 Yn ystod o'r ffordd, dweud yng Nghymru, mae'n bwysig i ddweud ysgol ac ymddangos i'r ffordd yn ei wneud am ymddiadau i'r ffordd yn yng nghymru, yng Nghymru, yn Ymddiadau Dynedig, yn Damos Cllosys, yng Nghymru Econwysol, a'r gweithio yng nghymru, 2016. Welcome also to those of you watching us live online at weforum.org. Now the purpose of this issue briefing is to look at the South Africa's economic outlook to provide an in-depth learning about South Africa's prospects and challenges for the year ahead. Those of you that are familiar with this format know that we don't have a lot of time that I keep my remarks to a minimum. I'm going to introduce my esteemed colleague here, Pravin Gordon, Minister of Finance of South Africa. We've little more than to say that he's been described to me this morning by one of the participants here as the best thing that's happened to the South African economy in quite some time. The best thing is sitting out there, you see? Not in this room actually, so somebody else. You have fans that you're not even aware of. We'll have time for questions and answers, but first I would like to ask the Minister to spend a bit of time outlining what his personal priorities are, how he's going to restore the country to sustainable growth in the year ahead and further, further way into the medium and long term. Thank you, and thank you very much for this opportunity. It's nice to see both the leading analysts and commentators in front and fellow South Africans at the back. It's comfortable in the Congress centre, but come to the southern tip of Africa is far more comfortable. I can assure you, you don't need the coats and the ties, and you'll be having a great deal of fun. The outlook for South Africa. Firstly, I mean, we work as a government team. No finance minister can succeed in this. He has reasonably good support from government as a whole, and over the past few weeks we've worked hard as a government to understand our current environment, understand its challenges, and begin to ask ourselves some tough questions about what we need to do differently. Secondly, South Africa is part of the commodity producing countries. It's part of the emerging markets that are currently under stress because of a variety of things that are happening, and a global environment that's volatile, where lots of corrections are taking place, and which have either intended or unintended effects in the financial sector in particular, but elsewhere in the real economy as well, which result in greater uncertainty, particularly for the business sector. So a lot of the focus of our work is about how we create greater confidence both amongst foreign investors in our debt market, but also in the real economy, but in particular amongst the African business. And therefore, leading up to Davos, we've had good discussions with our business sector to prepare for this eventuality. Secondly, obviously the numbers seem to indicate certainly the IMF numbers yesterday for 2016 that we might be looking fairly dismal. I think for the challenge we face is to see what we can do differently to surprise the IMF and others a little bit this year. And our numbers which we will publish on the 24th of February when we table the country's budget might indicate slightly more optimistic numbers than what the IMF is saying at the moment. The struggling areas of the economy, agriculture, manufacturing and mining, mining for reasons that are very obvious and that's a fairly general phenomenon. And an additional factor is of course drought. Some of the traditional supporting parts of the economy like the services sector and so on is slowing down a little, so that's an area that we need to focus our minds on and our actions on more importantly to see how we can get better results of that. Exports seem to be improving and obviously the weaker currency is a huge supporting factor but demand on the other side of the border is equally important, whether it's from Europe or the rest of Africa. And one of the issues that we are looking at together with business is how can we enable business to actually get involved in more tradeables, more effective winning of market share, particularly in sub-Saharan Africa because there's a lot of space to be gained in the construction and generally in the services sector as well. So focusing in certain parts of the real economy and supporting that particularly through investment in infrastructure and undertaking some tough reforms, particularly in the education and skills development area, in the area of delivery of infrastructure in terms of creating greater efficiency and better spending of public funds, creating co-investment opportunities for business and government. In our IPP programme for renewable technology is one of the best in the world at the moment, understated at the moment. We tend to understate ourselves in South Africa but it's attracted hundreds of billions of dollars both from South African institutions and from foreign investors as well and there's another round that's coming as well which will significantly change co-investment in that particular area but change our energy picture as well. I think last year in Davos, I wasn't here, we were under watch so to speak for the energy situation. We've stabilized that and the renewable side is introducing I think about 2,000 megawatts at the moment and that's going to increase incrementally in the next couple of years to come as well. So restoring confidence, making sure that we undertake key reforms in delivery of infrastructure, skills development and education, greater attention to how we focus. There are tens of billions of rounds of business incentives either through the tax system or through direct rebates to business is another area that we want to look at so we boost the right areas of the economy. Giving a lot more attention to small and medium-sized businesses in South Africa. Here Martin Wolf after his visit to South Africa talked about some of the legacy issues that we still confront as a society both on the social side and on the economic side as well. And given the dominance of two or three companies and key areas of the economy, the rise of the small and medium-sized business sector has been very limited and it's an area that we need to give a lot more attention to together with building entrepreneurship on our side as well. Last point, we're focusing a lot particularly in the new area of the oceans economy and how do we tackle the issue of limited demand for our commodities differently from just exporting where the demand is actually limited through a program called Operation Pakistan which together with business and other sectors is looking at the details of what goes on and how do we implement those details differently or think of more creative ideas as well. Often there's skepticism about the stalling of FDI into South Africa some of the more recent examples I've got in front of me are from our department of trade and industry, Mercedes-Benz 2.4 billion-run announcement on increased investment, General Motors 1 billion-runs, Ford 3 billion-runs, the Meta Group 400 million-runs, BMW 6 billion-runs. It goes on particularly in the auto sector. Beijing Automobile Corporation 11 billion-runs high-sense which has created an operation in South Africa has also made some investments and more recently Unilever and Johnson & Johnson have increased their production capacity as well. So clearly we need to increase our FDI, create more confidence, work more coherently as a country from amongst both business and labour and government as well and I think we can do better as we go forward. But as I say, crises are useful. It brings the truth to your face and it forces you to think more creatively and differently, understand your challenges perhaps more deeply than you would have if things were comfortable. So both 2008 and 2009 taught us that to some extent but we thought that just getting a massive stimulus going from the fiscal side and some efforts from the monetary side will help us to overcome the kind of challenges we had post 2009. That hasn't been the case. So we've got to take a harder look at some of our structural constraints and begin to deal with them in a lot more assertive way. Thank you very much. Thank you. Now it's customary this time to open the floor to questions but for the first time I notice one of our audience actually has the microphone already, Alicog. Are you hogging the microphone there for a reason? Okay, it's your own. Any other questions? For our audience, can you mention your name? Yes, alecogbusnews.com in Johannesburg. Can you give us any clarity on how you're going to reign back on public sector spending and the second thing is your old stamping ground south African revenue services. Your team seems to be cleaned out there or you go to reinstate them. Do we take one at a time? Let's see if future hands are public sector and that's S.A.R.S. Lady there in the back in the third row. Afternoon, my name is Matsimodise, the managing director of Simodisa and I'm essentially an entrepreneurship activist. To keep my question brief, venture capital is key to enhance and enable this fourth industrial revolution because technology and appins it. What role will the government play in terms of creating VC right now basically nonexistent? And how does that then integrate with a partnership with a private sector? Okay, so just in the front of them so we have them in public sector spending, S.A.R.S. venture capital. Sir. I'm Martin Wolfe from the Financial Times. The two questions which are linked, it seems that this is an extraordinary opportunity to the crisis who said to relaunch fundamental reform in South Africa. This goes beyond 2016. What are you thinking are likely to be your priorities? In particular, it seems to me the biggest challenge of all you have is persistently high unemployment which is the cancer economically and socially and what do you plan that could really make a difference to this long sounding problem? Okay, so let's go to Alex's question. We've said, interestingly when we look back when these sorts of challenges are put to us about public spending, South Africa has actually had a very good record over the past 20 years on the fiscal side. We haven't breached any of the commitments we've made to the South African public and to other stakeholders at all in the last 20 years. And so post 2012-2013 we said belt tightening, cut down on wastage and we've had interesting results as a result of some of those efforts that we've put in. We will continue the fiscal consolidation path that we've indicated. We will be as tough on ourselves as we need to be. For example, one of the strains on the fiscal are some of the state-owned companies and you've heard me say very publicly from the day of my appointment, December 14, 15, that these entities must stop relying on the fiscal and our aim will be to retain them to some kind of profitability and financial sustainability and take the strain of the fiscal so that we can put the money where it begins to make a difference in terms of growth and job creation as well. On the revenue service there's a simple statement that what we want is, as part of our democratic project, we need to build solid state institutions which are not dependent on individuals, they're dependent on the values you instill, the integrity you have and in the case of a tax and customs administration the fairness with which you deal with the public and the kind of legitimacy that you hold in the public eye. But also you need a different kind of sophistication given the kind of discourse that's taking place in the OECD, in the G20 about basic erosion and profit shifting. It's a nice catch-all phrase but it hides a lot of complex transactions that banks of lawyers and other professionals are working on full-time in the effects of both developed countries, physicists and ourselves as well. So what we want there is stability at the end of the day, a skilled leadership that will take us in the kind of direction we want to go in and build on the good reputation that the revenue service has. So the nitty gritty, I'm still going to get on top of all the issues there and we'll come back to that when you're back in South Africa. Venture capital is clearly, I think, one of the challenges. So we've made some changes already to begin to provide at least in policy terms for venture capital and a bit of money has been set aside. I think our contribution to small businesses is too fragmented in too many different places. Now that we have a ministry and a department, hopefully we can concentrate those resources and begin to talk a lot more actively to the private sector, my own view is that we need a few building around set aside. But don't ask me where we're going to get the money from just yet. But at least the objective is clear about what we actually need to do to build the kind of entrepreneurship culture with the help of the private sector as well. Fundamental reforms. For some years, Martin, both the IMF and the OECD have one-liners in their reports about South Africa. Your product market is very concentrated. It's a nice euphemism for saying that you have quite significant oligopolistics industries in South Africa. Given our history and the way things have happened, but more recently in our country, there's a fascinating, let's call it, discussion going on about what did 1994 give us. And the bottom line is that it gave us equal rights for all South Africans and a democracy. What it didn't give us is the equalization of the economic scales. And I think here those who have wealth and have economic power and those who've already accumulated some over the last 20 years or so need to have a very different kind of discourse now for saying how do we restructure our economy in a way in which there's greater inclusivity. Not just between poor and rich, but between different types of business categories as well. Because there's certainly a kind of impatience developing that we need to build on. But secondly, from the state side, we've been giving lots of assistance in monetary terms and sometimes technical terms as well. But we're also learning that not all of that achieves the kind of objectives you set initially. Because there's a long line of delivery from an intent and the actual impact on the ground. And so we've got to learn to do a few things differently as well in terms of the kind of support that we provide to restructure. But there's no doubt also that all South Africans from all classes and backgrounds need to contribute to this venture. And on last Friday we had a meeting between just a handful of government ministers in a fairly large delegation of over 40-50 people at the CEO level from the business sector. Some of them are present here today. And there were other discussions in the course of the last few months as well. All of which indicates that business leaders now begin to understand the importance of inclusion, the importance of social cohesion and for us to be able to discuss the race issue in a constructive way so that we can capitalise on our diversity and use it as a positive factor in terms of where we go. So some of the things we need to do is, if you like, deconcentrate the economy, but more importantly grow a new generation of entrepreneurs, give a lot more support to the skills development sector in our economy, although that's a more medium-term objective to ask the private sector to absorb more people as apprentices, as part of the learning scheme, as part of the subsidy scheme we have as well. So lots of opportunities for the private sector to come to the party, and government is doing some of its work through public employment programmes at the moment as well, where billions of rounds are being spent on an annual basis. So the skills area, retooling, if you like, are a manufacturing sector, so it becomes a lot more aggressive and competitive and has a drive to win market share. Because without that, what are we actually doing? We're only supplying consumption in South Africa. We're not getting into the export trade as assertively we can. The services sector is also a key opportunity area, as is what is now called the oceans economy, where we're working with countries like Norway, which is offering a fair amount of technical assistance to South Africa as well. So there are any number of areas which I outlined earlier on, which we can work on. Some of that we need to do in the short term so that we can have what is called a demonstration effect, and some will take the medium term in order to demonstrate this impact. Just going to the front row, please. Wait till we get the microphone first, thanks. Another Financial Times columnist, I'm afraid. Gideon Rachman, two quick questions. One is obviously you came in after a week of apparent chaos over the appointment of the Finance Minister. How much long-term damage do you worry that that did to South Africa's image? And another image-related question I saw, I think it was a transparency international survey which said that 80% of South Africans feel that South Africa has become more corrupt over the last year. Are they right? On the first one, I think if that was an event that took place in the middle of the 2000s, it wouldn't have mattered too much because we were on a nice swing of 4% growth, large amounts of revenue coming in, a commodity boom, and the economy doing fairly well. On this occasion, I think it gave us very useful feedback about how the markets can respond to events like this, and I think it's a compliment to the leadership of the country A, that they listened carefully to keep people in the business sector but also within the political organisation itself and very quickly acted to stabilise the situation. So hopefully having a new old hand at the till might actually help us to restore some of that confidence. And I think in statements since then, all of us both within government and the ruling party have indicated very clearly that we want to continue the fiscal prudence, fiscal consolidation, cut out waste and begin to aggressively attend to some of the issues that I talked about earlier on as well in respect of the economy. So there's been a slight setback but I think we can win that if not just we talk the right words but we do the right things as a country and that's both the private sector and ourselves as well. Transparency international, I think that's a perception index as you know. So I think that there's some petty bribery that's been on the increase recently. Traffic officers trying to capitalise on a few hundred rounds here and there on motorists who find themselves defenseless. Some in the bureaucracy doing similar things. There are some issues around procurement areas as well. A, we are aware of it. B, what we need to talk a lot more about in the FT is how predatory behaviour is very much part of the current and past capitalist systems, whatever form it has evolved through over the last hundred, hundred and fifty years. And what kind of values and models and integrity do you want to set up and checks and balances within government itself in order that we can undermine these sorts of phenomena. So at the end of the day, Gideon, we need to, and I think there's a significant number of us in government and in the private sector, want to restore integrity and get the right value system going. But it's not going to be an easy task because people will look for a quick way out. Everybody in South Africa who's been repressed for a couple of hundred years or a couple of decades wants to drive the best BMW that the neighbour drives and get a better house than they can actually afford. Ask the bankers here, they know what kind of loan applications they get for the next house that is to be built or to be bought. And so in that sense, these knocks that we take and rises interest rates are a good reminder. Live within your means, both as a country and as households. And save as much as you can. There's a current debate in South Africa as well. And we'll work our way out of this. But it's not going to be easy. Greed is not an easily counted phenomenon in the upper middle classes, but elsewhere as well. And so I think all of us in our respective countries have a challenge, but that's no excuse for South Africa. Coming from where we come from and the kind of struggle that we've put up over the years, we need to do better. And we will, I think, over the next few years. Have a hand there. Just sir, before you do this, just develop that thinking about the new old hand. What are the key learnings, the key experiences from your previous time in government that help you meet your challenges? That no economic moment is the same as the previous one for the start. So things are very good in South Africa. If you look at the build up to elections in May 2014, it's three months after I got into office and the new administration of President Zuma got into office that the effect of the recession hit home. So one of the first public announcements I had to make in about July when Parliament opened in late July was we're going to have a deficit of 50 billion rounds on the revenue side. So the second lesson is speak the truth, speak the facts to the country, win their confidence that there are certain measures that need to be taken in the interest of everyone concerned and we'll sort of come through crises that we have. We have these that we live in a very interconnected and interdependent world as Martin and others have written endlessly. And so South Africa is not a little island that you can talk about on its own. Once, if all of you would remember the taper tantrum of, I think it's May 2013, just a couple of sentences from the Fed Chairman send ripples throughout all of the emerging markets. The care with which the current Fed chair is and has been communicating to ensure that emerging markets are not damaged in the same way as they were done to before is an indication that a lot of lessons were learned in this period as well. And the thought is that both then and now geopolitics plays a part in economic developments as well, either in the form of posing risks or continuing to, and that's the worry about the fourth industrial revolution. Sounds nice, digitalisation, using modern technology, interconnectivity, et cetera. But what's going to happen to the billions of people that are on the margin where the digital divide is still there in many of our countries or parts of countries as well where everybody is not as skilled as they need to be to be absorbed into these new developments. The economists, amongst others, have written about a jobless society and a jobless economy, I think nine months ago, six months ago. Now that's not the scenario you want to tell young people today that they will face in ten years' time. So global connectivity in the sense of coming up with answers to inequality, the social divide, the pickety phenomenon, the role of the financial markets in relation to the real economy, we're all very interesting lessons of that time, which haven't disappeared, by the way. In fact, the threat that we all face is those divides will increase and that geopolitics is presenting more and more challenges as each year goes rather than using international institutions to dampen those challenges, regrettably. I've had several conversations with South African media over the past few days, as I always do, ahead of these meetings. A lot of the questions often are about the fourth industrial revolution and the natural question is the fear of unemployment, the displacement of jobs. What is your strategy about that, bearing in mind we are heading for a period of transformation? Transformation is always useful. What you want to be careful about in each instance is what's positive for society and the economy, both within a country and around a country, and how do you utilise that? We were just discussing that earlier today among some of my colleagues. My colleague, the Minister of Health, will say, no, that would be very interconnectivity, excellent, because as you know in certain parts of the world doctors that in one part helped to do nurses to do a diagnostic on a patient thousands of kilometres away. Now I believe they're even undertaking certain types of surgical procedures under the guidance of a doctor. Interconnectivity in terms of tracking trends around pregnancy or HIV and AIDS and tracking whether patients are compliant with the requirements to take medication at a particular time or not is another factor. In education where we have a shortage of skills in the mathematics and science area, again if you were an excellent mathematics teacher we could have you in Davos, but you could be teaching children in a thousand schools in South Africa. A one-hour lesson on how to undertake a particular mathematical exercise. And those are I think the pluses that we need to build on as well. Robots also will increase productivity and make both companies in a country look good. But that curve can't be an endless curve because somewhere along the line the costs at the societal level begin to come in. So I think we must anticipate some of that and ask ourselves how do we mitigate those risks when they do arise? Now we're running very perishly close to running out of time but the gentleman did have his hand up. Can we just have one more question please from the gentleman in the back? My name is Teranishi from Japanese newspaper Sakishinbun. I would like to ask about the BRICS Corporation. So after the financial crisis, we enjoy the economic recovery from the economic crisis thanks to the BRICS economic growth. But now China has a problem, the economy is growing, and also Russia and South Africa are the same kind of problem. So how do you see the possibility that the members of the BRICS to cooperate to respond to the current crisis? I think many of you will remember that when global growth was impacted quite seriously, 08, 09, 10, 2000, it's the quite strong stimulus packages that China, Russia, India, South Africa, Brazil and others put forward including the kind of measures that were taken by the monetary policy authorities that actually helped us to keep the world away from a great depression and not just suffer a great recession. We now have a situation where parts of the developed world, not all of them, Japan is still just above the deflationary level, are beginning to find their way out of the crisis. But I was at another session a while ago where commentators said if the United States during that very period to 008 to say 2012 had borrowed $10 trillion and invested it in infrastructure, they would have grown faster. And once again become an important engine room, together with India and China growing in the 6% to 7% region, that would have still kept global growth above the kind of estimates that we are actually seeing today. The second is that this fluctuation in sentiment which is accompanied by these massive capital movements and often back to the United States and out of and into emerging markets is one that we, let's be frank, we haven't found an answer to as a globe. Despite endless discussions in the G20, task forces that are going out of control are the element of the kind of financial aid elements that we're suffering as a globe. We've got no answer to some of those questions. In that panel session there was an asset manager from a fairly big US bank who was saying that trillions of dollars are sitting in, as she put it, in various corners of the world waiting for a moment when there will be sufficient confidence to invest that money. So the question for policymakers at a global level and in the big and leading economies, both emerging and developed, how do you inspire confidence in the global environment? How do you minimize these financial sector volatilities? Corrections and expansion and corrections again. We'll have different analyses about how these things work. The way in which the divergence is taking place between central bank policies just in the developed world is another area of instability, potentially or in real terms at the moment that people are concerned about as well. So G20 was set up to actually get some level of political or other economic cohesion in policy terms. It's coming apart in some ways and it needs to, how do you say, it needs to find its essential mission again in the current moment when we need new answers to where is new demand going to come from? How do we get growth but inclusive growth because that's the new direction we need to go in? How do we stop the divide increasing between developed and developing? Although in the net effect over the years is that we have a bigger mental class across the world today than you've ever had before, but you also have a very significant group of people that the World Bank talks about, the bottom 40%, that's so required to be attended to. So the globe as a whole has some tough questions to answer and we hope that taking a different strategic approach and if developing countries can manage their politics better in some instances and maybe claw back some of the or recover from some of the policy mishaps that they might have had at some stage in the recent past that you can have a world where both developed and developing big countries are once again taking us to 5, 6, 7% global growth and that will impact positively on others as well. Trade is also depressed at the moment as a result of these growth numbers and demand numbers which means that your demand factor is not there to generate the kind of trade that we actually require. Driving inclusive growth, investing in skills and education is going to be a busy year minister. Thank you very much indeed for your time. We're swish and we have to keep to our schedule. There are plenty more questions that could be asked but thank you very much indeed for joining us. Thank you for joining us here in the room and watching this live online.