Minister of Economic Opportunities: What Makes Western Cape World-Class?

Interview with Alan Winde, Minister of Economic Opportunities of Western Cape

Can you tell us whether or not you think the DA has showcased their wider strategies for South Africa with the governance of the Western Cape?

You mean exercising our policies to show the difference? Well I definitely think so and that is part of two things; firstly it is about good governance and that has been the focus for the first term of our government. We need to make sure that government is trusted and that government is doing what it is supposed to be doing, spending its money in the right place etc. We have a big problem in our country with high levels of corruption and so we have made sure that governance has been put in place to get the right ordered outcomes, and the right measurements in place to show people that the money is being spent where it should be spent, and not being stolen but that we are running an efficient government. We have an internal vision, we don’t generally put it out there but we want to be the best run regional government in the world. When someone in the government does something that doesn’t really make sense, or even myself, then they send an email that says “you know, that decision doesn’t really bode well for the best run regional government in the world, what are you doing about it? Why are you taking too long to answer? What are you doing?” That has been the first five years’ focus: really getting the basics right. Now it is about taking our vision to the next level and that is depending on which space you are in, for me it is about growth in the system and creating jobs.

That is what keeps you up at night then? The population of the Western Cape went up by around 40% in fifteen years, which is extraordinary demographic growth and mainly from inward migration. How successful have you been in absorbing these numbers into the formalised economy?

First of all, it puts pressure on the system. One of the arguments that we always have is that our financial system is a centralised taxation system decided by national government and devolved down to provinces through a formula; that formula is really I suppose a per capita formula but it is also based on the fact that the more poorer, rural provinces might get a bit more money so that they can up their education levels and health levels. It is generally a bit of a fight. We always say that we are getting too little money, migration is happening faster than the financial change but you have to look at the numbers; quarter on quarter our unemployment rate keeps on going down despite that increase in population growth. In the last quarter, South Africa’s narrow unemployment rate went up to 25.6% and the Western Cape came down to 20.5%.

The unemployment rate has been continually dropping since the 2008/9 recession. My goal for this year is to go below 20% and we are just going to keep pushing that boundary.

How does that compare on a national level? Is it lower?

Yes. Then the next indicator which is probably even more telling is the narrow and broad. We have a one or two percent difference between our narrow and broad where in the other parts of the country they have ten and more percent. Many many people in the north of the country stopped looking for work. Then of course it is about the business confidence index; we keep on moving up in the business confidence index whereas nationally it is moving down. Interestingly, if you look at the gap between the national and provincial business confidence index last year it was about five points and if you look at it this year already in the first quarter it is at a ten point difference. We have a ten point more positive lead in that process. I always say that our numbers are in the national numbers too so if you took our numbers out it would be an even broader difference.

I believe we are starting to do the right thing. Remember that in migration of people, first of all it puts pressure on our system, specifically health and education, but it is not a bad thing. Remember people who migrate to this part of the country are looking for opportunity and they are the risk takers; they are the kind of people you want in the economy. Whether you are just coming here to look for a job or whether you are moving here to open a business to invest in, you are welcome to come and play a part in this economy. Obviously it is working because the unemployment rate has been continually dropping since the 2008/9 recession. My goal for this year is to go below 20% and we are just going to keep pushing that boundary. The opportunities are there now more than ever before despite the business confidence position nationally, we have a very different ecosystem in the region.

One the sectors in which your administration has been very successful with job creation is within back office processing (BPO), attracting some of the world´s major companies such as Lufthansa, Google, and Amazon. What are you aiming to do to further enhance the overall sector?

It is very focused in the city. Obviously we look at the whole province almost as an outer ear so to speak but these BPO offices are very key job drivers or creators. Since I started in this job there were about 7,000 jobs in that space and now we are probably sitting at about 50,000 jobs. As you say, Lufthansa was one of the early investors in putting their BPO here in this country.

How long have you been in your post?

I am now in year 7.

What was the rationale behind combining or amalgamating the departments of agriculture, economic development and tourism in a single Ministry?

It is about how we face the economy with one Ministry. It really is about consolidating those silos; the big players in our economy in this province are these areas. We are not a commodity driven economy such as the mining sector in the north of our country, ours is services, added value for agricultural products, BPO, tourism, the financial sector, we have a lot of asset management companies based here and a lot of new tech stuff happening.

Certainly asset management is huge. We have been staggered by the scale of it.

Correct. They are all based here. There is something like 8 trillion US dollars of African assets being managed out of Cape Town.

Your bug bears appear to be cutting the red tape and fixing the legislation to make business more friendly and obviously employment. How effective has the red tape reduction program been?

Perhaps I should say that it started off with a red tape reduction team, but their name has actually changed now and they are called the ease of doing business team. When the world thinks about this region and Cape Town as a brand, automatically it is seen as a tourist destination with beautiful mountains, great wines, great restaurants and beaches. It is a tourism destination and that is the brand generally out there in the world. I actually want it to also have a brand that says it is an easy place to do business; a place that you actually want to come to do business. We started off by saying let’s cut the red tape so it was a red tape reduction unit and then last year I said “we have to change the name of this unit”. We talk about red tape reduction but let’s move it to be more positive: ease of doing business. We tackle all sorts of things. Our focus nationally at the moment is we have a big visa issue; we have a mind-set around visas that really doesn’t make sense, so that team is continually putting pressure on the regulatory environment but at the same time looking at possible ways of finding solutions for individuals or companies. For example if you are an Indian tour company and you have 25 people that still need visas and you are coming tomorrow to South Africa, phone me. We will get our guys onto the Home Affairs department and start putting pressure on them to get these visas sorted out. At the same time as putting the regulatory pressure on at a national level, at our own level it is about having our own people walk through what the private sector experiences. We also have a very receptive call in system that we log. We have already done in excess of 4,000 cases and we have got about a 91% resolution rate that means the cases have been resolved but what I am interested in is the data, so looking at what are the ten prominent problems so that we can take them on systematically and start tackling them.

As well as encouraging tech entrepreneurship how hospitable an incubator is Cape Town for tech entrepreneurs?

Well it is something that we continually try to improve on but it is obviously on the radar because we have had our own government funded incubators here for a while, with Bandwidth Barn and we have a Barn in Khayelitsha but of course we have also now seen the private sector really step up in that space as there is almost now more private sector involvement than government sector involvement and that is great because we have to look at how we stimulate it and get it going and then we need to just let it happen. Our latest investment was Rise, the Barclays incubator system; now suddenly Cape Town is connected to London, Manchester, New York etc. They are really looking at financial tech and they are probably very cleverly investing into a space where perhaps the next disruption to banking is going to come from so at least they will either own it or have an early warning system! It is rolling out all over the place and that is on the back of our project of spending billions on broadband, which is not just about connecting Cape Town to Johannesburg and to Hong Kong, but it is about connecting the population in an emerging market. For every 10% of your population that you connect you get about 1.3% GDP growth. Just this year we will roll that out and connect 2,000 government offices and have free Wi-Fi hotspots in rural and in densely populated poorer areas. That of course creates a whole lot more opportunity.

The old venerable industry of tourism here is one of your most competitive sectors, particularly with what has happened with you currency. It is showing high growth at the moment and excellent job creation with a lot of linkages into the economy. It is a very labour intense sector. How do you boost awareness of the Western Cape to keep up?

We have an agency that we use as a marketing agency and that is Wesgro. Their job is trade and investment but their job is also promotion so they act as an agent that links together with all of our local regions and we then go to market with industry in the tourism space. Of course as government we also have a project called project Khulisa and tourism is one of the sectors that we are really driving hard. The sector choices that we have made as a government for the next few years are tourism, agri-processing and oil and gas. Those are our sector focuses and the rest of the work that we do is about our enablers.

Khulisa means regrowth or renaissance?

Yes it means to nurture and to allow to grow.

How critical is it to amend the rather bundled visa regulations thus enabling more people to travel to South Africa and regain some of the lost ground with newer markets like China and India? We have spoken to a lot of people in the leisure and hospitality sector and they were absolutely spitting blood over this.

It is a really crazy idea. If you look at that regulation, considering us as a country where our government is taking us to be part of the BRIC nations, it makes no sense that those specific nations find it the hardest to get here. That is where the real blockage comes in. Our traditional markets find it OK to get here and that is where our core market is and where we have continued to see growth. The only problem there is the unabridged birth certificate. What that has done is that it has put a bit of a damper on family type holidays. However it looks like we are getting traction.

The apparent justification for this was to prevent trafficking and yet it has had a catastrophic impact on your industry.

I don’t want to get into the political nuts and bolts of this thing but it was a stupid decision. It was a decision that was based on incorrect information. Some of the numbers that were put on the table were incorrect and no one wants child trafficking of course but we need to become a bit smarter in putting in the correct mechanisms to holt or deal or police child trafficking as this is definitely not one of those.

It just seems like throwing a baby out of the bath water.

Correct. We have a commitment to the reversal of the process; it is just taking far too long again. There was a special committee set up under the deputy president and they did announce at the end of last year that they will be retracting and changing that and it is supposed to be happening right now as we speak. Let’s see what they come up with.

Do you think that a sharply weaker rand will overall be a hindrance to the Western Cape?

If you gave me a choice I would prefer a stable currency. We have a Ministry called the Ministry of Equal Opportunities. I have to use this as an opportunity. I believe it is a perfect opportunity to really boost our marketing into our core markets to really up those numbers. It is suddenly all about how we tell the correct story to get investment to increase, especially as it is not about your investment into the region, it is about your Africa strategy; how do you use the region as a base to make sure that your roll out of your Africa strategy for the next 20 years as a business is successful. This is a great place to stay, it is a great place to visit and to base yourself and then over the next 20 years grow your business up into Africa. That is quite a key focus and from an investment point of view it is absolutely going to be how we ramp it up.

Then of course there is trade, suddenly our wines are more competitive, suddenly all of our fruit exports are more competitive and suddenly our bed nights and our restaurant meals are more competitive.

To come back to the opportunities in agriculture, what are they in the Western Cape, particularly in the agri-business side?

How do we enable agri-processing in general without choosing any specific area? Although if we had to say some of the focuses we have, one of them is wine. In the last 20 years we have gone from 50 million litres to 500 million litres of wine that we export. We have seen some fair growth. Our traditional markets will be kept strong but we are also seeing quite a push into China. We have seen fair growth there; we grew by 95% into China last year and by value 104%. That is also nice as they are starting to buy a higher price point in wine. China is also a nice market because they buy bottles, they don’t buy in bulk. At the moment we export 60% of our wine in bulk. I have now set the target of only exporting 40% of our wine in bulk and 60% in bottles. That means we have to push the higher price point and we have to create better value and be seen as a much more value driven wine market rather than a bulk budget wine.

We met Siobhan Thompson this morning and she said almost exactly the same thing. Do you think Cape Town could ever challenge Johannesburg as South Africa’s real business hub?

Did you read the Moneyweb article? Google it as they had an article in November and it was headed “Is Cape Town Challenging Johannesburg for The Economic Capital of the Country?” Absolutely. The economy in there is driven on last century’s growth generators so commodity driven, resources out of the ground, but this economy is about services and trade and that is exactly what the article spoke about. We represent 13 or 14% of South Africa´s economy and there it is 34% of the economy but it’s a nice challenge. I think the new economy is all about that and it is the ecosystem that we are trying to build.

Would you concur with Michael Bloomberg who said “the best way to create a city businesses want to invest in is to create a city people want to live in”?

Absolutely. This is a liveable and dynamic city. If you just speak to anyone who comes here for the first time, who has never been to Africa before but comes to land in Cape Town, they fall in love immediately. They generally become not only visitors but they become investors. It is amazing to see that conversion rate.

That is why we are here, to do coverage on Cape Town because we believe that Cape Town has something for the future knowing how the economy is changing. That is why we are really focused on it as if it was an independent country.

I was going to say that on the tech side, you know U-start? It is an organisation that has their big gathering in Milan every year. Basically all of these tech start-up companies go to Milan because Milan is a pitching space. Generally those that are there are the big tech companies so the Microsofts and such are all there to try and buy the next thing. There are also a lot of the big family trusts looking at the next thing that they want to invest in and there are the angel investors. Two years ago, Africa was invited. Up until now it had basically been the Americas and Europe but Africa was then invited. We got five slots. We were told that Africa could get five pitches so we ran a U-start program across Africa because tech is quite strong in Kenya where they have a nice brand that is actually stronger than ours. We are doing a lot of work there actually. So we ran a kind of competition across Africa and eventually the five slots were filled. Four of the five came from Cape Town. The fifth one came from Kynsna which is my home time actually; it is a five hour drive. I found out about it when I heard they were going and all five were from this province. I said to my guys, being the provincial governor, “I love this idea, let’s get these guys in and get them branded with Cape Town” but they said “but we are the provincial government?!” and I said “I don’t care, brand them with Cape Town!” That is a hard thing to get a government to do, brand something not their own! We won the top pitch! The best pitch! The company is called Over and they do apps but they owned one of these film apps where I think you write over…

Are they already successful?

Yes they are out there but this was two years ago when they won the pitch. So after they got back I got my guys to phone them as I wanted to have a coffee with the winner. He is actually a young American. So I said to him “Congratulations! Tell me what happened.” He said “When I was about 17 or 18 I had some ideas and created some apps and I sold them for lots of money. I then started travelling around the world and I ended up in Cape Town and loved it here so that’s where I am. I am married, I have a tech company that employs around 25 people, and it’s the right ecosystem…”

You would be amazed.

There are just so many of them!

 

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