26 August 2010

Africa: South Africa, the Continent and China in a Changing World Economy

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Beijing — Lecture by President Jacob Zuma of the Republic of South Africa, Renmin University, Beijing, China

The President of Renmin University of China, Prof. Ji Baocheng, Honourable Ministers, Excellencies Ambassadors, Honoured Academic community, Distinguished Guests, on behalf of my delegation and myself, I would like to thank the University for the invitation to address this distinguished institution.

I am told that this is one of the foremost institutions for the study of Social Sciences, particularly in the fields of Law, Economics and Journalism.

Therefore, I am honoured to be delivering a lecture here today on "South Africa, Africa and China in a Changing World".

Our visit to China is a reflection of this changing world. Yesterday, we signed the Joint Declaration on a Comprehensive Strategic Partnership between South Africa and China, elevating our bilateral relations to the highest level possible between States.

We also signed other Agreements between the two Governments.

Ten years ago, the countries in the developed world were South Africa's largest trading partners.

Last year, China became South Africa's largest trading partner. Twenty years ago, it would have been unthinkable for Africa to host the FIFA 2010 Soccer World Cup.

South Africa has just completed hosting one of the most successful Soccer World Cup tournament ever, thereby demonstrating that our country can compete with the best in the world.

These developments show emerging economies succeeding against predictions and odds.

That the world is changing is not in dispute.

It is an irrefutable fact that economic power is in a process of shifting from North to South, and West to East. China for example is once again assuming its historic position as a major power in the world.

The objective reality is that today no major decision on issues of global governance, such as reforms of the United Nations, the WTO Doha Development Rounds, Climate Change, global financial issues related to G20, rebalancing the world economy and addressing the global financial crisis - can be taken without the consent of the developing world.

Given the dramatic changes in the world order and the global power shifts, it is thus not surprising that the emerging powers, which face many common challenges, share very similar views on issues of global governance and consequently established their own formations.

These include the India-Brazil-South Africa Dialogue Forum, (IBSA), the Brazil, Russia, India and China grouping, (BRIC) and BASIC (Brazil, Africa South Africa, India and China) on Climate Change as a counterpoint to the developed world.

The purpose of these formations is to restructure the global political and economic system to one in which the developing world shares equal power and influence with the developed world.

To understand what is going on we must look at how the world economy has changed in the past few decades.

The first decade of the twenty-first century has seen some of the most profound changes in the balance of the world economy.

The dramatic extent of the shift was evident during the depths of the world financial crisis.

During the course of 2009, the economies of the Organisation for Economic Cooperation and Development (OECD) member countries shrank by about three-and-a-third percent.

Only three members of the OECD grew at all. These were South Korea, Australia and Poland. Overall, gross fixed investment fell in the OECD countries by nearly twelve percent and unemployment rose sharply.

The developing world was badly hit too. Several middle income developing countries were seriously affected too. But, overall, developing countries grew by about 1.2 percent.

So, in the middle of the financial crisis, the developing world grew four and a half percent faster than the OECD member countries.

In the past it was the other way around when the industrialised countries sneezed, the world caught a cold. This time, the influenza has affected the industrialised countries most severely.

Also, in the past, economists from the developed countries told the developing countries that they should behave more like the developed countries.

The developing world was told that if it did not Westernise and change its political systems to mirror those of the West, they could forget about achieving economic growth and development.

Now we are asking what we could learn from other political systems and cultures?

Is the political discipline in China a recipe for economic success for example?

I must however hasten to add that the developing countries are not autonomous from the industrialised countries. Indeed, the world economy is more integrated than ever before, and all markets are linked.

Even though China is now the second largest economy in the world, the United States and the EU are still by far the world's biggest markets. We all, I am sure, hope that they soon return to stable and healthy growth.

A return to sound economic health in Europe and North America would undoubtedly be good for all of us.

Nevertheless, the dynamism in the world economy is clearly shifting from North to South, and from West to East.

The OECD Development Centre estimates that, measured in terms of real domestic buying power, the developing countries will have a larger share of the world economy than the OECD countries by the year 2012.

By the year 2030, developing countries will have fifty-seven percent of the world economy, and the current OECD members, forty-three percent.

If we measure the contribution of different parts of the world to economic growth, the developing world contributed almost seventy percent of world growth last decade, measured in terms of domestic buying power.

China alone contributed nearly thirty percent of world growth.

However, simply because the economies of the South are growing successfully, it does not mean that we are ready to take over the responsibilities for world economic stability and growth.

Although countries like China, Brazil, India and South Africa have an increasingly important role, it cannot be forgotten that they are still developing countries that have not yet overcome the challenges of poverty and inequality.

As the leaders here have recently pointed out, it is unrealistic to expect a country like China to attempt to take over as the locomotive of the world economy.

China is still a developing country facing challenges of poverty and inequality, but it is doing exceptionally well and which provides many lessons for others in both the developed and developing world.

Ladies and gentlemen,

In this changing world, the performance of the African continent continues to surprise critics. Few people realise how profound the changes in Africa have been in recent years.

Africa came through the depths of the economic crisis better than many expected.

Indeed, there were fears that the weakness of the world economy would affect Africa so severely that the economic advances of recent years would be reversed.

As it turned out, Africa grew by about two percent, on average, during 2009.

Most African countries grew even faster than that, but a few of the bigger economies were more badly affected by the crisis. There is a lot we have achieved in Africa.

Many African countries are beginning to roll back poverty.

While we might not achieve all our Millennium Development Goal objectives, Africa made more progress in the war against poverty during the last decade than many give it credit for.

The lesson we draw from this is that African governments have adopted better policies.

Many of the improvements in African policy-making began after the end of the Cold War.

We have seen quite clearly that those African countries which have made improvements in their governance and in the way that they account to their citizens, have developed better economic policies.

In these new developments in Africa, China has played a role.

China has contributed to African development through trade and investment, as well as in directly helping African governments.

Chinese assistance in infrastructure development in some of the less developed parts of Africa is certainly making an important contribution to future African development.

And where does South Africa fit in, in this changing world?
Since we won our freedom in 1994, South Africa''s economic performance has improved dramatically. During much of the last decade we have been able to grow income per person in South Africa by four percent or more.

Our investment rate has also improved. We expect that with our natural and human resources, we will grow stronger for many years to come.

There are a number of reasons for this. We are investing heavily in electricity, freight transport systems, and public transport. We are also investing more heavily in the education of our people.

We believe these investments will greatly increase our capacity to grow during the next boom period.

The plans we are now developing are in order for us to achieve a target growth rate of at least seven percent per annum in the near future. And where has this put relations between South Africa and Africa?

Like China, we see a great future in our relationship with sister countries in Africa.

Economic studies have shown that South African growth has made a considerable positive impact on African growth, and that the main mechanism has been investment by South African companies in other African countries.

This has included investments in mining, banking, food production, hospitality and communications.

These ongoing economic activities augur well for economic development in the continent.

Therefore, all indications point to a successful economic future for South Africa, Africa and China in this changing world. In particular, Africa has the potential to grow, to take millions out of poverty, and to provide a good life for all Africans.

Africa will become a continent that not only solves its own economic and social problems, but becomes a dynamic force and a key driver of world economic development in its own right.

South Africa and China have cooperated in several business ventures that operate in Africa, and we can undoubtedly extend that cooperation to other fields, to take advantage of these great possibilities.

Ladies and gentlemen,

It is plain for all to see that we are living through one of those historic moments in world economic history.
It is an exciting period, but it is also an uncomfortable period, because international institutions and practices have not yet caught up to or adapted to the shifting roles and responsibilities of the actors in the world economy.

We welcomed the establishment of the G20 Summit as "the premier forum for international economic cooperation", and we have high expectations regarding its outcome.

We are certain that the G20 Summits helped reduce the impact of the global financial crisis.

However, I believe that both China and South Africa are disappointed in the lack of urgency in bringing international institutions in line with the newly emerged character of the world economy that I described earlier.

The global financial crisis did provide the opportunity to hasten some reforms in the international system.

One example is in the transformation of the Financial Stability Forum into a Financial Stability Board with much broader representation. But, in other areas progress is disappointing.

For example, the International Monetary Fund, which has had to play a central role in addressing the global financial crisis, has not yet been allowed to restructure itself better to represent the realities of the international system today.

We hope that the G20 meeting in South Korea will show very significant progress in the reform of the IMF.

So, while the replacement of the G8 by the G20 as the key focus for global economic cooperation was an important step in the right direction, there is still a lot more to do, to bring the international system in line with current global economic realities.

It will still take some years for the impact of the global economic crisis to wear off.

However, I do not doubt that the economic future for China, South Africa and Africa is very bright.

I also believe that South Africa, other African countries and China will make full use of the opportunities available, to cooperate in support of sustainable economic development, which will benefit all of our citizens.

We are still at an early stage of what will be an exciting journey, a journey out of poverty, a journey to sustainable improvements in the lives of our people, here in China, and on the African continent.

Ladies and gentlemen,

It has been an honour to have the opportunity to discuss these matters in this excellent forum, during the State Visit to China.

I thank you.

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