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Monday, July 28, 2014
- South Africa has experienced a significant shift in trade with a new emphasis on links with developing nations, at the expense of traditional partners in the developed world, according to a leading South African economist.
Mike Schussler, CEO of economists.co.za, a Johannesburg-based economics consultancy, has looked at the evolution of South African trade since 1998. “Two important changes have happened since then,” he told IPS.
“China has become the manufacturing capital of the world, and a lot of South Africa’s mineral products go to China, and India is becoming a manufacturing and service centre.”
Schussler said that in 1998, the five major destinations for South African exports were the United Kingdom, the United States, Germany, Japan and the Netherlands, with China in eighth place.
In 2008, the top five were Japan, the U.S., Germany, the U.K., and China in fifth place – while India was in seventh place, according to data from the South African Department of Trade and Industry.
Figures for the first nine months of this year show that China is now the number one destination for South Africa’s exports, followed by the U.S., Japan and Germany, with India now in fifth place.
“Two of the top five are now South-South players, with China and India both members of the BRICS alliance,” said Schussler, referring to the association of Brazil, Russia, India, China and South Africa.
“I predict that by 2015, India will be in the top three export destinations, overtaking Japan and Germany.”
He also noted that while the scale of inter-regional trade remains more modest, there has been growth in South African exports to the rest of Africa.
Meanwhile, Schussler stressed that just as exports are being increasingly sent to other developing nations, South African imports are also increasingly coming from the nations of the South.
“The top six currently consist of China, Germany, Saudi Arabia (which is mainly oil), the U.S., Japan and India,” he said.
He cautioned that imports from emerging markets into South Africa have not seen as dramatic a shift as that of South Africa’s exports because of the components of the import basket.
“Apart from oil, we mainly import consumer goods and capital goods, and that’s why China is doing so well.
“We don’t make cell phones here, and yet there are more cell phones in the country than there are people.”
Schussler suggested that South Africa could widen the range of its exports beyond the current dependence on commodities if the government were to boost support to certain targeted industries.
“We manufacture cars for export, but maybe our advantage lies with agriculture,” he argued. “If we gave our farmers a bit of protection and subsidised our agriculture, our farmers would do very well – as the food sector is an area we should be concentrating on.”
He recalled that South Africa has had to stop exporting raw ostrich meat, after a strain of bird flu was detected. “But that shouldn’t be the end of the matter,” he suggested. “If there are health problems with raw ostrich meat, why not cook it and then export it, adding value.”
He said that exports of cooked ostrich meat would not face the same restrictions as exports of raw meat.
Schussler also suggested that more emphasis could be put on boosting South Africa’s trade with its neighbours.
“The rest of Africa is growing at twice the pace of South Africa, and we could really boost our exports if we could provide more consumer goods, in particular, to the region,” he claimed.
“In addition, we could provide more services to the region, such as the transport of goods, and tourism.”
South Africa joined the BRIC group of leading emerging markets at a summit meeting in China in April 2011, and President Jacob Zuma will host the next BRICS summit in Durban in 2013.
There has been much criticism of South Africa’s inclusion in the club, as all the other members have far larger economies.
However, Schussler noted that South African membership is already reflected in changing trade patterns, with less emphasis on business with developed nations, and more on cultivating closer economic ties with developing partners.
And he pointed out that while South Africa alone may not have the same economic weight as fellow BRICS nations Brazil, Russia, India and China, it has a political and strategic importance as an African member.
“South Africa is not a member of the BRICS in its own right,” he admitted. “But it does have a place in the BRICS as a representative of Africa.”
Pretoria-based international relations consultant John Maré said that the new focus of South African trade need not be at the expense of its historic ties with the developed world.
“I hope that we can strengthen our well-established trade ties with the West while developing those with Sub-Saharan Africa and the broader global community – where the BRICS context is especially notable but not the only one,” he told IPS.
“South Africa could be able to help create varying partnerships, often alongside other African players.
“If we handle this well, South Africa can indeed become a switchboard or a crossroads of global trade, especially when an Africa dimension is needed.”
One way in which trade ties between nations are cultivated is by ensuring that business delegations accompany government leaders on official visits.
It is therefore likely that South Africa will want to see not just teams of government officials and politicians at the next BRICS summit, but also businessmen and women from the four partner nations.
As Schussler explained, the evolution of South African trade in recent decades has to some extent been determined by the wider changes in the global economy, with the ascendancy of China and India.
However, this change is in line with the South African government’s own wish to boost commercial links with other leading developing nations, and there is every reason to believe that the South African trade spotlight will continue to shine strongly on the BRICS nations and the rest of the developing world.