South Africa Swiss Economic Cooperation and Development
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COUNTRY
STRATEGY
Swiss Economic Cooperation
and Development
South Africa
2017–2020
Abbreviations AFD French Development Agency (Agence française de développement) ANC African National Congress B-BBEE Broad-Based Black Economic Empowerment BRICS Brazil, Russia, India, China and South Africa CHF Swiss Franc COSATU Congress of South African Trade Unions CO2eq CO2 equivalent DA Democratic Alliance dti Department of Trade and Industry EFF Economic Freedom Fighters EFTA European Free Trade Association EU European Union FDFA Federal Department of Foreign Affairs FDI Foreign direct investment G-20 Group of Twenty GDP Gross domestic product GHG Greenhouse gas IEP Institute for Economics and Peace JEC Joint Economic Commission KfW Reconstruction Credit Institute (Kreditanstalt für Wiederaufbau) MTSF Medium Term Strategic Framework NDP National Development Plan NGP New Growth Path ODA Official development assistance OECD Organisation for Economic Cooperation and Development O&M Operation & Maintenance PEFA Public Expenditure and Financial Accountability Programme PFM Public financial management SACU Southern African Customs Union SADC Southern African Development Community SARB South African Reserve Bank SDG Sustainable Development Goals SECO State Secretariat for Economic Affairs SME Small and medium-sized enterprise UN United Nations UNIDO United Nations Industrial Development Organization USD United States Dollar State Secretariat for Economic Affairs SECO – Economic Cooperation and Development SECO’s Economic Cooperation and Development division is responsible for the planning and implementation of economic cooperation and development activities with middle income developing countries, with countries of Eastern Europe as well as the new Member States of the European Union. It coordinates Switzerland‘s relations with the World Bank Group, the regional development banks and the economic organisations of the United Nations. SECO is part of the Federal Department of Economic Affairs, Education and Research (EAER). Switzerland’s international cooperation efforts as defined in the Federal Council’s 2017–2020 Message on International Cooperation aim to reduce poverty and global risks, alleviate suffering, and promote peace and respect for human rights. Accordingly SECO’s economic and trade policy measures strive to support sustainable and inclusive growth. The Economic Cooperation and Development division focuses its activities on its specific areas of compe- tence and experience in four target outcomes aligned with the 2030 Agenda for Sustainable Development: 1) effective institutions and services, 2) more and better jobs, 3) enhanced trade and competitiveness and 4) low-emission and climate-resilient economies. Special emphasis is placed on issues related to economic governance and gender. 2
Editorial Contents
5
With the present Country Strategy 2017–2020, and shall not compromise the well-being of Country
SECO reiterates its commitment to contrib- future generations. It contributes to reduc- context
uting to inclusive and green growth in South ing poverty and the impacts of global risks. It
Africa that will create jobs, ensure resilience enables the private sector to create more and
and reduce disparities. better jobs and the state to provide adequate
9
Development
services. Competitive economies and effective cooperation
Today, poverty remains a crucial issue also for institutions are also key to reinforcing the resil- context
middle-income countries like South Africa. ience of societies increasingly confronted by
While a number of these countries have expe- different dimensions of fragility.
13
rienced significant growth in recent years, the Development
challenges and
gap between rich and poor has widened in This Country Strategy defines the following
SECO’s response
many cases. In an increasingly interconnected three objectives of the economic and trade
world, middle-income countries are often par- policy measures deployed by SECO in South
ticularly vulnerable to global risks, such as cli- Africa. First, SECO supports an efficient public
17
Programme
mate change, economic and financial crises, sector and good financial governance. Second, implementation
or political instability. It is thus more impor- SECO’s measures strive towards a competitive and manage-
ment
tant than ever to ensure that all sections of and inclusive economy that fosters sustaina-
the population can benefit from sustainable, ble employment and international value chain
18
resilient economic growth. This is where SECO integration. And third, SECO aims at support- Financial
resources
applies its core competencies and compara- ing climate-friendly and green growth through
tive advantages in economic cooperation and the development of a low-carbon industry.
development.
Building on lessons learnt and the encouraging
19
Results
In line with the UN 2030 Agenda for Sustain- results achieved in the past cycle 2013–2016, monitoring
able Development and the Federal Council’s this Country Strategy sets the frame for SECO’s
2017–2020 Message on International Coop- continued activities in South Africa for the next
eration to the Swiss Parliament, SECO aims at four years. Based on the goals and priorities
fostering sustainable and inclusive growth in its described therein, we firmly believe that we
partner countries. Such growth addresses eco- can make a significant contribution to South
nomic as well as social and ecological aspects Africa’s further development path.
Marie-Gabrielle Ineichen-Fleisch Raymund Furrer
State Secretary, Ambassador,
Director of SECO Head of Economic Cooperation
and Development SECO
SECO | South Africa Country Strategy 2017–20203
1
2 3
4
1
Traditional products like the fruits
of Morula trees that can be used to
produce cosmetics bear great economic
potential.
2
The share of SMEs in total external
trade remains small: 93% of export
sales come from large firms.
3
Water is increasingly becoming a scarce
resource, exacerbated by early-stage
climate change effects.
4
Urban hubs remain an important con-
tributor to economic development and
job creation.
Country context
Political and institutional
South Africa’s smooth and peaceful polit- challenges. Fraud and corruption are increas-
ical transition to a constitutional democ- ingly raised as concerns by citizens, despite the
racy remains one of the most iconic polit- government’s commitment to fight this. The
ical feats of the past century. This political high unemployment rate combined with con-
transition brought freedom, civic rights and tinued immigration of job-seekers mainly from
extended social services to millions of South neighbouring countries add to social pressures,
Africans. Yet, the country is facing significant spurring social unrest, strikes and violent
challenges: its society remains divided and ine- attacks, including xenophobic attacks against
qualities persist. African immigrants. Nonetheless, South Afri-
ca’s widely respected Constitution remains a
Political landscape: The African National solid foundation that has limited the risk of
Congress (ANC), which has been driving the widerspread instability.
policy agenda since 1994, remains at the head
of government. The fifth general elections Decentralised government system: Since
were held in May 2014, which saw the ANC 1994, South Africa has made significant pro-
winning with a majority of 62% of votes and gress in building the structures of a democratic
eight out of nine provinces. President Zuma state, which saw the consolidation of frag-
was re-elected for a second term, ending in mented governance structures into a system
2019. Political tension between the parties of designed to better represent the entire popu-
the government alliance as well as within the lation. Challenges include unequal local gov-
ANC and other political partners and move- ernment capacity that leads to uneven perfor-
ments has become prominent. Political inter- mance, caused by, amongst others, tensions in
ests are increasingly affecting state institutions the political-administrative collaboration, skills
and state-owned enterprises. The contest for deficits, erosion of accountability and author-
municipalities is also fierce: with the 2016 local ity.
government elections the opposition took the
lead in several metropolitan areas. As they South Africa holds a unique position in the
won by a small margin in several municipalities region and in Africa. It is seen as an impor-
these will be managed by minority councils as tant regional hub for economic and political
no coalitions could be formed. These minority collaboration, engaging with other African
council dynamics are likely to change the way countries and working closely with African
decisions are made at local government level regional blocks including the Southern Afri-
as well. can Development Community (SADC) and the
African Union (AU). South Africa is also active
Most challenging issues and risks to politi- in international fora, being the only African
cal stability: High unemployment, income ine- member country of the G-20 and BRICS.
quality and poor service delivery remain major
Economic
After the dismantling of apartheid, South and stimulating faster economic growth. These,
Africa successfully re-integrated into global however, fell short in reducing poverty, creating
affairs, substantially strengthening the eco employment and distributing wealth. Subse-
nomy’s macroeconomic underpinnings. The quent strategies focused mainly on the latter –
economy is well diversified, with key sectors but are falling short in stimulating the former.
including tourism, financial and business ser-
vice, energy, transport, trade, telecommuni- South Africa faces persisting domestic
cation, mining, automotive, textiles, food pro- structural challenges. The country contin-
cessing and agriculture and fisheries. However, ues to face the triple challenge of high unem-
South Africa has not yet found an economic ployment, high inequality and high levels of
policy that could balance economic growth and poverty. The unemployment rate in 2015 was
job creation: previous strategies focused on 25.4%1 – the highest among the G-20 and
the achievement of macroeconomic objectives BRICS countries. Challenges, such as skills
SECO | South Africa Country Strategy 2017–20205
shortages and remote settlement structures, value chains and have suffered from external Economic sectors in
continue to characterise the economic land- factors such as energy bottlenecks, limited South Africa
scape. South Africa remains a dual economy product market competition and labour mar-
with one of the highest inequality rates in the ket constraints. Exports have slowed down,
world. With an income Gini of 0.63 in 2011, growing at only about 4% between 2011 and Primary (agriculture), secondary (indus-
try) and tertiary (services) sector in %.
closing the gap between the two economies is 2014. The share of SMEs in total external trade
Source: Central Intelligence Agency,
a priority policy and implementation challenge remains very small – 93% of export sales come World Factbook (2015)
for the government. from large firms.
South Africa is facing its fifth consecutive Infrastructure investment has been iden- 67 % 3%
services agriculture
year of slowing growth. The average income tified as a way to stimulate the economy.
per capita has fallen rapidly in the past five years, Municipalities, in particular, are under-spend-
and poverty has slightly increased from 36.5% ing significantly on both asset development
in 2014 to 37% in 2016. GDP per capita based and maintenance in all major infrastructure
on power purchasing parity has grown only sectors, while having insufficient capacity to
slightly in the past five years. Real GDP grew implement effective mechanisms for planning
only 1.3% in 2015, and growth for 2016 was and delivering infrastructure. To improve this
revised down to 0.5%. Growth forecasts for would need significant leveraging of private
2017/2018 were revised down to 1.3%. funding through innovative financing mech-
anisms. The government is reviewing the
The weak economic outlook has made the structuring and functioning of its challenged
implementation of appropriate fiscal and state-owned enterprises (SOEs) with the aim
monetary policies more challenging. The of making these more efficient and profitable.
country faces current account and fiscal defi-
30%
industry
cits, and debt has almost doubled in the past The urban hubs remain an important con-
seven years. The budget deficit is expected to tributor to economic development and
be reduced to 2.4% by 2018/2019, from 3.2% job creation. With an estimated 78% of the
in 2016, while debt is close to 50% of GDP. country’s population living in urban areas (cit-
The South African Reserve Bank (SARB) faces ies and towns), South Africa’s rate of urbanisa-
an increasingly difficult task of balancing rising tion is rapid and higher than planned for. This
inflation and weak growth. The negative out- places considerable pressure on local author-
look is further exacerbated by China’s economic ities. Urban development can be a driver of
slowdown, the fall in commodity prices and economic growth, but there remains a dire
waning business confidence with sovereign need for thorough planning and management
debt and credit ratings downgrading. Key pri- to unlock the pivotal potential.
orities include maintaining debt sustainability
and fiscal tightening in the face of rising core
inflation. Being a widely traded currency, the
rand is vulnerable to global uncertainties and GDP growth of
perceived political and economic instabilities. South Africa
South Africa’s financial sector remains Gross Domestic Product (GDP) per capita based
robust despite the global economic down- on purchasing power parity (PPP) in current
turn. It has relatively high capital buffers, international dollars.
manageable exposure in the foreign exchange Source: International Monetary Fund, World 14000
Economic Outlook (2016)
market and has diversified its markets into 12000
Sub-Saharan Africa. South African banks 10000
remain in a sound position and benefit from a
8000
long-term rigorous regulatory framework.
6000
Weak export performance and competive- 4000
ness problems: With the exception of the min- 2000
ing and automotive industries, South African
0
exports are still weakly integrated into global 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1 The inclusion of people no longer looking for work pushes the number to around 34%, and youth u
nemployment is
estimated at around 40–50%.
6
Social, humanitarian and security
Although major achievements have been nology and engineering, although there have GINI-coefficient of
made over the past 21 years, progress on been gains: 43.7% of the total researcher
South Africa
social outcome indicators has been below workforce in 2012/2013 was female.
target. The legacy of low-quality education
in historically disadvantaged parts of the edu-
cation system persists, and many parts of the
Migration remains a challenge in South
Africa. It is estimated that there are just over
0.63
secondary and further education and training two million immigrants living in South Africa.
sectors are underperforming; the overall per- Figures released in 2014 by Statistics South Degree of income inequality within
the population (0 = complete equality;
formance of the health system since 1994 has Africa suggest that over two-thirds of immi-
1 = complete inequality).
been poor, and inefficiencies and inequities in grants in South Africa are from other African Source: World Bank (2011)
South Africa’s settlement patterns are deeply countries, mainly SADC. The continued immi-
entrenched. gration into South Africa has a great impact
on the country’s economy, education, and the
Life expectancy, after falling dramatically government’s ability to deliver social services.
to 53 years in 2010, recovered to 62 years
in 2014. The recent recovery was largely due Crime is a prominent issue in South Africa.
to the rapid expansion of the antiretroviral The Institute for Economics and Peace (IEP)
treatment programmes to fight HIV/AIDS. puts South Africa among the 15 countries in
There was a remarkable decline in both adult the world with the lowest marks of societal
and infant mortality rates. Yet, the poor remain safety and security, and ranks it as the eighth
particularly vulnerable. High HIV/AIDS infec- most violent, with a murder rate of 31 per
tion rates and tuberculosis infections (amongst 100,000 people. This has significant implica-
the highest worldwide) have impacted labour tions also for both the economy and the cost
supply and productivity, strained the health of doing business.
system and drained the fiscus.
Water is increasingly becoming a scarce
Gender diversification remains a key prior- resource, exacerbated by early-stage
ity for the country. Statistics indicate that the climate change effects. Freshwater systems
unemployment rate for women is 28.7%. The are impacted mainly by increasing variability
employment absorption rate for men is higher in rainfall and rising sea levels. Water losses
at all educational levels. The official labour are also a key concern. South Africa is experi-
force participation rate is the lowest among encing water wastage caused by leaks, losing
black African women, at 49%. There is also a 37% per annum of the natural resource and
need to attract more women to science, tech- close to USD 600 million a year.
Bilateral economic relations
Owing to its regional hub function and past years. South Africa’s exports to Switzer-
its high economic potential, South Africa land remain largely dominated by precious
is an important gateway for Swiss com- metals such as gold (2015: 78%) and plati-
panies on the African continent. The Swiss num (2015: 6%). Other metal types such as
Business Hub plays an important role, offering aluminium and agricultural goods constitute
potential linkages with SECO programmes. most of the remaining exported products.
With bilateral trade of almost CHF 2.9 bil- Switzerland is among the ten largest
lion in 2015, South Africa remains Switzer- investors in South Africa in terms of for-
land’s most important trading partner in eign direct investment (FDI). More than a
Africa. Switzerland’s trade flows with South hundred subsidiaries of Swiss companies oper-
Africa represent a quarter (25%) of Swit- ate in South Africa, some with relatively large
zerland’s overall trade with Africa. Switzer- production plants. Switzerland is also amongst
land’s exports to South Africa amounted to the top 15 European trading partners of South
CHF 676 million (–6.6%) in 2015, whereas Africa.
imports were worth almost CHF 2.2 billion
(0.3%). Switzerland’s main exports to South The free trade agreement between EFTA
Africa are machinery (2015: 26%), pharma- countries and South Africa within the
ceutical products (2015: 20%) and watches SACU framework has been in force since
(2015: 9%). While Switzerland’s import vol- 1 May 2008, complemented by a bilateral
ume seems to be subject to annual fluctua- agreement for the agricultural sector between
tions, exports have been quite stable over the Switzerland and SACU. A Framework Agree-
SECO | South Africa Country Strategy 2017–20207
1
2 3
1
Striving entrepreneurship and a
competitive private sector are key for
job creation.
2
The South African government seeks to
eliminate poverty and reduce inequality.
3
Improving public transport is a major
objective of urban development in
South Africa.
ment on development cooperation was signed Switzerland’s foreign economic strategy with
in 2013. Furthermore, based on the Memo- South Africa, annual top-level talks (FDFA) and
randum of Understanding on “Strengthening Joint Economic Commissions (JEC, SECO) are
Mutual Cooperation” of 2008, resulting from held.
Development cooperation context
Partner country development strategy
The main strategies relevant for economic and food security; sustainable human settle-
development are: ments; responsive, accountable, effective and
efficient local government; protected and
The National Development Plan (NDP) and enhanced environmental assets and natural
Vision 2030 seek to eliminate poverty and resources; an efficient, effective and develop-
reduce inequality by growing an inclu- ment-orientated public service; a sustainable
sive economy, enhancing the capacity of social protection system; a diverse, socially
the state, and promoting leadership and cohesive society and a common national iden-
partnerships throughout society. The plan tity, and a better South Africa that contribute
emphasises the need for a strategy to address to a better Africa and world.
poverty and its impacts by broadening access
to employment, strengthening the social wage The New Growth Path (NGP) of 2010 is a
and improving public transport. It calls for pri- framework for economic policy and the
vate investment to be boosted in labour-in- driver of the country’s job creation strat-
tensive areas, competitiveness and exports. It egy. The aim is to reduce unemployment to
also stresses the need for jobs to be located 15% by 2020 through the creation of five mil-
where people live, for informal settlements to lion new jobs. The New Growth Path has fixed
be upgraded, and for housing market gaps six priority areas for job creation: infrastruc-
to be closed. The plan suggests that public ture development, agriculture, mining, man-
infrastructure investment be set at 10% of ufacturing, the green economy, and tourism.
the country’s gross domestic product (GDP). It The NGP was the first government paper to
outlines the steps that need to be taken by acknowledge disparities and unemployment
the state to professionalise the public service, as a major challenge to South Africa.
strengthen accountability, improve coordina-
tion and prosecute corruption. In addition, a number of sector policies
have been formulated and are relevant
The Medium-Term Strategic Framework to SECO’s activities: the Industrial Policy
(MTSF) 2014–2019 has the aim of guid- Action Plan (Department for Trade and Indus-
ing planning and resource allocation try), the National Infrastructure Plan (Presiden-
across the three spheres of government tial Infrastructure Coordinating Committee),
(national, provincial and local) in line with the Integrated Resource Plan (Department of
the NDP. As such, it forms the first five-year Energy), the National Skills Development Strat-
implementation phase of the NDP. Similarly, egy (Department of Higher Education), the
the MTSF has been aligned to the election Integrated Urban Development Framework
manifesto of the national governing party and (Department of Cooperative Governance) and
has two over-arching strategic themes – rad- the National Climate Change Response White
ical economic transformation and improving Paper, the Biodiversity Economy Strategy and
service delivery. The MTSF outlines 14 devel- the National Waste Management Strategy
opment outcomes: high quality basic edu- (Department for the Environmental Affairs).
cation; health services; safety and security; The government is continuing to pursue its pol-
decent employment through inclusive growth; icy on Broad-Based Black Economic Empow-
a skilled and capable workforce to support the erment (B-BBEE). This policy aims to advance
inclusive growth path; an efficient, competi- economic transformation and enhance the
tive and responsive economic infrastructure economic participation of black people in the
network; comprehensive rural development South African economy.
SECO | South Africa Country Strategy 2017–20209
Donor landscape
In 2014, gross ODA to South Africa made ODA flows to the country include grants,
up the equivalent of just above USD 1 bil- technical assistance and concessionary
lion, mainly from the United States (USD 501 loans (directed mostly towards state-owned
million), EU Institutions (USD 200 million), enterprises, parastatals and municipalities).
Germany (USD 146 million) and France (USD A number of donors have shifted their focus
140 million). During this period, Switzerland away from bilateral ODA towards economic
was ranked the sixth largest bilateral country partnerships, targeted at the Southern African
donor. The main beneficiary sectors are social region. In this context, SECO, with its focus
and economic infrastructure and multi-sector on economic development cooperation, and
support. its ability to work with both public and pri-
vate-sector role-players alike through grants
Economic development assistance to South and technical assistance, is well positioned to
Africa as an upper middle-income country tar- support the country in achieving its strategic
gets structural and developmental challenges economic objectives and to play an increas-
that hamper the country in achieving higher ingly important role in this regard.
economic growth and employment, and
reduced poverty and inequality. The South African government has a high
preference for using country systems as it
ODA, which South Africa defines as gov- enables transparent and more effective
ernment-to-government support, accounts use of aid, increased ownership, improved
for less than 1% of the annual budget and alignment and cohesion. Some major
must play a more catalytic role in leverag- donors have shifted to sector budget support
ing South Africa’s own resources. It is South by which government systems can be used to
African government policy that ODA is used disburse ODA funds. Other donors, however,
to support new, innovative and more effective are maintaining a focus on project-type and
ways of implementing government policies, technical cooperation modalities, committed
to build capacities, to transfer skills and to and disbursed through their own systems.
implement good practices. Institutional capac-
ity, especially at subnational government level, After initial limited engagement with
remains critical. SECO’s support from 2013 to South Africa, the World Bank Group
2016 has contributed significantly to adding has increased its technical cooperation
value where South Africa demanded support, activities in South Africa in the areas of
such as in the field of energy efficiency, finan- financial sector reforms and urban devel-
cial sector reform and urban development. In opment with the support of SECO. SECO
addition, through the Swiss State Secretariat has an established working relationship with
for Education, Research and Innovation (SERI), the United Nations Industrial Development
bilateral cooperation with South Africa was Organization (UNIDO) in the area of energy
established in 2009 in the fields of nano-, efficiency and value chain development. The
bio- and clean technology, social sciences and expansion of SECO’s portfolio in niche areas
humanities, public health and biomedicine. where South Africa demands support offers
A new partnership was established 2015 to potential to work with multilateral organisa-
further develop cooperation in the field of
tions such as the African Development Bank
vocational and professional education and and other development finance institutions
training. such as Agence française de développement
(AFD) and the German Kreditanstalt für Wied-
eraufbau (KfW).
Lessons learnt from 2013–2016
SECO’s Country Strategy 2013–2016 proved The main successes during this period
highly relevant to South Africa’s national include establishing new projects in the fields
development objectives. It showed that well of local economic development, integrated
designed projects can have positive impacts urban development, energy efficient infra-
that could be replicated to the benefit of structure and green credit lines to the com-
the country. Commitments are on track mercial banking sector, while strengthening
and successful outcomes are starting to be support in industrial energy efficiency, finan-
recorded. cial sector, taxation and domestic resource
mobilisation and trade. The launch of the
10first Subnational Doing Business reports and zz Harness regional linkages: South Africa
Metropolitan Public Expenditure and Financial has an important role to play in the region
Accountability (PEFA) survey provided a diag- and opportunities exist to support the
nostic basis for SECO to initiate support activi- country’s cooperation with its regional
ties in the respective fields. partners. However, such project objectives
would need to shift from South Africa
Important lessons that can be drawn from the to the countries as part of a regional
portfolio include: exchange of knowledge, expertise and
peer learning.
zz Continue going green: SECO has zz Sustainability anchored in institutional
achieved positive results in its objective scale-up: As activities are often on a
to promote climate-friendly and green pilot basis, aspects of institutionalisation
growth. However, this field also proved and sustainability should be built into
challenging due to aspects of green project design. Consideration should be
market maturity and uptake, a low tariff given to how best to upscale an initial
environment, competition from vari- investment in projects, while positioning
ous development partners and funding project support within a leading govern-
sources, insufficient project design, ment department or strong private sector
unclear implementation strategies and organisation. This will enable sub-regional
subsidies crowding out commercial oppor- or national roll-out.
tunities. zz Finding the right modality mix: A more
zz Focus where population density balanced portfolio is needed to maximise
increases: Recent experience in urban impact and value-added. Consideration
economic development showed that should be given to the impact of different
SECO’s support could be effectively used modalities on transaction costs and who
to build capacities and to introduce inno- would carry it. While bilateral projects
vative approaches to address challenges might increase direct transaction costs,
faced in the urban environment. Results beneficiaries could be better targeted and
need to support linkages with policy visibility increased. Experience by SECO
discussions and design. While large-scale and partners have shown that bilateral
impact could be achieved in the metro- programmes take longer preparation time
politan environment, there is also demand with the possibility of lengthy procure-
to address challenges facing the second- ment processes and co-funding challenges
ary cities in a coordinated and coherent due to governmental procedures that
manner through local economic develop- have to be applied. Stakeholder consulta-
ment, public financial management and tion and ownership are key elements that
infrastructure service delivery. have to be evaluated carefully for each
project.
SECO | South Africa Country Strategy 2017–2020111
2 3
4
1
SECO supports the development of an
efficient public financial management
system and know-how exchange within
the continent.
2
Enhanced market access for biotrade
products can contribute to a green
economy and creates employment.
3
A stable and inclusive financial sector is
a prerequisite for sustainable economic
development.
4
Reliable energy supply is crucial for a
sustainable development.Overall objective Objective 1
Inclusive and green An efficient
public sector and
growth that will good financial
create jobs, ensure governance
resilience and
reduce disparities
Objective 2
A competitive
and inclusive
economy that
fosters sustainable
employment and
international value
chain integration
Development challenges
and SECO’s response Objective 3
Climate-friendly
and green growth
The overall objective of Switzerland’s economic through the
development of
cooperation and development is to contribute a low-carbon
to inclusive and green growth that will create industry
jobs, ensure resilience and reduce disparities.
Based on the context analysis, the challenges
and the alignment with South African devel-
opment strategies identified in Chapter 2,
Switzerland’s economic cooperation and
development programme with South Africa
responds to these main development
challenges with three specified main objec-
tives.
SECO | South Africa Country Strategy 2017–202013Objective 1:
An efficient public sector and good financial governance
Challenges Proposed SECO measures SECO contributions
Together with its main responsibility of pro- zz Strengthen financial sector integrity and First priority
viding public services and infrastructure, the stability. • T ransparent
public sector needs to be able to utilise pub- zz Develop an efficient public financial man- resource
mobilisation and
lic resources efficiently at all three levels of agement system, including debt and risk reliable public
government and increase domestic resource management and capacity building, at all financial
mobilisation. Constraints in creating a stable three spheres of government. management
and inclusive financial sector and implement- zz Support sustainable urban service delivery, • Stable and deep
financial sector
ing a stability-orientated macroeconomic including energy, water, solid waste
• I ntegrated
policy framework underlie the country’s per- management and urban connectivity and urban
sistent income inequality and modest growth. mobility, support to reduce spatial dispar- d
evelopment
In addition, capacity constraints are evident in ities in service delivery, efficient planning
Second priority
implementing the country’s rigorous, transpar- and urban management, institutional
• Reliable basic
ent and well-designed public financial man- development, environmental manage- public services
agement system, especially at subnational ment and urban infrastructure financing
government level. Given the current reform and investment.
trajectory, there is demand for support in
aspects such as, inter alia, revenue and asset Regional dimension: South Africa has a
management, internal controls and audit, sup- crucial role to play in the region to contrib-
ply chain management, risk management and ute to peer learning, knowledge sharing and
capacity building. institution-to-institution support. SECO’s eco-
nomic development cooperation programme
The apartheid-legacy spatial divide continues supports South African and regionally-based
to dominate the economic and physical land- initiatives in the areas of public financial man-
scape and determine life opportunities, espe- agement and financial sector stability.
cially for the poor. While the urban centres
dominate the economy, increased urbanisation Contribution to South Africa’s country
puts pressure on service delivery, infrastructure development objectives
development and environmental management. SECO’s contribution addresses priorities and
Persistent bottlenecks in the public sector and demands identified by the South African gov-
large spatial inequalities obstruct inclusive and ernment in various strategic frameworks and
integrated urban development. Challenges policy papers to build a state that is capable
range between poor alignment and coordi- of playing a developmental and transform-
nation of spatial planning and investment, ative role. Priorities include strengthening
weak capabilities for spatial decision-making local government, improved spatial plan-
and administration, non-alignment of various ning to eliminate social inequality and eco-
institutional roles and responsibilities, rela- nomic inefficiency, establishing liveable, safe
tively low densities and extensive sprawl that and resource-efficient cities and towns, and
increase transport costs, under-investment maintenance and expansion of the electricity,
and maintenance in infrastructure, inefficient water and transport infrastructure to support
property markets, insufficient funding for cap- economic growth and social development
ital investments, maintenance backlogs and goals. The government also wants to create
fragmented governance of infrastructure. an efficient, competitive and responsive eco-
nomic infrastructure network, and a respon-
Focus sive, accountable, effective and efficient devel-
SECO’s contribution aims to strengthen pub- opmental local government system, together
lic institutions so as to improve efficiency of with an efficient, effective and development-
the use of public resources, reduce inequality, oriented public service.
promote financial sector stability and improve
access to and the quality of public service
delivery in the urban environment.
14Objective 2:
A competitive and inclusive economy that fosters
sustainable employment and international value chain
integration
Challenges Focus SECO contributions
Unemployment remains one of South Afri- SECO’s contribution aims to create more and First priority
ca’s most critical challenges. Given the right better jobs, and enhance trade and compet- • Dynamic entre-
conditions, an innovative, competitive and itiveness. preneurship,
strengthened
more inclusive private sector could become an
skills and flexible
important source of employment for the most Proposed SECO measures labour market
marginalised in the country’s labour market, zz Support measures to create dynamic • Greater interna-
and accelerate economic growth. The Global entrepreneurship and strengthened tional competi-
tiveness of SMEs
Entrepreneurship Monitor report indicates that expertise and skills through innovative
and facilitated
around 93% of South African’s entrepreneurs sector-specific projects. market access
are below 35 (considered “youth” in South zz Strengthen access to long-term capital
Second priority
Africa), offering prospects for entrepreneur- with a focus on a resource efficient and
• Access to long-
ship as an engine to spur private-sector inno- inclusive private sector and green jobs. term capital
vation and employment. Overall, the govern- zz Improve an efficient business environment
• An efficient busi-
ment recognises the importance of the private by supporting implementation of reforms ness environment
sector, but efforts have not been sufficient to at the local government level; and greater
unleash its full potential for job creation. international competitiveness of SMEs
and facilitated market access through
The South African private sector faces impor- integration into international and regional
tant challenges in terms of skills mismatch value chains and by focusing on voluntary
and training, business environment, access to sustainability standards.
long-term capital, market access, value-chain
development, and international competitive- Regional dimension: The South African
ness of SMEs. Policies and approaches need economy plays an important role in the region,
to be implemented to support SME innovation, for instance, for integrated international and
promote entrepreneurship, sector diversifica- regional value chain development but also as
tion and economic inclusion. a centre of expertise, for peer learning, knowl-
edge sharing and institution-to-institution sup-
The 2015 Doing Business Report assessed that port in different areas related to private-sector
SMEs face a wide array of business obstacles development. Whenever possible, this dimen-
including inefficient and complex red tape to sion is taken into account by SECO’s support.
registering property and trading across bor-
ders. Further challenges include loosening Contribution to South Africa’s country
rigid labour laws, improving the quality of development objectives
education, and adopting investor-friendly laws SECO’s contribution addresses priorities and
to grow the economy. demands identified by the South African gov-
ernment in various strategic frameworks and
South African SMEs are yet to take full policy papers to eliminate poverty and reduce
advantage of global and regional integration inequality, raise levels of employment and,
opportunities in trade in goods and services. through productivity growth, the earnings of
Strengthened international and regional sup- working people. To achieve this, the govern-
ply chain integration, focusing on sustainabil- ment places jobs and decent work at the centre
ity aspects, could significantly contribute to of its economic policies and prioritises employ-
inclusive economic growth in South Africa and ment creation in infrastructure development,
the neighbouring countries. agriculture value chains, green economy, man-
ufacturing sectors and tourism and high-level
Moreover, South Africa is the third-most bio- services. Supportive actions to achieve more
logically diverse country in the world, after inclusive economic growth include, among
Indonesia and Brazil. The conservation of bio- others, the elimination of regulatory burdens,
diversity is high on the government’s agenda, skills development, SME support, and research,
and there are opportunities to create linkages development and innovation.
with green growth and employment creation
through enhanced market access for sustaina-
ble value chains in high growth potential sec-
tors, such as biotrade.
SECO | South Africa Country Strategy 2017–202015Objective 3:
Climate-friendly and green growth through the
development of a low-carbon industry
Challenges coordination and the organisational landscape SECO contributions
South Africa is among the world’s top ten (across spheres of national and local govern- First priority
countries for coal production capacity, con- ment, amongst donors and the private sector) •R esource-
sumption and exports, and is one of the represent a challenge, as do competitive and efficient
private sector
world’s top 20 emitters of greenhouse gases sustainable finance, and the creation of a criti-
(GHGs). GHG emissions per capita are high cal pool of technical expertise. Second priority
compared to China or Brazil, but below the • S ustainable
OECD average. The energy sector is the larg- Focus energy supply
est and a growing source of CO2 emissions, The focus is on accelerating South Africa’s tran-
reflecting the coal-dominant structure of sition to climate-friendly and green growth,
energy (74%) and electricity supply (94%) using mitigation measures in key infrastructure
and the under-pricing of this fossil fuel. South sectors and the energy sector. South Africa’s
Africa has been experiencing an energy cri- collaboration and role in the regional context
sis, with power supply shortages that have provides opportunities for project activities on
affected production and business confidence a regional scale.
and could potentially impact the inflow of
long-term capital. It offers, however, poten- Proposed SECO measures
tial to increase energy efficiency and renew- zz Support the creation of a low-emission
able energy resources in the country. In 2011, and climate-resilient economy by strength-
the government approved the Integrated ening more competitive and sustainable
Resource Plan for the energy sector – a 20-year businesses, public institutions and manu-
projection on electricity demand and produc- facturing production processes.
tion where, amongst others, about 42% of zz Provide green finance.
new electricity generation capacity must come zz Promote sustainable and clean technolo-
from renewable resources by 2030. There has gies, especially in energy, but also water
been strong growth in the renewable and and waste; energy efficiency and cleaner
hydro energy sectors, with a procured mix of production.
16% in 2015. Rising electricity tariffs, increas-
ing water scarcity and unutilised waste surplus Contribution to South Africa’s country
present opportunities for climate-friendly and development objectives
green growth initiatives. SECO’s contribution addresses priorities and
demands identified by the South African gov-
South Africa made a commitment to the ernment in various strategic frameworks and
development of a green economy as a priority policy papers to support its transition to an
public policy area through the Green Econ- environmentally sustainable, climate-change
omy Accord in 2011. Transition to a low-car- resilient, low-carbon economy and a just soci-
bon, resource-efficient and equitable economy ety. In order to protect and enhance its envi-
will require substantial investments in energy, ronmental assets and natural resources, the
transport, and environmental infrastructure, government’s priorities include protection of
emphasising the need to mobilise both local ecosystems, efficient use of natural resources,
and foreign markets. However, green markets the implementation of an effective climate
and their investment potential in South Africa change mitigation and adaptation response,
remain poorly understood, especially with an environmentally sustainable, low-carbon
respect to job creation, SME, entrepreneurship economy resulting from a well-managed and
and skills development, and improved systems just transition, enhanced governance systems
and standards. Further efforts are needed to and capacity, and sustainable human commu-
mobilise markets and thus realise the potential nities. In line with these priorities, the govern-
of the country’s green economy for sustaina- ment supports employment creation in the
ble growth and prosperity. Poor institutional green economy.
16Programme implementation
and management
Implementation modalities
SECO’s international cooperation seeks Partner strategies: SECO’s operational activ-
to deliver inclusive sustainable growth. ities to deliver inclusive sustainable growth in
To reach this objective, the 2030 Agenda partner countries are aligned with national
for Sustainable Development and the Addis development strategies, thereby applying the
Ababa Financing for Development Action Plan principles of national ownership and partner
provide a common language and direction, focus. The activities are harmonised with those
whereas international aid and development of other donors and rely on the principle of
effectiveness principles provide the common mutual accountability. SECO’s local experts are
ground on which SECO and its international systematically involved.
partners cooperate.
SECO increasingly provides targeted
SECO uses an appropriate mix of modali- impulses to mobilise resources. A relatively
ties for its development cooperation, con- modest, yet very specific, Swiss contribution
sisting of financial aid, technical assistance and can go a long way. For instance, to leverage
capacity building at an individual, organisa- the impact of Swiss ODA, SECO supports
tional and institutional level. partner countries in developing framework
conditions that foster domestic resource mobi-
Partnership and dialogue are necessary to lisation and private enterprise. Similarly, inno-
promote reforms as well as to develop and vative programme and project approaches as
implement policies. This dialogue involves well as innovative financing mechanisms are
players on several levels that can contribute very effective instruments to stimulate new
to coherent and synergistic solutions to devel- forms of collaboration and increase effective-
opment challenges: governments, private and ness.
civil society players as well as other donors
and multilateral institutions. SECO balances SECO’s activities include sharing of Swiss
bilateral and multi-bi cooperation and has knowledge and facilitation of technolo-
established guidance to help implement the gies. Specificity, high quality and effectiveness
principle of alignment, harmonisation, and are the hallmarks of SECO’s international co
accountability and, when appropriate, the use operation.
of national systems.
Cross-cutting issues
To meet its objectives, SECO focuses on Economic governance: Strengthening eco-
two transversal topics: gender equality nomic governance is another essential com-
and economic governance. Making a highly ponent of SECO’s commitment to promoting
relevant contribution to inclusive sustainable inclusive sustainable growth. It is a subset of
growth, gender equality and economic gov- good governance and refers to the entire set
ernance are systematically integrated into all of economic rules and frameworks accounting
SECO activities. for a transparent and accountable public and
private sector. It is a prerequisite for a stable
Gender equality: SECO considers gender economy and success in the fight against cor-
equality an important element of poverty ruption, which undermines inclusive economic
reduction, social inclusion and economic development.
development. Therefore, it is essential to sys-
tematically address the gender dimension The gender and economic governance dimen-
(social norms, legal provisions and gender-spe- sions are taken into account regarding the
cific risks) in its economically oriented projects. project design, implementation, risk assess-
No projects should place either women or ment and monitoring in order to contribute to
men at a disadvantage. the greater effectiveness and sustainability of
SECO’s projects.
SECO | South Africa Country Strategy 2017–202017Accountability and monitoring
The country strategy will be monitored annu- The country strategy is aligned with the partner
ally for the following purposes (cf. also chapter country’s development goals and strategies as
on Results monitoring): well as with the SDGs. Therefore, the annual
monitoring ensures that SECO’s portfolio does
zz Steering: Data and information for evi- indeed contribute to the achievement of the
dence-based decision-making partner country’s goals.
zz Risk mitigation: Identification of relevant
risks and mitigation measures In the case of major changes in the country
zz Learning: Identification of factors for context or development goals, the results
success and failure, challenges, gaps and framework for the country strategy will be
good practice adapted.
zz Accountability: Data and information
for accountability towards SECO head- A country portfolio assessment will be per-
quarters, the Swiss government, the Swiss formed at the end of the Country Strategy
public, and the partner country period to evaluate the relevance of SECO’s
goals and objectives in the South African con-
text and the relevance, effectiveness and effi-
ciency of the SECO instruments.
Financial resources
SECO’s activities under this strategy will cannot be considered a firm commitment or
be financed through the Swiss frame- claimed as such by the partner country. This
work credit 2017–2020 for economic and information serves merely as a basis for the
trade policy measures within development forward spending plans that are reviewed
cooperation. The final allocation of funds to each year by the Swiss Parliament. Actual
individual countries, programmes and projects disbursements will depend on various factors,
will depend on the identification of suitable such as the changes in the project portfolio
interventions, the absorption capacity as well and the framework conditions of the partner
as the efficiency and effectiveness of the coop- country as well as available disbursement cred-
eration with the relevant partners in each pri- its authorized by the Swiss Parliament. Portfo-
ority country. lio and planned disbursements are regularly
discussed with the partner authorities.
Accordingly, the following information
on planned commitments for the four-
year period of this strategy is indicative. It Projected funds allocated
to objective
Planned commitments for
South Africa 2017–2020: 25 %
A competitive and
55
inclusive economy
that fosters sustainable
50
CHF employment and
international value
million* %
chain integration
An efficient public
25
*South Africa also benefits from regional and global sector and good
initiatives financed by SECO. When these measures cannot fi
nancial governance
be earmarked to a specific country, they are not accounted %
for in the financial projections mentioned above.
Climate-friendly and
green growth through
the development
of a low-carbon
industry
18Results monitoring
The following table contains the results framework for Swit-
zerland’s economic cooperation and development programme
with South Africa. It will be monitored under the SECO quality
management system, which is based on international stand-
ards (results-based management). These are aligned with the
country development objectives as well as with the SDGs and
will be monitored at outcome level.
The results framework covers the overall economic coopera-
tion and development portfolio. However, the proposed indi-
cators will be measured only in relevant projects and will pro-
vide a selection of key data for steering and accountability.2
The results framework allows for focused monitoring, report-
ing and evaluation of key issues identified by and agreed
between SECO and the partner country counterpart. Both
are committed to results orientation and the highest possible
effectiveness of economic cooperation. Both want to learn
about factors for success and failure as well as about risk man-
agement and mitigation in order to continuously improve
results. Even though the results framework should contribute
to efforts to capture and assess SECO’s contribution to achiev-
ing the partner country’s development objectives, it is not
meant for measuring the partner country’s achievements as a
whole.
2 For the systematisation of results measurement and the collection of aggregated data, SECO has formulated so-called
Standard Indicators which are part of Country Results Frameworks and most project logframes. The Standard Indi-
cators also allow for the collection of results information on cross-cutting issues (see also Chapter 4.2.). With regard
to economic governance, many Standard Indicators require the collection of relevant data. Regarding gender, the
Guidelines on Results Reporting with SECO Standard Indicators explain in detail which kind of relevant information
(e.g. gender disaggregated data) should be collected per Indicator.
SECO | South Africa Country Strategy 2017–202019Overview SECO overall objective in South Africa:
Inclusive and green growth that will create jobs, ensure
able and deep financial sector
resilience and reduce disparities
SECO objectives SECO contributions
Objective 1 First priority First priority
An efficient Transparent resource Integrated urban
mobilisation and reliable development
public sector public financial manage-
and good ment
financial
Stable and deep
governance financial sector
Second priority
Reliable basic public
services
Objective 2 First priority First priority
A competitive Dynamic entrepreneur- Greater international
ship, strengthened skills competitiveness of SMEs
and inclusive and flexible labour and facilitated market
economy that market access
fosters sustain-
able employ-
ment and
international Second priority Second priority
value chain Access to long-term An efficient business
integration capital environment
Objective 3 First priority
Climate-friendly Resource-efficient
private sector
and green
growth through
the develop-
ment of a
low-carbon Second priority
Sustainable energy
industry supply
Effective institutions More and Enhanced trade and Low-emission and climate-
and services better jobs competitiveness resilient economies
SECO’s target outcomes
Economic and trade policy measures deployed by SECO in its development cooperation efforts with its partner countries
are targeted towards achieving the above-mentioned four outcomes.
20Objective 1: Partner
An efficient public sector and good financial governance objectives
First priority Build a state that is capable of
playing a developmental and trans-
Transparent resource mobilisation and reliable public financial management formative role, including:
Economic policy reforms and an improved financial policy lead to more transparent and efficient resource
mobilisation and more reliable public financial management. zz Strengthen local government.
zz Respond systematically to entrenched
Selected indicators: spatial patterns that exacerbate social
zzMeasures for improving public financial management inequality and economic inefficiency.
zzKey PFM indicators as per the PEFA framework zz Maintain and expand electricity,
zzMeasures for improving capacity development water, transport and telecommu-
zzResources mobilised nications infrastructure to support
economic growth and social develop-
ment goals. (NDP 2030)
Stable and deep financial sector
Better regulation and supervision of the financial sector contribute to a stable, diversified and competitive
An efficient, competitive and
financial market and strengthen the international financial system.
responsive economic infrastructure
Selected indicators: network (MTSF Outcome 6)
zz Measures for financial market regulation and supervision
Sustainable human settlements and
improved quality of household life,
Integrated urban development including adequate housing and
Improved planning criteria and selective measures promote sustainable urban development in partner improved quality living environ-
countries. ments, a functionally equitable
Selected indicators: residential property market and
zz Number of inhabitants benefiting from sustainable urban development projects enhanced institutional capabilities
zz Number of cities with urban development measures (including for improving governance) in the sectors of public for effective coordination of spatial
transport, energy efficiency and natural disaster risk management investment decisions (MTSF Out-
zz Greenhouse gas emissions saved or avoided in t CO2eq come 8)
Responsive, accountable, effec-
tive and efficient developmental
local government system (MTSF
Outcome 9 12) and an efficient,
effective and development-oriented
Second priority public service (MTSF Outcome 12)
Reliable basic public services
Liveable, safe, resource-efficient
Through technical and financial support, public utilities are better placed to offer a reliable and affordable
cities and towns that are socially
public service.
integrated, economically inclusive
Selected Indicators: and globally competitive, where
zzNumber of persons with access to better (basic) services residents actively participate in
zzProportion of O&M costs recovered through charges urban life (Integrated Urban Devel-
zzMeasures for improving capacity development
opment Framework)
zzLeverage effect of SECO’s financing in USD
Support economic growth and
development, good governance,
social progress and rising living
standards through the accounta-
ble, economic, efficient, equitable
and sustainable management of
South Africa’s public finances,
maintenance of macroeconomic
and financial sector stability, and
effective financial regulation of
the economy. (National Treasury
Strategic Plan, 2015–2019)
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