South Africa Forbes

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Reprinted from the June 18, 2007 issue of Forbes

AfricaECLECTIC

South Africa is enjoying the longest run of economic growthin its history, and there are no signs that this remarkableprogress is coming to an end.

The economy has expanded in every financial quarter sinceSeptember 1999, with growth averaging 5% annually for thepast three years and projected to maintain that average overthe next three.

The transformation is strikingly apparent in Soweto, a blacksatellite township southwest of Johannesburg that was once asqualid symbol of the evil inequalities of the apartheid era.

Tourists now visit Soweto to see Nelson Mandela’s house andWalter Sisulu Square, where 52 years ago, at the height of theapartheid regime, the African National Congress adopted itsFreedom Charter, spelling out its vision of a nonracist society.

While Gauteng province, which incorporates Johannesburgand Pretoria, is the economic powerhouse of the republic,Kwazulu-Natal, a province on the Indian Ocean coast, is chal-lenging its dynamism. Kwazulu-Natal’s biggest city, Durban, isrecording the highest economic growth rate in the republic, esti-mated to be above 6%, and is responsible for 65% of SouthAfrica’s gross added value to export products.

Durban’s port is the busiest on the African continent, handlingover 30 million tons of cargo annually, and is vying withMelbourne to be the largest container port in the SouthernHemisphere.

In addition to accommodating the two biggest petrochemicalrefineries in Africa, the city is home to Toyota, which has justcompleted a $346 million expansion to its Kwazulu-Natal manu-facturing plant to enable production of 220,000 vehicles peryear for local sales and export.

Toyota, together with General Motors and Volkswagen, hasmade vehicle production the second-biggest industry in SouthAfrica’s manufacturing sector, and its investment is a critical fac-tor in the province’s development strategy.

However, for all the economic progress it has made, Kwazulu-Natal, like the rest of South Africa, suffers from a shortage ofhousing, water and electricity, and extensive poverty.

“These social backlogs can only be addressed two ways interms of getting money to fund them,” says Russell Curtis, chiefexecutive of the Durban Investment Promotion Agency. “Thefirst is to get funding from other spheres of government. Thesecond is to get substantially more private sector investment.”

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To attract investment, Durban hascredit ratings of AA+ and claims the bestcombination of business and pleasureinfrastructure in the republic. Workershave just completed rolling out the lastmiles of fiber-optic cables, which willservice 888 square miles of the munici-pality and 60 miles of Indian Oceancoastline. In the agricultural sector, thefocus is on the development of biofuel.

Another project under discussionwould equip Durban’s street vendorswith handheld devices that would enablethem to order and pay for goods viaInternet banking.

“This would facilitate a substantialescalation in economic and social devel-opment,” says Curtis.

Yet, while the benefits of sustained,decade-long economic development arebeginning to show in Gauteng, Kwazulu-Natal and the other South Africanprovinces, unemployment nationwidestill stands at 25% and, paradoxically,there is an acute shortage of skilledworkers.

To solve the problem, job training hasbecome as important as job creation forboth the government and business leaders.

At present the number of jobs beingcreated is increasing by a modest 5,000a year. However, many of these jobs areof higher quality than in the past, andmore workers are gaining formalemployment.

Curtis says that Kwazulu-Natal, as themost populated province, has the broad-est mix of skilled, semi-skilled andunskilled labor, and the most progressivetraining schemes. “We are linked tosome of the fastest skills developmentprograms, which are backed by theUniversity of Kwazulu-Natal,” he says.

Nationwide, as the authorities tacklethe skills shortage, living standards arerising and a growing number of workersand businesses are paying more taxes.

With publicfinancesstrengthened bya decade ofsound fiscalpolicies and anexpanding taxbase, the gov-ernment is nowsubstantially

increasing its spending on infrastructureand the social services required by themillions still living in dire poverty.

In 2007, for the first time, South Africarecorded a budget surplus, and FinanceMinister Trevor Manuel marked themoment by announcing that the countrywould spend $6.3 billion on infrastruc-ture projects over the next three years.

These investments will improve publictransport and supply the basic services of

water, sanitation and electricity to thoseschools, clinics and poor households thatstill lack them.

Such is the country’s economic progressthat some now hope the government canachieve its primary aim of halving unem-ployment and poverty by 2014, ten yearsafter it first set that target.

Prospects for achieving this goal areenhanced by the preparations, alreadyunder way, to stage the soccer World Cup,a sporting event second only to theOlympic Games in size and with thelargest worldwide television audience.

The country is spending more than$1.9 billion on upgrading its airports,improving its road and rail network,building or renovating ten World Cupstadiums, and enhancing its tourism facil-ities in readiness for an estimated 3 mil-lion visitors for the soccer tournament.

Consultants have estimated that theWorld Cup events will pump around$3.1 billion into the economy, generat-ing $1.8 billion in direct spending andcreating 160,000 new jobs. With thisprospect on the horizon, South Africa istackling the efforts to overcome its skillsshortage with renewed urgency. ❖Michael Knipe

“These social backlogs can only be addressedtwo ways in terms of getting money to fundthem. The first is to get funding from otherspheres of government. The other is to getsubstantially more private sector investment.” Russell Curtis, chief executive, Durban Investment Promotion Agency

Project Managers: Antoine Rolin, Tim Bradley, Lucas Montesde Oca. Publisher: John Gasser. Managing Editor: Beverley

Blythe. Art Director: Y. Taravilla-Marin. Editor: Michael Knipe.Cover: © S. Osolinski/CORBIS.

This special advertising feature was produced by InsightPublications, a division of Impact Media Global Ltd.

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City Skyline Beach, Durban, South Africa

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With national unemploymentestimated at more than 25%of the labor force, job cre-

ation is one of South Africa’s funda-

mental problems, says MembathisiMdladlana, South Africa’s minister oflabor. “But,” he adds, “so is the skillsshortage. Remember, 30% of our pop-ulation has no education and cannotread or write.”

The country’s sustained economicgrowth over the past eight years hasoutpaced the supply of skilled workersentering the job market. The govern-ment’s goal, therefore, is to increasethe number of engineering graduatesfrom the present average of 4,000 ayear to 12,000 a year by 2010, and thenumber of qualified artisans from5,000 a year to 50,000 a year over thesame period.

One of the academic institutionsengaged in helping to meet these tar-gets is the Durban University ofTechnology (DUT).

The first university of its kind inSouth Africa, the DUT was created in2002 by the merger of the hundred-year-old Technikon Natal with the MLSultan Technikon. Malukmahomed

Lappa Sultan, an immigrant whoarrived from India in 1880, foundedthe latter during the apartheid era.After his successful business career, he

was instrumental inthe 1950s in establish-ing a technical educa-tion facility for Indianpeople.

Today the universityhas a multiracial stu-dent population ofmore than 20,000, anacademic staff of 560and four faculties(arts, commerce, engi-neering science andhealth science), spreadacross seven campussites.

“Most of our engi-neering studentsbegin working beforethey have even fin-ished their three-yeardiplomas,” saysProfessor NqabombiGawe, the university’sdeputy vice chancellor.

“We have forgedeffective partnershipswith industry and

other employers to ensure the rele-vance of our programs, hence theemployability of our students. Quality-wise, it is industry that keeps us on our toes.”

Gawe says the DUT is still in theprocess of defining what a universityof technology should be within theSouth African context and how itshould handle its relations with theindustrial sector.

“It is critical to distinguish betweenour role as the generator of knowledgeand theirs as the users of knowledge,”she says.

The university’s staff has the capacity,she says, to produce graduates whonot only will be employable but willhave the ability to create further jobsand spread knowledge.

To improve access to its facilities, theDUT offers bridging courses for stu-dents who have the capacity to copewith undergraduate studies but lackthe qualifications for some of the for-mal programs offered. ❖

Encouraging learning

Laboratory technicians monitoring water quality samples

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South Africa special advertising section4

As the world’s largest producer ofgas-to-liquid (GTL) fuels, SouthAfrica is seeking to trade its

expertise in this field with the continent’smajor oil- and gas-producing countriesfor the benefit of all.

“We want to see how we might usethe expertise and infrastructure availablein South Africa to work with our Africancounterparts who are bigger producersof oil and gas,” says Sipho Mkhize, thechief executive of PetroSA, the republic’snational oil company.

“Such collaboration would act as aspringboard in alleviating the petroleumshortage on the continent since paststructures and inefficiencies have forcedmany African countries to import theseproducts.”

South Africa uses more than half a mil-lion barrels of oil a day and, with fewenergy resources of its own, must importmore than 80% of this total. Fortunately,its GTL technology and infrastructure isthe world’s best.

Mkhize believes that by trading witheach other, South Africa and the conti-nent’s oil- and gas-producing nations couldminimize their respective energy costs.

South Africa has long been on thepath to becoming the world’s largestproducer of GTL fuels.

Technology for making gasoline fromcoal was first developed in Germany inthe 1920s and was further developed bySasol, South Africa’s synthetic fuels andchemical company, in the 1980s after the

republic was subjected to an internationaloil embargo because of its racist policies.

When Sasol was privatized, the tech-nology passed to PetroSA.

The national oil company, establishedin 1965 for the purpose of oil and gasexploration, pioneered the adaptation ofexisting coal-to-gasoline technology intothe chemical conversion of natural gasinto liquid, now known as GTL. Thisprocess is not to be confused with LNG(liquefied natural gas), which uses arefrigeration process.

PetroSA developed distinctly home-grown technologies and operationalmethods and built the world’s first com-mercial GTL plant west of the town ofMosselbay, on South Africa’s scenicGarden Route. It continues to be theworld’s largest facility for gas-to-liquidprocessing.

“The uniqueness of the technology isthat it is very clean in comparison toother technologies and assists in envi-ronmental control,” says Mkhize.

In its efforts to maintain and increasethe country’s supply of fuels, PetroSA isactively engaged in worldwide explo-ration for oil and natural gas as well aspursuing its downstream refining opera-tions. Its gas-to-liquid plant currentlysupplies about 7% of South Africa’s liq-uid fuel needs, which reach the marketthrough the supply channel of the inter-national oil companies. In the future,however, Mkhize is planning to supplythe home market directly. ❖

Trading on expertiseA double-hulled tanker leaving Duncan Dock in Cape Town Harbor

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Once a gold rush town, Polokwaneis preparing to be a goal rush city.In 2010 it will be one of the nine

South African cities to host matches ofsoccer’s World Cup. A new stadium,hotels and an international conventioncenter are already under construction.

It is expected that Polokwane will takeall the preparations and the arrival ofthousands of international soccer fans instride.

Founded by the Dutch Voortrekkers in1884, and originally called Pietersburg, itis now the capital of Limpopo Provinceand one of the fastest-growing cities inthe Southern Hemisphere. And as aresult of post-apartheid border changes,its population has swollen from 50,000to 580,000.

Also, as the largest metropolitan com-plex in the north of the republic, it hasbecome a major transit link to and from

the neighboringcountries ofBotswana,Zimbabwe,Mozambique andSwaziland.

The N1 routefrom Johannesburg,which runs thelength of theprovince from northto south and passesthrough Polokwane,is the busiest overland route in Africa forcross-border trade in raw materials andgoods.

Mayor Thabo Makunyane believes thatin addition to bringing in revenue, theWorld Cup soccer matches staged inPolokwane will enhance the city’s inter-national image and promote furtherinvestment.

“Food processing would be a goodinvestment here, as fruit and vegetablefarming is a major activity,” he says.“Limpopo supplies more than 50% ofthe country’s tomatoes, but at themoment there are no places to processthem.”

There is also a need for the retail sec-tor to respond to the increasing

World cup impact on investment

South African soccer fans

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Although it is preparing for its cen-tenary celebrations next year, theUniversity of Pretoria’s gaze is

fixed firmly on the future.“‘Going beyond’ is woven into our

strategic intent,” says Professor CaliePistorius, the university’s vice chancellorand principal.

As one of four South African universi-ties rated among the world’s top 500,the University of Pretoria plays a signifi-cant role in the life of the republic, notonly by providing higher education andresearch facilities, but by helping to buildthe country’s social structures and con-tributing to its intellectual debate.

With 40,000 residential and 10,000distance-learning students, U. of Pretoriais one of the largest institutions of higherlearning in Africa. As befits a leadingacademic establishment located in aracially diverse population, more thanhalf of its students are black, and aroundone-quarter of its 2,000 foreign studentsare from other African countries.

The university’s contribution to thenational goal of increasing blackempowerment is further reflected by thefact that of the more than 9,000degrees it awards each year, it confers athird of them on black students.

Just as important as the diversity of itsstudent body is the emphasis the univer-sity places on academic innovation. Inaddition to serving as the vice chancellor,Professor Pistorius is the chairman of theNational Advisory Council on Innovationin South Africa and has made the pur-

suit of innovation one of the university’sprimary aims. For many years it has beenthe republic’s leading research university,particularly in the fields of science andengineering.

The university has nine faculties, special-izing in economic and management sciences; education; engineering, built

environment (architecture, townplanning) and information tech-nology; health sciences; humani-ties; law; natural and agriculturalsciences; theology; and veterinarysciences.

Not surprisingly, the universityattracts its share of outstandingundergraduate students, andmore than 30% of the currentenrollment finished high schoolwith six or more distinctions.Many of those pursuing degreeson its campuses today willbecome South Africa’s futureleaders.

Postgraduate students are of asimilar high quality, and the uni-versity leads the national field in

doctoral enrollments.“We need to prepare these students

to be the leaders of the future who cancompete in a globalized world,” saysProfessor Pistorius. “This country waspolitically isolated for a long time, andluckily this is no longer the case.

“However, we remain geographicallyisolated. We are now part of the global community, and we have towork hard to improve our internationalcompetitiveness.”

When South Africa emerged from itsisolation following the demise of theapartheid era in 1994, the path wasopen for radical changes in educationalpolicies. Seven years later, its higher edu-cation institutions underwent a compre-hensive restructuring exercise. Many ofthem merged, a number of well-knownestablishments closed and new onescame into being.

U. of Pretoria retained its identity, but,like other institutions in the republic, ittook the opportunity to redefine itsvision and mission, which it did by rein-forcing its commitment to academicexcellence and emphasizing its determi-nation to be a premier research center.

It also focused on enhancing its

World-class competitors

Lab students at work, Hatfield Campus, University ofPretoria

affluence of Polokwane’s citizens. Whileproperty prices have boomed, says MayorMakunyane, shops are still selling lesser-quality goods, and as a result residentsare traveling out of the province to shop.

Sello Moloto, premier of LimpopoProvince, says that the poverty of theprovince during the apartheid era wassimply due to neglect of its naturalresources.

“Since the inception of the new gov-ernment we have not added much valueto [natural resources],” he says. “All wehave done is expose and profile theopportunities and put in place the legisla-tive framework to allow investors tocome in.”

Now, he says, the province is seekingto add value to its natural resourcesbefore exporting them.

Currently, mining and quarryingaccount for 21% of Limpopo’s economicactivity, and tourism and trade for 11%.

With a population of 5 million, theprovince supplies more than half of SouthAfrica’s oranges, tomatoes, mangoes andavocados; has some of its largest plantedforests of eucalyptus and pine; and is thesource of half of the country’s recoverablereserves of coal. All of these areas offeropportunities for investment.

Limpopo, says Moloto, is now investingin the provision of skills, offering scholar-ships to good students who need assis-tance and focusing on training engineersand developing trade skills.

“We believe that investing in skills willpay back in the next five to ten years,”he says. ❖

“Food processing would be a good investment here,as fruit and vegetable farming is a major activity.” Thabo Makunyane, mayor of Polokwane

Insight Publications worked with the CarbonNeutral Company and its science partner, theEdinburgh Center of Carbon Management, tocalculate this report’s carbon footprint andimplement carbon offset projects to reduce theedition’s emissions to net zero. Global warmingemissions have been measured, reductions rec-ommended, and the remaining emissions offsetthrough renewable energy and/or sustainableforestry projects.


reputation internationally by collaborat-ing with universities around the world. Ithas strengthened its established linkswith North American and European insti-tutions, particularly with the UnitedStates. Professor Pistorius obtained mas-ter’s and Ph.D. degrees in electrical engi-neering from Ohio State University; amaster’s degree in management of tech-nology from the Massachusetts Instituteof Technology (MIT); and he completedan advanced management program atthe Harvard Business School.

The university is also developingalliances with Asia, South America,Australia and New Zealand, and staffand students felt great pride and satis-faction when President Hu Jintao ofChina chose the University of Pretoria as

the venue for a major policy speech onAfrica during his recent state visit to thecontinent.

In line with this international outlook,the university supports and promotesmultilingualism. It conducts courses inEnglish and Afrikaans — two of SouthAfrica’s 11 official languages — and pro-motes a third language, Sepedi, spokenby many of the students and staff.

The U. of Pretoria also encourages thelearning of non-South African languages.It has introduced Spanish courses, forexample, with the assistance of theSpanish Embassy, and plans to offercourses in other languages.

Another important strand of the uni-versity’s activities is its cooperation withthe private sector, science councils and

government agencies. A wide spectrumof national and international companiesand agencies have contacted the univer-sity’s major research centers, such as theForestry and Biotechnology Institute, theUP Water Institute and the Center forHuman Rights.

U. of Pretoria has also established arange of campus companies whose activi-ties include the provision of continuingeducation, sports, market research andventure capitalism. Start-up companies, anumber of which are joint ventures withoutside organizations, are commercializingseveral of the university’s research projects.

It is the university’s job, Professor Pistoriusbelieves, to deliver a new generation of SouthAfricans who have a global view and under-stand the nature of international competitive-ness. It must also ensure that a fair share ofthe world’s best students come to SouthAfrica.

“We must not only educate world-classengineers, doctors, teachers and leadersin other fields, we must also deliverworld-class people who can compete withthe world’s best anyplace, anytime,” hesays. ❖

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“We need to prepare these students to be the leaders of the future who can compete in a globalizedworld. This country was politically isolated for a longtime, and luckily this is no longer the case.”Professor Calie Pistorius, vice chancellor, University of Pretoria

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