 Anyway, thanks everyone for coming. Welcome to the TIPS annual forum. Welcome to the Minister, Minister Rob Davies, thank you for coming. Thank you to Channing from UNU Wada and Tim Ron Velodia from VITS. And thank you to all our speakers, panelists, discussants, reporters and delegates. Thank you all for joining us for an exciting two-day conference. We've got people from across academia, government research institutes, there's some private sector people, there's some people from SOEs, embassies, civil society. So we've got a lot of different people represented at this forum. And there's also people from academics from a multitude of universities from across South Africa and also from other African countries. We've included colleagues from Zambia and Zimbabwe and Malawi and one or two other places. So we've got a great representation and I'm looking forward to some really interesting and exciting discussion. We also have a few academics from international universities from overseas and welcome to South Africa. For those of you who don't know me and I think most probably do. My name's Saul Levine. I'm the Executive Director of TIPS and Program Director for the Conference. I just wanted to thank our sponsors for the TIPS Forum. They are UNU Wada who is represented by Channing and we've got the USAID Southern African Trade Hub and Katie is somewhere in the audience. Thanks. And I think their support is more than just funding that we get from them. It's also support that we get in terms of bringing people out to the conference and contributing speakers and discussants towards the program. So thank you very much for all your support and I think it's without that kind of support that we wouldn't have been able to have this kind of conference and event. So thank you very much. We also going to have UNU Wada assisting us with social media for the event. So there are going to be people tweeting and we've got a hashtag TIPS Forum. So if you want to tweet, I'm not really someone who tweets. But for those that do, that is the hashtag. And yeah, so they'll be tweeting some of the comments and the sessions are formed. So we would have liked sort of a open discussion but the forming and the tweeting sort of prevents sort of a Chatham House rules from applying. So what you do say may be recorded and may be tweeted. But I hope that doesn't prevent us from having some robust discussion. And we don't have any media present but we do have people who will capture some of the media. So there will be articles hopefully in some of the newspapers reporting accurately on some of what transpires through the conference. I also want to thank our partners from government who have given us huge support. So there's the team from DTR led by Gawth and his colleagues who have joined us and Landon from National Treasury and Rudy from Department of Performance Monitoring and Evaluation who have all supported this process and our partners in this forum. This forum is the 12 tips forum that's taking place since tips were started in 1996. So we have a long track record of running these forums. The last one though was only was run in 2010 but we have held two economic conferences subsequent to that. And these kind of events are important because they allow a space for people to present their research for policy makers to come and engage on some of the issues and for us to have some nice open dialogue around some of the research that's been taking place. So the reason we decided to resuscitate the forum after a few years gap was to try and get that dialogue back and to try to have some of those discussions. And the support that we got from our sponsors has enabled us to go down that road. We also after last year's dialogue conference that we held with the EU and Economic Development Department and DTI, we saw great value in having these sessions and that was also a prompt for us to continue with these type of sessions. Next year, tips turns 20 and all going well. We'll be having our tips forum in late May so we'll send out more details of that. We also will have a few other functions so there may be a party that we'll invite people to and a few other things, maybe a publication or two. The theme for next year's conference still needs to be finalised but we'll send out a call for paper in the next couple of weeks. So those who are interested in coming back next year, look out for that call. And then some of the work that TIPS does and it's an opportunity now, I've got a captive audience to plug tips a bit. But we do monthly dialogue sessions around some fairly interesting research that we've done. So we've had some sessions in the last few weeks where we presented our work on the Integrated Resources Plan, a research project that we did for NEDLAC, some work that we did on electricity pricing and economic development for the electricity war room and some research into the distressed mining community of the Platinum, communities of the Platinum belt. So we presented those in the last couple of weeks. We have them at the TIPS offices and we usually have some quite interesting and robust discussion at those sessions. And then we've also had sessions where we give feedback on the manufacturing circle, Cortley Bulletin, where we present the findings of the manufacturing circles report. And we also had quite a nice discussion a couple of weeks ago on the bits, which was quite a robust discussion. And then in the next couple of weeks, we will be doing a few more interesting activities. There's a book launch that we'll be partnering with you in Uwada and UCT. And that's a book launched by Aravik Hanbure. And that will be on the 11th of August at Hoppost 5 at the Sheraton. So we will send out a notice for those interested in attending that. And then in September, we're going to be hosting the Port Program with the DTI. There'll be a whole lot of parallel sessions and evening events. And we'll send out some notices to let people know. And then another conference of this nature on subnational economic development will take place in October. And that's partnering with the National Treasury G-TAC team, the Government Technical Assistance Advisory Centre. Okay, turning to this year's forum and the theme of regional industrialisation and regional integration, we selected this theme coming out of some research that we did for the DTI. And it was a partner where we had partnered with the CRED team at University of Johannesburg, the CSID team at University of Zambia, and a team at the African Institute of Agrarian Studies in Zimbabwe. And it was research that we did for the Department of Trade Industry. And it was looking at regional value chains. And some of the key issues that came out of that research will be presented by several of the research team during the course of the forum. But one of the most important issues that stood out for me was the significant opportunities for industrial development that exist across the region. And there's strong market demand across the value chains that we researched with potential benefits across the countries that we researched. So it's benefits across the value chain in different countries. And for me, that stood out is something that we really needed to explore and why some of the opportunities were being lost. And why countries were not getting the full benefit of those value chains that were in existence and being strengthened and created. These issues therefore worried more research and interrogation. And then when we issued the call for papers last year, we received an overwhelming response. And that highlighted that a lot of people are doing research in this area. And that means the conference of this nature is important. And it's important because it helps us to better understand the issues and gives us some understanding of what the dangers are and what the upsides are around regional integration and the need to accompany regional industrialization with that. The aim of this forum is therefore to deepen the understanding of regional industrialization. Some of the papers will look at the role of South Africa in that context. And then we'll start to explore some of the value chains that operate across the region. And then look at the linkages between regional industrialization and regional integration. The context for the forum, we've seen significant growth prospects within Africa over the past decade or so. But there are challenges now with commodity prices. There's a lot of infrastructure that's taking place. And it's been a strong driver of growth as well as some aspects of consumer demand. How that plays out in the coming few years is not clear with the commodity price. But despite that, we still see the forecast for Africa are above five percent annual growth, which means that there is a lot of growth in markets and things taking place. A second contextual issue is the linkage between productive industrial capacity, economic growth and levels of development, which is an important consideration, especially for SADEC. And as the region has very, very low levels of industrialization, how do we start getting those things right? The third contextual issue is really the understanding of industrial development in Southern Africa requires that we look at the role of the lead economy and the opportunities for smaller economies in the region to even increase their exports to South Africa and to grow their productive capacity on the back of that. South Africa has a lot to offer other countries in the region through its institutions, logistics and technical services. And that can also support the growth of industries in neighboring countries, particularly agro-processing and agriculture industries. Capitalizing on these opportunities may, however, require a rethink on South Africa and how it integrates region industrialization into its domestic industrial policy. And we look forward to the minister's input on the changing policy direction on that. And it's something that we've seen working closely with government a shift in the view and in the approach that is being taken. The value chain research that the team undertook and that I spoke about earlier gives some very practical case studies of what's going on in some of these value chains. The fourth contextual issue is around minerals and agricultural value chains. And I think both of those come through very strongly in the papers that will be presented. And then the last contextual issue for me, and it's probably not the only, these are probably not the only contextual issues, but the last one is the increasing push for regional market integration. That can result in positive outcomes, but there are downsides if we integrate without the necessary understanding and approach to industrialization. The themes for the conference are outlined in the conference agenda, and I'm not going to go through all of them, but just a few quick pointers on conference logistics. There are 10 sessions in the conference, and then there's the opening and closing plenaries. And these cover the themes that are in the program, and they'll be take the form of the panel discussion by people who are presenting papers. There will be two parallel sessions throughout the conference, so there will be one held here and one in the venue that's on the other side. So you need to choose your session wisely. Unfortunately, we can't have people in two places at the same time, so you'll need to make some decisions there. And then we do have rapporteurs who will be capturing the discussion, and we'll do a short briefing note at the end of the forum to capture the outcomes. Your name tags also double as a USB stick. So the clippy part, if you pull it apart, is a USB stick, and that has all the conference, or almost all the conference papers on that. So there will also be the conference papers available on the TIPS website and on the conference website if you would like to look at that. I'm looking forward to a great two days of discussion and going forward to continuing doing great research on these issues. And a key outcome of the conference for me will be to develop a greater level of research and what our research agenda should be, and that will then inform our research agenda over the next couple of years on regional industrialisation. Before handing over to, I think, is it Chenning or Imran, to say a few words of welcome from bits. I just want to thank the TIPS team who have been assisting with all the logistics of the conference. They are probably outside, but they've done a great job in making sure that everything is organised, everyone got here, and everything runs smoothly. So without those people, we don't have a great event. So thank you to them. And Imran, thanks. So being part of the TIPS annual forum again kind of leads me to make two kind of reflections. The first is a personal one and the second is about where we're going around industrial kind of research in South Africa. I'll start with the second one. I was part of the first TIPS annual forum. And for those of us who were there for the early years, I think it was by far the kind of place where sort of policy makers and researchers engaged on what were the most kind of, at the time, the most critical economic issues in the country. And I think we went through a transition when the TIPS sort of forum stopped away from a focus on kind of questions of industry, questions of firms, to sort of focus on sort of poverty issues and mainly questions of redistribution. And I think the relaunch of the TIPS forum kind of really for me captures the fact that I think the enormous amount of research on matters of firms, matters of industries, matters of new emerging industries in the IT sector, matters of sort of competition and regulation have really sort of come to the fore in the last while. And it's really, really fantastic that the TIPS forums being launched once more. And when it's all approached me about where the fits would want to be involved in this, my first response was, of course. And I'm really pleased that the sort of forums starting again today and that it's starting at Wits University. So welcome to Wits University to all of you. So the second transition issue is a sort of personal one. I made the choice about a year ago to move from a research kind of job to a university bureaucrat. And being the kind of person who has to do the bureaucrats welcome at the TIPS forum really sort of captures for me the fact that I've kind of made the transition from presenting papers at the TIPS forum which I would much, much rather do to making the bureaucrat speech at the start. But one makes these choices in life and I guess you have to live with it. So from Wits aside, welcome to all of you and I hope you have a fantastic two days around what seemed to be really, really interesting themes. I want to especially welcome the minister. I think one of the fascinating things about the minister and his role in this is that he's the ideal minister I think for us to have in this field because he sort of combines so much of what the TIPS forum is about. It's sort of both steep in kind of fundamental and robust research and I think he has a fantastic track record himself in that area and it's also steeped in a sort of policy engagement which which he's played quite an instrumental role in. So special welcome to you minister. So I've now sort of done the bureaucrats job and I wish you all of the best and I'm going to do what all good sort of bureaucrats do is make their short speech sit for a while and then leave for another meeting and I much rather stay but I have to leave for something else and I'm sure you'll understand. Good morning and thank you for coming and thank you for having me here. I'd like to recognize Saul for pulling this together as well as the full TIPS team. He's been the driving force behind this and I think it's great. I also recognize WITS, DTI, USAID and the National Treasury co-sponsors worth indicating the National Treasury. As part of the reason that wider is here today we're involved in a very productive and fascinating collaboration and we're really pleased with it. I'd also like to recognize Minister Davies for taking his time to come and share with us his thoughts this morning. Minister Davies, Rob Davies is not to be confused with Rob Davies, our discussant who's also here and deserves a recognition for his contributions to economics in South Africa for a long, long time. When Saul Levine came and asked me if we would be willing to collaborate with him on this, I jumped at the opportunity and the reason was, sort of like Imran, I remembered back to the first TIPS forum that I attended, which I can't remember the exact year, but it was around 1999 and I do remember very well that I thought the forum was great and I'm really pleased that TIPS is taking this step to re-initiate the forums and getting this going and wider, you and you wider, is really pleased to be a part of this effort. And I think it's useful to think back to the atmosphere of those early forums and Saul has done that a little bit, but if you think it was 1999, you had at that time a growing mass of economic data from South Africa that gave you an opportunity to study how the economy of post-apartheid South Africa was doing and that was a huge element of the forum. Also at the time there were broad visions of regional integration and those were also a topic of discussion and continue to be. Those discussions were really influenced by recent performance, what was going on at the time, of course. And at that time the EU was viewed as a large and stable market for products from Africa. It was growing both internally and through the accretion of membership. And South Africa and other countries in Sub-Saharan Africa historically had big trade shares with the EU and so this was a big part of the opportunities that existed at the time. And I recall having arguments as late as 2007 that all of this discussion about regional integration was a useless distraction from the real talks which should be with Europe about economic partnership because this is where the growth opportunities actually lie. And times change, right? We're now into the eighth year where the EU has barely grown at all and certainly the EU is not expanding or adding new membership. It's a different world. At the same time, we've seen a growth renaissance in Sub-Saharan Africa that nobody predicted. I'll make a short plug for a book that I edited with Andy McKay and Finn Tarp, Looking at Growth and Poverty in Sub-Saharan Africa that's going to come out from Oxford University Press shortly. But it's a changed situation. And perhaps the lesson is that you can't predict what's coming. You can't predict what's coming forward. If you had said in 2003, African economies are going to go five, seven percent per year for another decade and a half. You wouldn't have gotten very much listening, but they did. And this renaissance and this point gives us good reason to focus on the region. Sub-Saharan Africa, the economic weight overall is about double what it was in 1999. You have economies one that I know well, Mozambique, that is approximately coming up on four times as large as it was in 1999. And at the same time, a great deal has happened in terms of regional integration. We've fomented links. There are more linkages. There is more trade. Things are happening within the region. And this is a base. It's a broad base. It's rapidly growing and there are linkages there. And as Sol was saying, there's a great opportunity to achieve growth and development objectives via regional integration. And I think arguably greater than before. At the same time, the appetite for sort of broad ranging discussions abstract liberalization is perhaps less. For example, there isn't a lot of belief that the static customs union is going to become operationalized in the next few years, for example. And I think this is why the focus of this confidence is so important. The focus is on regional value chains and other specific opportunities. And we're very happy to contribute as you and you wider to this kind of discussion. We see and I think Sol was mentioning big opportunities in lots of areas. Energy, agriculture, services on top of traditional manufacturing and other items. And I think that serious exploration of these opportunities represents a viable way forward. And this is why we're so pleased to support this conference as you and you wider. And we think that your work and these discussions can be helping in realizing the development objectives for the region as a whole. So thank you. Minister, do you want to come through? Thank you very much, Sol. And let me say good morning to a number of very familiar faces I see here. Friends, colleagues that I've worked with before in various capacities. And also people I haven't had a chance to meet, but also who are scholars and workers in this particularly important subject of regional industrialization and regional integration. I want to start by congratulating the tips forum this year for selecting this theme. Because I think that this is a major, major challenge that we are confronting as a continent and as a country. How do we promote regional industrialization through, among other things, developing regional value chains? And I think that not only is this a major challenge, but it's one where a research input and a very well crafted and rigorous research input of that is actually very, very necessary. So let me just make a few points about the broad directions that we see as government and also as the continent as moving in terms of regional integration and regional industrialization. Why? What are the focuses and where are the institutional processes that are intending to give effect to this vision? So the first point I want to make is that if you listen to any number of African leaders who speak and articulate the way they see the future of the African continent, having improved its growth performance and all of that and having been identified as the next growth frontier, where do they see this process going? Any number of them will say that the continent has got to move up the value chain and has got to industrialize. That's what any number of them will tell you. Very good reasons for this. Those good reasons are, among other things, that the drivers of growth that took place in the previous period are no longer present in the same way that they were before. What I mean by this, in many cases, growth was driven in the continent by something called the mineral commodity super cycle. And the countries that are now the oil producers have been the last to join the rest of us in seeing that the Bonanza and the rinse that were available from the mineral commodity super cycle are not available in the same way that they were before. And I think that we've also got to understand that this is not just a cyclical matter, that we can hang around and wait and hope that the price of all these mineral commodities is going to bounce back up again because this is cyclical. This is also structural. It's got to do with the fact that the biggest demand of many of those mineral commodities, industrial minerals in particular, the People's Republic of China is changing its growth strategy, is moving up the value chain, is emphasizing consumption in its own economy and moving into a more diversified services economy and that that is actually a much less mineral commodity intensive growth path than the previous growth path that it was on. And there's nobody around it and by the looks of it, there's got to jump in and fill the gap in the same way. In South Africa, if you look at the current iteration of our industrial policy action plan, you'll see there they say, well, the obvious need of South Africa is that we need to promote higher levels of inclusive economic growth. I want to emphasize the inclusive part of it, but high levels of growth. And the analysis that is coming out of the IPAP is saying, well, if we look back over the last, well, over the 84 quarters that preceded the end of last year that takes us into 1993, we had growth of 5% in only 16 of them, 16 of the 84 quarters. And what was it that drove the growth during those periods? Well, it was consumption and it was the mineral commodity supercycle. With the balance of trade as it is, we can't any longer expect to live on a consumption- driven growth path, and nor can we rely any longer as I've already made the point on a commodity supercycle. So what we've got to do, we've got to move up the value chain. This corresponds with all sorts of other pieces of research or data that we can just mention. I've quoted this one, and many of you have heard this one before, but I think it just tells the story. It's a study by KPMG, which is called Africa Risen, which was done last year, presented last year. And they said that Africa produces an exports coffee which receives $6 billion round of value, $6 billion, rather, US dollars of value. But that coffee is converted into products, it's blended, it's packaged, whatever else they do to it, outside of the borders of the African continent that fetch $100 billion. In other words, $6 billion of the $100 billion value chain only is captured by the production and export of raw coffee beans. Another example they gave is that Italy earns more from the production and export of gold jewellery than South Africa does from the production and export of gold. I think these are all examples that the real value in global value chains is not to be found in the primary production stage of the value chains. In other words, the worst place to be integrated into global value chains is as a producer and exporter of primary products and as an importer of finished goods. Even if we were to say that many jobs were to be created in service sectors, I think there's enough evidence around now that is telling us that those service sectors will be more secure and also of a higher quality if they are part of an economy whose productive base is diversifying and moving up the value chain rather than if they are simply footloose like Cyprus banks, for example, where. So I think that all of these are factors which lead the continent to say that the next phase of African growth has got to be driven by industrial development, diversification, moving up the value chain and inserting the continent into a different place in the global division of labor. And I think that that is something which is the product of big debates. We were very active in those debates of South Africa, big debates, but now there is a consensus around some of this and many of the regional integration programs are addressing themselves to this what I think is increasingly seen as an imperative of promoting industrialization on the continent. If you look again at the situation of South Africa and some of the industrial development drivers which we identify in our iPad, you'll see a couple of things. First of all, we have a consistent trade surplus in the African continent and our exports to the African continent have a higher proportion of value-added products than our exports elsewhere. Of course it is our objective in all of our external trade relations to try to promote value-added exports. Wherever we are, we try to promote more value-added exports, but the fact of the matter is of course and I think for good historic reasons it's well understood that the African continent is where we have a significant presence in our trade basket of value-added exports. If we look at our drivers, a number of them I think speak directly to the continued processes in the region where we see for example that among the drivers are infrastructure-driven industrialization where I think that we're looking of course to use our own domestic infrastructure program and some of the localization measures that go along with that to drive a re-industrialization particularly focusing on capital goods, transport equipment sectors. But also I think we're seeing that those firms must also become part of a continental process as well where industrial infrastructure development programs will also take place and provide opportunities there. Mineral beneficiation, I think that these are very, very hard nuts to crack but I think that we can see that if we act together as a region on a continent we will be able to affect some of the policy changes that are required to support mineral beneficiation more easily than if we just act as individual countries. And then the other one is the one which is the focus of attention here is regional value chains. How can we develop regional value chains that support industrialization not just in South Africa but also in the broader continent and region? And if that gives rise to growth, a new growth spurt on the continent it will be a growth spurt that will benefit industrial development in South Africa as well. And so I think that that is the sort of background and the perspectives on regional industrialization that we support in South Africa and that we've also seen increasingly large numbers of other countries on the continent are also supporting. So how does this then lead into the approach that we've been taking on regional integration? I think it was mentioned by the speaker from UN wider when he said that we're not gonna be seeing the SADAC customs union any time soon. A few years ago, the debate on regional integration was a debate about deepening integration within existing regional communities. It was about setting time frames for SADAC to move beyond the current free trade area that is in existence in SADAC, into a customs union and also then into things like monetary union. That was the focus of attention to move further up Jacob Weiner's ladder of regional integration and to see this as the focuses of attention of the debate on regional integration. Now, we were a South Africa extremely wary of those debates. We started to ask ourselves and ask some very fundamental questions. What does the movement from a free trade area to a customs union, what does this bring in terms of opportunities to promote inter regional trade? And the answers that were coming even from the researchers that were doing the research is nothing because if you have a free trade area, you already have duty free trade among yourselves. The customs union simply means you add on top of that a common external tariff. And people were telling us that there were advantages because we could lock in low tariffs towards the world as a whole. And we would then benefit because we would somehow rather be integrated into global value chains. And I think that that kind of approach to integration into global value chains was extremely simplistic and didn't take account of a number of very, very important dynamics in the global economy. We have, for example, a South Africa. We have, I think, successfully managed to integrate one of our sectors into global value chains. That's the automotive sector where we were producing essentially for a local market and then we changed the programs in the 1990s and we've managed to integrate our productive activities into global value chains. That required a pretty significant and pretty costly effort by government to achieve that. That didn't come simply on the basis of trade liberalization. We've seen other examples practically. There was a company in Cape Town that was an international company. It was bought by another international company. It produced fire alarms. And that company came in and said, okay, now you're part of our global value chain. We're taking all the manufacturing business elsewhere. You're going to be a depot for our products. Unfortunately, in that case, the managers worked with our team and we managed to establish a local South African company which is producing better products than they used to produce before. But as an example, that integration into global value chains simply on the basis of a trade policy stance does not necessarily mean that you get industrial development offered. You can actually get precisely the opposite deindustrialization. And so I think that we said we can't see the benefits of this. We were, by the way, supposed by next year to have monetary union in SADAC, the old regionally indicative strategic development program, RISDP. We were supposed to have had a customs union by 2010 and we were supposed to have had a monetary union by 2016. Now, I think if you just think a bit about Greece in a monetary union with a currency which is set by a stronger economy, apart from all the debt issues that Greece is facing, the country's faced massive deindustrialization. Is that a model that we want to bring in? And isn't the whole approach, I think this is what we ended up saying, isn't the whole approach shaped by a view that in Europe or elsewhere, they have something like this and that somehow or other we think that we are more integrated if we prioritize institutional arrangements of a high ambition of this sort over developments on the ground. And I think that's the real issue because even if you go back to the work of Jacob Weiner when he talked about embarking on regional integration, he argued that regional integration made sense where you had high levels of complementarity where one country produced what the other country needed and vice versa. And that was the case in Europe where you had industrialized countries. In Africa, many of the barriers to the inter-regional trade are not actually to be found in the fact that we've got high customs duties between ourselves, but rather that to be found in the nature of the productive sectors where we're not producing goods that find markets in each other's countries because we are producers and exporters of copper and producers and exporters of iron ore and we don't have much to trade with each other if that's our place in the global division of labor. And so the issues are actually much more about promoting real economy diversification and addressing some of the other serious concrete barriers to inter-regional trade which are to be found in things like inadequate infrastructure which doesn't connect us up one to another but rather connects the mine to the port and then even if you want to go into things like soft infrastructure, border arrangements and other regulations which are often more important than tariffs. And I think that out of this, and perhaps without it being theorized at the beginning but I think that we can theorize it in this way now, I think that what we have come to the conclusion most of us, and this is the consensus and this is driving the current programs is that at this moment in time at the least what we need is not to deepen regional integration within existing regional communities but actually we need to broaden regional integration at FTA level across our existing regional communities but within a framework which is developmental. In other words, we need a development integration approach. And I think that again there's a number of very, very practical reasons why this is the case. And again I think they probably got to do with the state of the world economy and where we find ourselves right now. Again, let's take China, let's take India. Where are they seeking to drive the next phase of their industrialization and economic diversification? Well at the very least it's walking on two legs. The domestic market is one of the important legs that they are now emphasizing to a greater degree than before. The idea that we could all go out and flood the EU and the US with manufactured goods and that would be the drive of industrial development. Even if that existed in some earlier phase and I think there's a question mark over there it certainly doesn't exist now. Because the United States, Europe, all the countries that are around there are themselves trying to re-industrialize and they are becoming much less receptive to large influxes of new goods coming from other parts of the world. And in fact the state of their economies is not such that there is a growing demand for new products coming from elsewhere. And the fact of the matter is though, that those countries emerging markets which are trying to walk on two legs have all got large populations and a large domestic market, not a small domestic market. And so I think here comes the challenge for Africa. Colonialism divided us into 54 different countries. None of us, certainly not South Africa, I would argue not even Nigeria has got a domestic market which is sizable enough to support industrial development and diversification. But if we start looking across our countries, if we start looking beyond our regions in fact, if we start looking beyond SADAC and we start looking at SADAC, Commessa and the East African community, we start to hit the numbers that do make sense at that level. We start to talk about 500 to 600 million people. We start to talk about something like a combined GDP of over a trillion US dollars. If we look at the African continent as a whole, we're talking 2 trillion US dollars. We're talking a population which is about one and a half billion people. We start to hit the numbers that do provide the basis for supporting regional development and economic diversification. And so I think that we're coming up, perhaps it is that we've been walking across the stepping stones one by one and they've been accidental things and I think they were things like the fact that we had overlapping memberships in SADAC and Commessa in particular that drove us into this project. But I think that in the end of the day, the project and the definition of the project is the right way to go, broadening integration within a developmental paradigm. So where are we at in this process? And where are we at in the continent? Well, I think that the first thing to say is that it doesn't of course mean that there is no trade integration component. There is a trade integration component. We have to have an FTA in place. We have to have an FTA in place, not least, because all of us in different regions are negotiating something like this with the European Union. And if we don't, we will be trading with each other in worse terms than the European Union. That can't be the basis of developing regional value chains. So we do need an FTA in place. So we've been on this journey for some time now. We basically said, and I think pragmatically so, that we're not going to try to reopen the trade arrangements that exist within each regional community. So we're not gonna reopen the SADAC trade protocol. We're gonna focus instead on negotiations with countries or groups of countries with which each of us do not have any kind of trade preference. So we will move across the tripartite area like that. We had a summit in Sharm el Sheikh. I was there last month. And this summit adopted the legal agreement for the establishment of the tripartite FTA. And it also set a timeframe of one year to conclude the outstanding, which actually is the majority of the tariff schedule negotiations that have been started in one form or another. In our case, we have already exchanged office and had a few rounds of negotiations with the East African community. When I say us, it's SACU. We have to work as the Southern African Customs Union. A SACU East African community, that negotiation has started. We are pretty close to finalizing our offer, which we will submit to Egypt. That does leave a few. There's quite a few, actually. There's Ethiopia, there's Djibouti, there's Sudan. There's quite a number of others. But I think the two main ones are on track. And I think we can, as certainly in our outstanding negotiation, we can actually conclude that by the end of the year. But the approach is not just FTA negotiations. The approach is also supposed to be infrastructure development. I think Donald Kaboruka said a little while ago that the infrastructure deficit on the African continent was costing the continent the equivalent of 2% growth. There is an infrastructure deficit, which is not being covered by existing funding mechanisms. The infrastructure project that goes along with the TFTA is the North South Corridor. Some progress, but also still some challenges to build the infrastructure that's at stake. One of the reasons why we have been so keen on the BRICS New Development Bank, which is now up and running, is that, and why the first regional office will be established here in South Africa is because we see that there is an opportunity to tap into other funds, which can, among other things, support regional infrastructure development across the African continent and provide greater connectivity between our countries. The industrial development pillar, however, is very, very behind at the tripartite level. What we did do, though, was at the SATAC level, there was a special conference that took place about a month or so ago of SATAC, which was entirely devoted to the development of the SATAC Industrial Development Strategy. That strategy, I don't know if you've seen it, I think it's worth looking at, is a piece of work which I think we can say is a strategy document. I often compare it to our own National Industrial Policy Framework. It covers much of the same sort of ground. It indicates the domain of potential actions which can be taken to support industrial development with a big focus and a big expectation on regional value chains. And the other critical issue that I think we all are going to have to confront is the question of financing. Because the observation is made, which was the same observation we made when we introduced the first iteration of our current industrial policy action plans, is that private credit extension does not go to support productive investment. By and large it goes to support consumption driven activities. And the question of the role of development finance institutions and what these might mean in terms of regional industrial development, these are going to be massive, massive challenges as we move further forward. At the level of the continent, let's just say, of course the AU had reached the obvious conclusion from the tripartite process. And of course it is a really critical question for us as well. What about the rest of the continent? What about West Africa? What about the rest of North Africa? Because Egypt and Libya are part of the tripartite. What about the rest of North Africa and of West Africa? And so the conclusion was reached that, well we need to move towards a continental FTA, which is a journey that we also support. The negotiations for that were opened at the AU summit that was held here in Johannesburg. But the timeframe, let me just put it this way, as diplomatically as I can, is extremely ambitious. The negotiations are supposed to be concluded by 2017. And that is including also a trading services component which in the tripartite is put into phase two. But in phase one, the current phase of negotiations at the continental level is supposed to include a trading services component as well. So let me say that I think that's sort of a description of where these processes are at at the moment. Let me conclude with a few remarks about some of the challenges. I think first of all, the issue that you all here to talk about, regional value chains is one of the critical ones. We've identified I think in very, very broad conceptual terms that there are things called regional value chains that can include manufacturing which involves inputs from different parts of the regional or the continent. And that the identification and development of these is a critical component of African industrialization. And I think that is one of the challenges. And I think that actually getting down and dirty and really understanding and analyzing what are these regional value chains. Sometimes people talk about, well, auto component manufacturing can go to other countries and some of us like South Africa can be the automotive manufacturers and things like that. Well, I think that there is a bit of migration that takes place here and there. But how and what should we be doing to support an inclusive set of industrial activities? Because I think the temptation of some countries is not to see the regional value chain as the drive of industrial development but the domestic market. And that can lead to people saying, well, we didn't have the industrial pillar in place when we had the sat act trade protocol and therefore there's no need for us to respect the sat act trade protocol. And I think that what that would mean in practice would mean undermining a tool that could be in place that could support the emergence and development of regional value chains. For South Africa, we have, of course, supermarkets and exporters in all countries with a high proportion of South African products on sale. I think that this model of us is going to have to change. We're going to have to move into a different spot in regional value chains. And here I think there's a couple of examples that I think are telling us the way, practical examples. We are, for example, or we were, and I think as we'll continue under the new administration but we were involved in very earnest engagements with Nigeria about the Nigerian automotive program. We were providing them with quite a bit of technical input into the design of their program. And at the same time, I think we're at the point where we are looking for South African companies to be suppliers into the Nigerian market of components that will be used in semi-knockdown kit assembly and also some of the finished built up units that would enter under the program. That's the sort of thing that I think we're talking about. So as Nigeria begins to manufacture vehicles, maybe some of those will find their way into South Africa as well. I think that's the kind of model that we're looking at as well. Secondly, another practical example, I had the opportunity to attend the opening of an investment by a consortium including school metals. They had established a plant to manufacture grinding material for the West African mining industry in a cryongana. And now before that, this grinding material was imported from South Africa. Now there's a plant there manufactured that but the components into that will come from South Africa. So I think that these are the sort of signs on the wall if you like. Now we're gonna have to find ourselves occupying a somewhat different place in these value chains. We're gonna have to move up. What is that location for South Africa? What is the location for other countries? How do we promote an inclusive industrialization based on regional value chains? And perhaps resist the temptation with very small markets to say, well, this is going to be at the national markets gonna be the driver to hell with the regional integration and so on and so forth. I think that's going to be one of the very, very critical issues. The other one I was saying was the question of finance. Investment and finance. Now I think that doesn't all come from DFIs. We can be promoting some foreign investment in industrial activities. I think that sometimes we have to tell people in this country that the investment pipeline into manufacturing despite what may be happening in mining or in terms of the portfolio investments is actually holding up reasonably well because quite a number of companies are making the bet that the regional market will integrate. That South Africa is critical in the industrial development of the African continent and that this is a place that they need to invest in productive manufacturing activity. We've seen this in a number of different sectors that this is taking place. But how do we address, I think, the question of industrial financing? That I think is a very, very critical question. So let me then just conclude with where I started. I think that the stage we're in, the period that we find ourselves in is one where a very significant research input is required. In the case of SATAC, I said the strategy is a strategy which is at the level of identifying the potential domain of actions that can be taken to support industrial development across SATAC. The mandate that was given to the secretariat was that this must be turned into an action plan that must be tabled for adoption next year. So the clock is ticking and the identification in particular of regional value chains and how we promote some kind of inclusive involvement in regional value chains is, I think, critically important. And the last point I'd make is that we then face, I think, I'm going next week for a discussion about the WTO. How do we defend the policy space to develop and support regional value chains against what I think will be a series of demands for industrial tariff lowering with the ostensible benefit that we will have access to markets that are very distant from us and where the benefit, I think, is more hypothetical. But the risk is that the regional value chains will be undermined by the import of finished products coming from outside of the region. So I think that's the last point I would make. So welcome the focus of this TIPPS Forum. Wish you well and look forward to receiving a report of the outcomes and I hope that you have a good and valuable conference. And by the way, you told me that you had a really hot debate on the bits. You might want to look and see because the new investment bill will be tabled in Parliament in the very near future. It's already gone through Cabinet. Thank you very much. Thank you. Thank you.