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AFRICA: "Grasp the Benefits of Trade with BRIC Emerging Markets"

JOHANNESBURG, Oct 15 2009 (IPS) - While economists at a prominent South African bank are excited about burgeoning investment by Brazil, Russia, India and China (BRIC) in Africa, they are vague on the question of the extent to which it will benefit the majority of Africans. Ensuring this, they believe, is the responsibility of African states themselves.

“A country like China is also a developing country, so things like corporate social responsibility are novel ideas for Chinese companies,” said Standard Bank economist, Jeremy Stevens, speaking at a briefing the bank held yesterday on BRIC-Africa relations.

“When they come to Africa and they do a business deal where they negotiate terms that benefit them in purely capitalist ways, and then they leave and get criticised… I don’t see how it should be China’s responsibility to bargain (on behalf of) the African side.

“One, we need to know what China is doing and understand that. Two, we need to get our house in order so that when we negotiate with China we sing from the same hymn sheet,” added Stevens. “Africa needs to know what it wants. So far it’s come with its head hanging down to the negotiating table.”

Even though African states have historically negotiated from a restricted position, he believes it’s largely their own fault. The continent needs to seize the moment to ensure that it benefits proportionately from trade relations with BRIC. Moreover, African states need to change their trade policies and negotiate as a region instead of what boils down to a short-sighted nationalist race.

“At FOCAC (the Forum on China-Africa Cooperation) in 2003, China knew what it wanted. Africa, one, didn’t know; two, hadn’t agreed; three, hadn’t communicated with each other,” argued Stevens. “I don’t see how this becomes China’s fault. China is being what the world expects it to be: less communist and more liberal capitalist.”

Standard Bank economist for Brazil and India Simon Freemantle and Stevens explained that the seismic shift in world trade means that the BRIC trading bloc needs Africa as much as Africa needs them. Freemantle belaboured the point that it’s not longer “BRIC in Africa” but “BRIC and Africa”.

“The story of BRIC and Africa has only just begun. While trade between BRIC and Africa is declining, it is on account of the current economic climate. It has declined marginally — less than the traditional markets,” added Freemantle.

Stevens posited that Africa has a good bargaining position where it can pit BRICS and its traditional trade partners against each other to get the best deal.

Thanks to the huge appetite of the BRIC emerging market economies, they have set their sights on Africa to help them become major forces in the global economy. The BRIC will collectively outstrip the G7 in the next 40 years.

Group economist at Standard Bank Goolam Ballim explained that Africa has become “a vital market” to the BRIC trading bloc, which has increased its trade with the continent significantly from 3.5 billion dollars in 2000 to 166 billion dollars in 2008.

China and Africa

China has identified Africa as its strategic economic, trade and political partner, leading to unprecedented trade with the continent. China dominates the BRIC-Africa trade flows, doubling trade with the continent year on year.

In nominal terms, China-Africa trade increased from 3.5 billion dollars in 1990 to over 100 billion dollar in 2008, grabbing the lion’s share (two thirds) of Africa’s total BRIC trade. Twenty African states identify China in their top five of export destinations, with 32 countries in the continent listing China in their top five import sources.

“China-Africa trade has doubled every year, with 10 percent of all of Africa’s exports going to China,” according to Stevens.

Russia and Africa

The Russian rush for African “gold” has been preceded by its ideological ties dating back to the cold war. In 2003, Russia, a latecomer to the emerging market club, increased its trade with Africa by 30 percent, focusing largely on trade with countries in the northern parts of the continent.

But Stevens cautioned that Russia’s late arrival should not lead to the former superpower being underestimated. “Russia’s ties with Africa are not longer defined by its shared ideology with the continent but have become more trade and economically driven.”

Brazil and Africa

In 2005, Brazilian president Luiz “Lula” da Silva during a visit to Senegal stated that Brazil has a political, historical and moral obligation towards Africa and apologised for Brazil’s role in the African slave trade. Since then da Silva has used diplomacy and collaborative agreements to couch trade deals in Africa. He has visited the continent eight times between 2003 and 2009.

“Lula’s outspoken desire to create greater bargaining power for the Global South in multilateral forums is indicative of his desire to conduct good politics,” said Freemantle.

“In this third world alignment, Africa with its 54 states presents significant voting power in multilateral forums when it comes to trade talks. Brazil needs that assistance,” added Freemantle.

In 2008, trade with Brazil was approximately 26.3 billion dollars, making Brazil Africa’s 10th most significant global trading partner. Freemantle said the figure is important given the continent’s traditional partners and the manner with which Brazil has entered the African market.

“Brazil’s trading partnerships are relatively narrow concentrated but substantial. African exports to Brazil are overwhelmingly focused on energy intensive countries: Angola, Nigeria and Algeria “according to Freemantle.

India and Africa

India’s trade with Africa has been marked by private trade with companies on the continent, especially South Africa. India’s trade with Africa increased by a massive 1,000 percent over the past decade, driven in large part by its emerging multinationals such as Tata, Ranbaxy, Mahindra & Mahindra, Reliance and ArcelorMittal.

India’s trade is also buoyed by its energy needs. India is the fifth largest consumer of energy in the world.

“There is no doubt that India views Africa as a major economic and diplomatic priority, not only to secure energy assets but to grow key sectors in Africa in order to boost bilateral trade. For India, the more advanced African economies are, the greater the bilateral trade prospects,” added Freemantle. “Africa’s growth is very much in India’s best interest.”