990 figure.

South Africa is a good fit for Australia. For example, we export motor vehicles to each other: cars like South African BMWs and Australian Falcons and Fairlanes; parts and accessories; and Toyota engines.

In fact elaborately transformed manufactures like these accounted for nearly 40 per cent of Australia's 1995 exports, making South Africa our fastest growing markets for ETM'sit our fastest-growing market for ETMs.

The Government sees strong future export growth in alumina, mining equipment, processed foodstuffs, telecommunications equipment, education services, information technology, medical equipment, rural development systems, construction equipment and services ... and the list goes on.

While on the subject of services, tourism is growing by close to 20 per cent a year and clearly has a big future. More than 35,000 South Africans visited Australia in 1995, with 40,000 Australians visiting in the other direction. And the decision to extend the full EMDG rate to tourist providers will build further on those numbers.

The investment picture is positive, too, though Australian companies seem to be less active than their European and American competitors in South Africa.

South African companies like GENCOR and ISCOR have reportedly invested almost $3 billion in the Australian mining industry. By the end of 1994, the stock of Australian direct investment in South Africa was $117 million, a relatively small proportion of the total $7 billion invested from other countries in 1995 alone.

The Australian mining industry is, however, investing heavily in the rest of Southern Africa. For instance, BHP-Utah and Delta Gold have invested $265 million in the Hartley platinum mine - Zimbabwe's largest single investment since independence. More than 80 Australian companies have invested a total of over $4 billion in African mining ventures.

Government Policy for the Future

The Australian Government is strongly committed to helping the business community make the most of Southern Africa's trade and investment opportunities. We are doing that in four ways.

The first is trade and investment promotion.

My Department and Austrade are working actively to increase business awareness of the new economic environment in each country. Those of you who went on the trade delegation to South Africa in May will recall the Australian High Commission's "Australia Week" program. That promotion generated a high level of interest in both trade and investment.

Here in Australia, Austrade has just completed a series of seminars in Perth, Adelaide, Melbourne and Sydney on the subject of "South Africa: A Gateway to Sub-Sahara Africa".

And in December, South Africa will again be a feature market at the National Trade and Investment Outlook Conference, or NTIOC. Mr Kevan Gosper will chair the session, which will look at the importance of strategic alliances with South African companies, and at opportunities for doing business with the emerging black sector in South Africa.

Since this is the second time South Africa has participated in NTIOC as a feature market it clearly appreciates NTIOC's value as a networking and business-building event. Guest speakers will include the Minister of Finance, Mr Trevor Manuel and the Secretary General of the ANC, Mr Cyril Ramaphosa (RAMMA-PO-SAR), who is also Executive Deputy Chairman of New African Investment Limited.

The second way the Government is assisting the business community is by strengthening the framework for trade and investment.

A Double Taxation Agreement will be signed later this year, and we expect to negotiate an Investment Promotion and Protection Agreement next year.

Only last week the two Governments agreed to increase airline capacity by adding two passenger services a week, as well as a weekly air freight service. That's a strong incentive for Australian firms to develop the South African market.

The third avenue of assistance is strengthened economic consultations between the two Governments.

The first Joint Ministerial Commission is planned for July next year. With the assistance of the private sector, that meeting will lead the way to Governments identifying and removing barriers to business.

The fourth avenue is our continued close cooperation with South Africa on the Indian Ocean regional initiative. I am particularly pleased that South Africa will be hosting the next Indian Ocean Rim Consultative Business Network Meeting in Durban early next year.

Conclusion

In all this, the Government will be liaising closely with you in the business sector, because it is organisations like yours that are closest to the cutting edge of trade and investment.

We will be looking for your inputs into the Joint Ministerial Commission. We encourage you to make the most of NTIOC, and we hope you will participate in the Indian Ocean business network meeting in Durban.

Let me conclude by suggesting that Australians need to focus more clearly on the fact that South Africa is an import market of over $40 billion a year. And it is a gateway to the rest of Sub-Saharan Africa - itself a growing market of more than 500 million people with a total GDP of nearly $200 billion.

South Africa and Australia are natural partners with a good economic fit.

I look forward to working with you and your Council to encourage more Australian businesses to make the most of this new era of opportunity.