France ‘will honour SA’s empowerment policies’
French president agrees to encourage local content in bilateral agreements, writes Mark Allix
FRENCH President François Hollande, on a state visit to SA this week, says France will “play by the rules” with respect to SA’s broadbased black economic empowerment (B-BBEE) priorities, understanding this in the context of strengthened regulation.
France will “back” empowerment because it wants to “tackle inequality”, and this will be the “best image” of a “new partnership” that will secure long-term investment. “We agree you need participation in the capital of companies,” he says.
Mr Hollande also says France agrees that SA needs more local content in manufacturing, and more youth employment.
“(French multinational) Alstom understood that it had to take a step forward towards SA about local production,” he says. But he also puts first emphasis on commercial relations between the two nations, saying “new customers” need access to consumer goods for a “better quality of life”.
Mr Hollande says French companies “are ready” to build SA’s civilian nuclear energy capacity. But SA wants “a bit more time” before it signs a new bilateral co-operation agreement on this.
Bilateral negotiations are concluded, according to senior French officials. However, the draft agreement has to be cleared by the European nuclear energy community.
Mr Hollande’s statements coincide with Alstom and the Passenger Rail Agency of SA (Prasa) signing a R51bn deal for 600 passenger trains, including 3,600 coaches over the next 10 years. These would have at least 65% local content.
Trade between the two countries was R27bn last year — still significantly under the R30.6bn recorded in 2008 — as a result of the global recession. But South African companies have only invested about R1bn in France, compared with France’s R9.4bn of investment stock, leaving much room for improvement.
However, SA’s Minister of Trade and Industry Rob Davies told a SA-France business forum on Monday that the two parties have decided to resurrect a joint economic committee, established in 1995, to strengthen trade and industrial co-operation between them. “We will revive it — that’s a concrete outcome of our meeting today.”
President Jacob Zuma told the forum the government wants to encourage content localisation as part of the country’s B-BBEE strategy. “We want to promote black industrialists … and we want French companies that want to partner with SA companies to bear this in mind.”
The Alstom-Prasa deal, one of the largest rail engineering projects in the world today, will replace ageing suburban trains in SA’s major cities. But Prasa says it is still in the process of reaching financial closure, which it expects at the end of this year. However, SA’s department of finance has not yet provided clarity on funding.
Alstom CEO Patrick Kron says the contract is the largest in the company’s history. Alstom is already working on major SA power projects, including Eskom’s new Medupi and Kusile coal-fired stations.
He downplays often violent labour strife at the sites, saying the group has the “necessary relationships”, including a longterm collaboration with Eskom.
Mr Kron says there are no delays in building the Medupi plant, despite Eskom having said a boiler control system had failed numerous tests due to “errors, omissions and faults in the design performed by Alstom”, despite the utility’s assistance.
He says Alstom is in talks with Eskom over “some specific delay relating to control systems”.
Mr Kron says the firm’s empowerment partners, Gibela, have been mostly selected by Prasa, but also by Alstom, which has a 61% stake in the project. Various empowerment partners make up the rest.
He says Alstom won the Prasa contract after a “thorough and transparent process” that attracted all its competitors.
Mr Kron says B-BBEE legislation “is a challenge” but is not new to Alstom.
However, the European Union (EU), of which France is a founding member, says companies from member countries are struggling to comply.
“When EU firms make efforts to comply ... they find it difficult and expensive, yielding little or no commercial benefit.
“Ironically, this low commercial benefit is often experienced in the course of competing for business within the public sector,” the EU says.
Gibela’s stake in the Prasa project will be warehoused by the National Empowerment Fund.
But “the equity partners have to provide their share of the equity and funding”, says Jerome Boyet, Alstom SA’s country president.