As the BRICs go into Africa, where does South Africa stand?

Bilateral relations with Brazil are important, something which South Africa has long recognised. This was underscored by the key agreement to strengthen political and economic relations reached during President Lula da Silva’s visit to South Africa in July 2010 as part of what some are calling his Farewell Continental Safari to several African countries. In 2003, the two countries, together with India, formed the India, Brazil, South Africa (IBSA) Forum, which has developed an impressive body of work and trilateral relations.

President Jacob Zuma has in recent months been intensifying his drive to cement relations and attract investors from the IBSA countries. His visit to India in June was designed to deepen the strategic partnership between South Africa and India and strengthen and broaden economic and commercial ties between the two countries. South Africa and India share several common interests, including the reform of the UN and Bretton Woods systems, cooperation in the IBSA Dialogue Forum, the G20 and on Climate Change. South Africa and India also share common positions on international threats to security, including terrorism, religious extremism, trafficking in drugs, small arms and human beings and infectious diseases such as the HIV and AIDS pandemic.

But the big foreign policy question for Pretoria now is how to use its relationship with Brazil and the others to ensure it is drawn more tightly into the sphere of influence occupied by the BRIC nations globally and continentally.

South Africa is also setting its sights on Russia with a visit this week (12-14 July 2010) by International Relations and Cooperation Minister, Maite Nkoana-Mashabane. The Minister is expected to hold discussions with her counterpart, Sergey Lavrov on a wide range of issues that define South Africa-Russia bilateral relations. South Africa considers the Russian Federation as an important strategic partner in the promotion of development, socio-economic and political progress as well as global stability. In the multilateral arena, both countries support the promotion of equal distribution of power and influence in the global political and economic systems; the primacy of the UN in global security matters; sustainable development; free and fair trade; and an equitable international economic order. The Minister’s visit comes ahead of a scheduled visit by President Zuma in early August. He is expected to round off his contacts with BRIC members with a visit to China later this year.

Though the term BRICs was coined by US bank Goldman Sachs in 2003 as a description of countries with fast-growing economies and markets, it has since become formalised into a coalition of sorts. Its members have met several times over the past year to share views on globalisation, though the extent to which this will become a negotiating body so far seems undecided.

The success of the BRIC nations for the African continent has changed the manner, means and urgency in which other (new and old) partnerships with the continent are being undertaken. It has also put the spotlight on South Africa and its economic position and influence in Africa. With an economy of around $27 billion which accounts for 18% of Africa’s GDP and 27% of sub-Saharan GDP, it is certainly perceived as an economic powerhouse and a powerful African player that must be engaged. Notwithstanding that it is also Africa’s main manufacturer.

While global manufacturing exports have grown by around 6% annually since 2000, Africa has not been able to keep pace. It still relies heavily on exports of raw materials. South Africa is the only exception with a manufacturing sector-to-GDP ratio of 15,9%. As a result, its manufacturers are looking to other markets on the continent and local brands are becoming known in Southern, East and West Africa, and more recently, in the North.

Of all the BRIC countries, China presents the biggest competition for SA in terms of exports of manufactured goods. China’s exports to Africa have increased by about 39% annually since 2000 and they reached $55,9 billion in 2008. By comparison, India’s exports increased by an annual average of 21% to reach $23,2 billion in 2008; Brazil’s exports increased by around 19% annually to $16 billion in 2008; Russia’s by around 25% each year (from a very low base) to $6,3 billion in 2008.

With regard to trade relations with the continent, SA’s total bilateral trade of $5 billion in 1999 put it very much on the same level as China, India and Brazil. But since 2000, it has been slipping significantly. In 2008, SA’s total trade with Africa reached $20 billion, whereas BRIC trade with Africa (excluding SA) soared to $151 billion in 2008.

South Africa has the competitive advantage of longstanding historical ties and geographical proximity to the continent. According to Standard Bank, relative to both GDP and total trade, it is the country most integrated with the rest of the continent. Although in certain contexts this is a moot point since some may argue to the contrary that South Africa is perceived as set apart from the rest given its economic dominance of African markets.

Nevertheless its exports to the rest of Africa have been central to its broader drive to participate in global trade. SA’s exports to Africa have increased from $3,5 billion in 1999 to $12,5 billion in 2008. Most of the exports go to Zambia, Zimbabwe, Mozambique, the Democratic Republic of Congo, Nigeria, Tanzania, Kenya and Angola. These comprise mainly machinery, base metals, transport equipment, chemical products, mineral products and prepared foods (these are similar to China’s exports to the continent). SA has a comparative advantage over countries like Russia, China, India and Brazil in such areas as precious metals, prepared foods, chemical products and works of art according to Standard Bank.

Barely ten years ago, Africa was receiving less than $5 billion in foreign investment a year. However, by 2008 this picture had changed dramatically and the continent was receiving inflows of around $62 billion. The three top destinations for inward investment were South Africa, Morocco and Egypt.

SA’s corporate interest in Africa has grown exponentially over the past years. According to the South African Reserve Bank, direct investment into Africa has increased from $1,6 billion in 2001 to $13 billion in 2008. The investment charge into Africa has been led by companies such as MTN, Shoprite, Naspers and Standard Bank. However, the contribution from small and medium business is also growing, driven by Africa’s growing consumer market. Positive growth projections for this market indicate that there is little likelihood of South African companies being sidelined. More than 70% of Africa’s population is under the age of 50, and by 2030 projections have put the total number of Africans of working age at 1 billion. With a per capita income – in purchasing power parity of $2 241 (according to Standard Bank) - Africa is wealthier than India and getting close to the $3 000 typically associated with rising consumption. Wealth on the continent is very unequally distributed, even though the trend and direction signals a positive outcome.

There are also implications around whether the continent would become the stomping ground for corporates from the South (including the BRIC countries and South Africa) in search of a cheap labour pool and an expanding market base.

While the BRIC countries undoubtedly present challenges for South African companies in certain areas, the country has definite advantages that can be exploited. The growing regional integration and especially the proposed merger of the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC) and the East African community (EAC) can only serve to enhance South Africa’s attempts to broaden co-operation and ties with the rest of the continent. SA’s position can also be a strength as it is viewed by the BRICs as a gateway to Southern Africa and beyond the region and the possibilities for co-operation are compelling. Undoubtedly South African companies will grasp these opportunities and thereby engage the BRICs so as to position SA as a key player in the fast-growing BRIC-Africa business ventures. And all of this would be done as part of strengthening the South-South cooperation.

BROUGHT TO YOU BY PAMBAZUKA NEWS

* Janet Szabo is a SABC news researcher based in Johannesburg. She was one of the four journalists that participated in the Journalist study visit to China in April 2010, organised by Fahamu’s Emerging Powers in Africa program.

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