The Southern African Development Community has an ambitious infrastructure development plan to deal with the region’s deficit road, rail and ports infrastructure. Pictured here is the Democratic Republic of Congo capital, Kinshasa. Credit: Einberger/argum/EED/IPS

By John Fraser and Collins Mtika
LILONGWE/JOHANNESBURG, Aug 29 2013 (IPS)

The Southern African Development Community has had to revisit its plans to raise funding for its ambitious regional development plan in the wake of a cold-shoulder from western nations and multilateral finance institutions.

“Nobody has come forward to fund any of the projects we have outlined. I have been to Japan, the United States and the United Kingdom, among other countries,” SADC deputy executive secretary for regional integration Joao Samuel Caholo told IPS.

“What is holding us back as SADC is our inability to fund our own priorities and programmes. Therefore, a sustainable funding mechanism has to be established if we are to show that we are committed and progressing.”

However, development experts have questioned whether SADC is sufficiently mature to handle ambitious projects such as the Regional Infrastructure Development Master Plan (RIDMP), which is estimated to cost 500 billion dollars.

The RIDMP aims to rebuild the region’s deficit road, rail and ports infrastructure, increase its power-generation capacity, and establish communication and weather systems. Access to water, and providing the infrastructure for its distribution is also a priority.

“SADC has the potential and we are asking for the goodwill of all member states. Let them put in the seed money,” said the outgoing executive secretary.

The long-awaited SADC Development Fund will be modelled on the European Investment Bank and other regional funding ventures. SADC countries will initially contribute 1.2 billion dollars or 51 percent. The private sector and international partners will contribute the remaining 37 and 12 percent respectively.

Contributions will be over a five-year period starting in 2013 based on a country’s affordability, institutional capacity and other criteria, which Caholo was reluctant to divulge.

“If after five years a country fails to pay its contribution, its shares will be recalled and distributed among the complying states so that the 51 percent shareholding by African states is maintained,” Caholo said.

However, a member state will still be able to access funds for its development projects as outlined in the RIDMP.

Professor Eltie Links, the chairperson of Doing Business in Africa at South Africa’s University of Stellenbosch Business School, told IPS that “SADC as a regional body would have to think about the objectives and the management of a new financing arm.”

“The fact that the region comprises a number of countries with varied levels of development makes it essential that some or other form of assistance be given to economies that are suffering in the development sphere. This, however, can only be afforded if there is sufficient economic and financial muscle in the regional body,” Links said.

He said there was no doubt about the need for more infrastructure development in the region, but development aid channelled through SADC “will always be at the cost of the bilateral support given by these same [donor] countries to the region’s needy countries. This aid funding pool has always been finite.”

He suggested that donors would need to be convinced that SADC is now at a stage where it can handle multi-billion dollar projects.

“SADC’s record as an institution that is well organised and governed has been questioned in the past. To the extent that these perceptions of a body with challenges in governance still persist, it will not get the type of support needed for a project financing arm.

“It will also have to demonstrate the ability to administer and manage such funding and projects; something it has not been able to prove beyond any doubt.”

This view was echoed by the chief executive officer of the Frontier Advisory consultancy, Martyn Davies, who argued that the SADC secretariat should not be the body that seeks to fund projects, and should instead focus on coordinating and bringing projects to the point of bankability.

“SADC, unfortunately, does not do enough in harmonising pursuits towards regional integration, and needs to do more of the basics toward promoting the facilitation of trade and capital flow in the region,” Davies told IPS.

“Donors regularly work with SADC, but the more important engagement should be with big business, and this is currently insufficient. There needs to be greater communication from SADC as to its role and also outreach to and engagement with business in order to better implement these goals.”

Trade consultant John Mare agreed that initially SADC should play more of a coordination role.

Mare told IPS a new funding institution was not needed as “there are already too many others – but SADC can help shape bankable projects and relate them to SADC priorities.”

He added that there was a need for better capacities inside SADC to work on such projects and, especially, a greater need for coordinating mechanisms between all stakeholders at national and regional levels.

“A key challenge is to improve SADC coordination with other regional organisations in which many SADC members are also members. It is crucially important that this happens – and the tragedy is that SADC is said to have more capacity than many other regional organisations in Africa,” Mare said.

He added that while there were many potential projects in Africa, what was missing was driving mechanisms for these projects.

Davies agreed there is no shortage of projects, but suggested “the challenge lies in fostering cooperation between the respective governments and bringing the projects to bankability.”

“I have never seen a good project that cannot get funding when politics is aligned.”

Professor Anthony Turton, a trustee of the Water Stewardship Council of Southern Africa, says water will be key to the growth of the Southern African Development Community. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, Aug 20 2013 (IPS)

Water remains a key component in development policy. And, as the Southern African Development Community discusses how best to develop the region, the effective management of watercourses will be key, says Professor Anthony Turton, one of the foremost experts on water policy in southern Africa and a trustee of the Water Stewardship Council of Southern Africa.

The Southern African Development Community (SADC) has an ambitious 500-billion dollar regional development plan that aims to develop the region’s roads, rails, and ports. The generation of power, and establishment of communication lines and meteorological systems have also been outlined as important to the region’s development.

Turton told IPS in an interview that the SADC Water Protocol, which outlines the practical implementation of management, protection and use of the shared watercourses in the region, is regarded globally as a model example of regional water integration. Currently, about 70 percent of the region’s water is shared between two or more countries.

“Energy is a national developmental constraint for many countries, but if the hydro potential of SADC is fully realised then regional energy security will replace national deficiencies,” Turton said.

“To do this we need regional [cooperation] over water, which is why the SADC Water Protocol was the first signed after South Africa joined the grouping. The private sector is now starting to come to the party, most notably in the mining and agribusiness sectors, where water and energy constraints are being recognised.”

Excerpts of the interview follow:

Q: What is the track record of past cooperation, in terms of success on the plus side or inefficiency and corruption on the other?

A: The SADC region is often cited in the global water sector as being the best example of water cooperation in transboundary resource management. The SADC Water Protocol is the foundation document for SADC regional integration, and serves the same purpose as the original coal, iron and steel agreements played in the creation of the European Economic Community and later the European Union. Cooperation over shared water in SADC is thus high.

Regarding corruption, the best case was that of Masupha Sole who was a senior executive in Lesotho Highlands water scheme who was indicted and imprisoned for corrupt dealings involving major construction companies in the 1980s and 1990s, some of which were South African. That case became one of the world’s first in getting a conviction, so I guess it is actually a good news story."Water is to SADC as coal, iron ore and energy was to the creation of the European Economic Community (which later became the EU)." -- Professor Anthony Turton

Q: In practical terms, do any worthwhile future or potential regional water projects come to mind?

A: On a grand scale there are major inter-basin transfer projects such as the Lesotho Highlands between Lesotho and South Africa; the North-South Carrier in Botswana; the Eastern National Water Carrier in Namibia and the Cunene-Cuvelai project between Angola and Namibia. Another interesting project is the first major desalination plant at Trekopje in Namibia. I believe this will be the first of many in the SADC region.

Q: Do you believe that climate change is a real threat to the region, and if so how might it have an impact?

A: In short yes. Greenhouse gas concentration is likely to raise ambient air temperatures by as much as four and maybe even six degrees Celcius in some parts of southern Africa – assuming a global rise of two degrees Celcius is “acceptable”. This will fundamentally alter the conversion ratio of rainfall to runoff, but it will also increase evaporative losses off dams.

An appropriate mitigation strategy is Aquifer Storage and Recovery (ASR) (also known as Managed Aquifer Recharge – MAR), now a mainstream technology in places like California, Texas and Australia, but not yet in widespread use in the SADC region. I am currently working with an Australian technology provider to introduce this into Botswana. This stores water underground rather than in dams, preventing the losses to evaporation and thus greatly improving the sustainable yield of a given system.

Q:   Why is there a need for SADC countries to cooperate over water issues?

A: The four most economically diverse countries in southern Africa are highly water constrained (South Africa, Botswana, Namibia and Zimbabwe), whereas some of the neighbouring states are water abundant (Angola, Democratic Republic of Congo and Zambia). Water is to SADC as coal, iron ore and energy was to the creation of the European Economic Community (which later became the EU). Water cooperation in the SADC region will enable regional integration to mitigate these risks by allowing regional water, food and energy security to be guaranteed at regional rather than at national level.

Excerpt:

Sipho Mabaso selling the second-hand clothing he imports from Mozambique. He said he has been forced to pay bribes to Swaziland Revenue Authority (SRA) officials at the border. Credit: Mantoe Phakathi/IPS

By John Fraser and Mantoe Phakathi
JOHANNESBURG/MBABANE, Aug 18 2013 (IPS)

Experts are agreed that the key to unlocking the economic potential of the Southern African Development Community lies in easing cross-border flows of people, goods, capital and services.

But even if border restrictions can be lifted, a lot more needs to be done in terms of enhancing road, rail, electricity supply and other infrastructure within the region.

Chief executive officer of consultancy Africa @ Work, Dianna Games, told IPS that while moves are being made to bring down physical barriers to cross-frontier movement, informal barriers are often replacing them.

“As tariff barriers have gone down, there has been a mushrooming of non-tariff barriers – leading to delays at border posts and inefficient border posts, with the worst being the Beit Bridge border crossing between South Africa and Zimbabwe,” she said.“Quite simply, really, we need an Africa that works.” -- Dr. Rose Phillips, the South Africa-based chief executive officer of management consultancy Accenture

“This should have been sorted out long ago – and it suggests that while there is a lot of political lip service being given to trade liberalisation, the countries are as protectionist as ever.”

Even Swaziland’s cross-border traders say they are barely able to make ends meet because of the high taxes and customs duties that they have to pay to import goods through the southern African nation’s border posts. While the Swaziland Revenue Authority (SRA) charges 14 percent value added tax (VAT) for goods from South Africa, a different formula applies to those imported from Mozambique.

Dudu Fakudze sells second-hand clothing in the Swazi capital of Mbabane and goes to Mozambique every week to purchase stock.

“It’s always frustrating to bring in stock from Mozambique because the customs officials do not consider the value at which you bought the item,” Fakudze told IPS.

“We are forced to pay either E450 (46 dollars) per bale or charged between E3 and E5 (30 and 50 cents) per item for the second-hand clothing from Mozambique,” Fakudze said. “I hardly make a profit because of the amount I pay at the border.”

SRA communications director Vusi Dlamini admitted that importers pay more for goods from Mozambique compared to those from South Africa. He attributed this to the fact that Mozambique is not part of the Southern African Customs Union (SACU), which Swaziland is part of, along with South Africa, Namibia, Lesotho and Botswana.

Dlamini said that according to the Harmonised Tariff Book used by all SACU countries, second-hand clothing from countries that are not part of SACU should be charged at E25/kg (2.50 dollars/kg) in custom duties plus 14 percent VAT. Goods imported from SACU countries are only charged 14 percent VAT.

But he said it appeared that the application of this provision for non-SACU countries would throw the traders out of business.

“After much engagement with hawkers’ representative, it was decided that a flat rate which provides for both customs duties and import VAT be used for a range of commonly-imported goods,” he said.

Dr. Rose Phillips, the South Africa-based chief executive officer of management consultancy Accenture, stressed the importance of SADC countries working together to tackle the region’s challenges through agreements between governments.

“They are key in promoting and facilitating the creation of new industry opportunities given, for example, that Angola and Nigeria are experiencing the highest growth rates in Africa,” she told IPS.

“The World Bank, IMF [International Monetary Fund] and the WTO [World Trade Organisation] should actively promote government legislation which reduces corruption, improving the flow of foreign and cross-regional investments, as well as creating a consolidated platform for sectoral growth.”

She said that more facilitation of trade and less reliance on aid was needed to accelerate sustainable economic development on the continent.

“Quite simply, really, we need an Africa that works.”

“Regional economic integration and intra-Africa trade are designed to benefit SADC countries and businesses through providing economies of skill and scale, predictability, common standards and regulations and transparency of information in the region – key ingredients for a strong private sector that is competitive. Further harmonisation of trade policies, stronger governance and joint regional cooperation and investment are but some of the actions needed.”

She stressed the need for more focused investment in the building and the maintenance of infrastructure, such roads, information and communications technology, rail, water and power supply.

And she also supported the SADC focus on developmental corridors.

“Road freight costs (in Africa) are two to four times higher per kilometre than in the United States, and travel times along key export corridors are two to three times longer than those in Asia.”

South African trade consultant John Mare told IPS that while donor support for infrastructure development from bodies such as the African Development Bank was welcome, “the funds must be targeted and managed in an effective manner.”

“I personally support the creation of bodies that are dedicated and linked to certain infrastructural projects, as they can help manage all aspects of the completion of such projects – along with funding management and the inclusion of the private sector in public-private partnership structures.

“This all seems to suggest regional authorities should create some suitable body such as the Maputo Development Corridor Board, but with an expanded executive mandate from the start – to work in partnership with all stakeholders and help mobilise as well as manage funding,” Mare said.

Phillips stressed that the opening up of Africa cannot just be left to governments. “The private sector plays a vital role,” she argued.

“Inclusive growth and development that advances the active economic participation of Africans is the responsibility and the reward of the public and private sector alike.”

Phillips said that the development of Africa required more than money, and that people are crucial, with human capital a key resource for African development.

“As more and more highly-educated Africans are coming home and our talent investment is bearing fruit, we are capitalising on the melting pot of talent that is uniquely African; diverse by nature, education, experience and viewpoint, and innovative by implication,” she stated.

Analysts are concerned that there is a security risk in transferring power from the soon to built Inga Dam in the Democratic Republic of Congo to South Africa. Pictured here is the city of Atlantis, on the outskirts of Cape Town South Africa, where people access power illegally. Credit: Lee Middleton/IPS

By John Fraser and Maurice Wa ku Demba
JOHANNESBURG/LUBUMBASHI, Aug 17 2013 (IPS)

There are big aspirations for Africa’s largest hydroelectric project, the Inga III that is set to be built in the Democratic Republic of Congo. But analysts are sceptical that such an ambitious project will ever be realised.

In May, Congolese Minister of Energy Bruno Kapandji made the announcement that the project was moving forward, adding that that Inga III would generate 4,800 megawatts (MW). The project will be constructed on the site of two existing dams on the lower Congo River in western DRC. It will be built on one of the largest waterfalls in the world, the Inga Falls, where the Congo River drops almost a hundred metres and flows at an enormous speed of 43 cubic metres per second. South Africa is both a partner in and the major client of the project.

Independent economist Ian Cruickshanks praised the vision behind Inga III, but expressed concerns about whether it would ever go ahead.

“The potential of this project is enormous and exciting and could make a huge difference to sub-Saharan Africa,” he told IPS.

“It could provide cheaper and cleaner electricity than is currently produced in coal-fired power stations. The river is there – you need to put in the turbines and to build the power lines.”

Inga III will require 12 billion dollars in total, with dam construction costs estimated at 8.5 billion dollars of this amount. The project will take six years to complete.

As a first step, the World Bank and the African Development Bank (AfDB) have to approve a 63-million-dollar technical assistance package for the project. According to the World Bank information sheets on the project, 43 million dollars will come from its concessionary funding arm, the International Development Association, and the remainder would come from the AfDB.

However, Cruickshanks cautioned that it will be a challenge to transport electricity over the long distance to South Africa. “My one concern follows experiences of the Cahora Bassa Dam project on the Zambezi River in Mozambique. [It] generates electricity, but the transmission to customers in South Africa isn’t efficient,” Cruickshanks said.

“Then there is a huge security problem of giant power lines [running] across the DRC, which is at war with itself.”

According to the United Nations Refugee Agency, the security situation in eastern DRC has been precarious since July 2011.

Fresh fighting between M23, an armed group started by former Tutsi soldiers who mutinied in April 2012, the DRC army, and other local armed groups, has uprooted thousands more. Some 2.2 million people were displaced internally.

Independent engineer and commentator on energy issues Andrew Kenny told IPS that regional projects are essential for developing Africa’s electricity supply, which are key for development.

“Transmission lines linking different countries are vitally necessary. Since actual demand in most African countries is so small, many generating projects will provide more power than the whole country needs, and the excess should be passed on the neighbours in need,” he argued.

“Grand Inga is only possible if it is a regional project providing power to many other countries. Similarly with a large coal station that Botswana was considering.”

He echoed Cruckshanks concern about the instability in the DRC.

“At the moment investors would fear political and commercial risk from an unstable government in a country wracked with bloody conflict.

“There would also be risks in payments for the electricity, operation and maintenance of the hydro plants, sabotage, confiscation, nationalisation and inability to repay debt. They would also fear risk from surrounding countries owning transmission lines: risks of confiscation, imposition of very high tariffs and incompetent maintenance.”

Senior research and strategy analyst at Frontier Advisory, Simon Schaefer, told IPS that he shares Cruickshanks’ concerns that such an ambitious project would be possible in a troubled part of Africa.

“I think the Inga III project has to be seen in the greater context of the political situation of the country and the region,” he said. “The DRC is very fragmented internally. It is questionable whether the government in Kinshasa actually exercises effective control/power of all parts of the country.”

He also noted that the project has been on the cards for many years. However, he suggested that the size of the project, the complex political landscape and problems of the DRC and the region were key obstacles to its implementation.

“The political situation in the DRC is instable and the country has often been described as a failed state. Other major problems in the DRC are rampant corruption and the lack of credible institutions. All these factors are not the ideal starting point for multi-billion dollar project with a long investment horizon,” he said.

However, he did emphasise the benefits of collaboration between African nations in tackling power challenges – an issue which was highlighted by U.S. President Barak Obama on his recent trip to Africa, when he pledged billions of dollars in U.S. funding to support energy infrastructure in Africa.

“I think African countries are well advised to tackle power deficits by developing cross-board projects and to focus on integrated transmission networks across multiple countries,” Schaefer told IPS.

“This would allow countries to share the financial burden of the project and ensure absorption of the generated electricity. South Africa’s commitment to purchase a set amount of electricity from the DRC is a first step to increased integration in the power sector. While the key objective of the DRC may be the generation of revenues and job creation from the construction of the dam, the country has to be realistic about the off-take of power by countries in the region.”

The extent to which banking services are available freely between SADC states differs across the various products offered and the clients served by banks. Credit: Kristin Palitza/IPS

By John Fraser
JOHANNESBURG , Aug 14 2013 (IPS)

Leading bankers are concerned that the regulatory environment in some southern African states is preventing them from offering a full range of services to individuals and companies across the region.

Efficient and affordable financial services are crucial to both the development of businesses and infrastructure projects within the Southern African Development Community [SADC] – and in expanding the reach of banking to the millions who are currently outside the system.

The concerns are being raised ahead of the SADC heads of state and government meeting in Lilongwe, Malawi, on Aug. 17 and 18.

The group chief executive officer of BancABC Douglas Munatsi told IPS that, on the surface, the banking rules in SADC states are similar, as they all stem from the Basel guidelines, an international regulatory framework for banks.

“However, the reality is that some regulators don’t apply the rules the same way, on issues such as the minimum capitalisation of a bank,” he said.

“Sometimes the process is not as transparent as it should be. A country may have very positive investment rules, but labour laws can be very rigid, such as those covering expatriates in Botswana.”

The group chief executive officer of BancABC Douglas Munatsi said that banking rules in SADC states are similar on the surface. But in reality all regulators did not apply the same rules. Credit: John Fraser/IPS

He said that if a bank extended its reach across the region, it needs to be able to deploy people into new territories, but this is not always easy.

“This affects us, as we find limited skills in some places, but we are only allowed to move in a certain number of staff,” he said. “The regulatory environment in some countries is still relatively weak...Political uncertainty in countries like Zimbabwe is another matter of concern.” -- Cas Coovadia, the managing director of the Banking Association of South Africa

Mike Brown, the chief executive officer of Nedbank, one of South Africa’s biggest banks, agreed that there are inconsistencies.

“The extent to which banking services are available freely between SADC states differs across the various products offered and the clients served by banks,” he told IPS.

“In wholesale banking [bank services for companies] for example, the growing trade between SADC countries has resulted in banks developing trade finance solutions to facilitate the ease of intra-regional trade.”

Brown noted that there has been “more limited” progress in providing banking services to ordinary customers because of a failure to harmonise regulations across SADC. He also cited exchange controls as an obstacle to expansion.

Brown said that migrant workers, such as miners from neighbouring countries who work in South Africa, need to be able to send funds across borders to support their families back home.

“Companies have emerged that provide cross border money remittance solutions. These include mobile operators and money remitting companies [such as Western Union and Moneygram]. The cost of these services is still, however, high and prohibitive for many people – and not highly utilised,” he warned.

And in some cases banks are not open to providing services for rural women.

Forty-year-old Vivian Zivira, an agro-dealer from Nyanga in Zimbabwe’s Manicaland province says many women like her with communal land face significant challenges to secure loans to start income-generating programmes.

She says that this is because Zimbabwean banks take too long to process their applications, and charge high interest rates.

“It took me about six months to access my first loan because the banks wanted collateral, which I eventually provided through my husband. They gave me 5,000 dollars with 25 percent interest. Despite a very good repayment record, the bank could not increase the second loan,” Zivira told IPS.

But Cas Coovadia, the managing director of the Banking Association of South Africa, said he believed there were no major issues affecting the offering of banking services between states.

“The SADC Banking Association has been working with the SADC Committee of Central Bank Governors to develop an integrated payments and settlement system, which will improve banking across states substantially,” he told IPS.

However, he did warn that “the regulatory environment in some countries is still relatively weak. Infrastructure is another issue, particularly telecommunications. Political uncertainty in countries like Zimbabwe is another matter of concern.”

The chief operating officer of First National Bank Africa, Leonard Haynes, agreed that sound infrastructure plays a big part in a bank’s ability to make its services available, and he highlighted the importance of telecommunications and stable electricity.

He also suggested that the unavailability in some places “of personal identity documents or similar reliable forms of identification makes it a challenge to comply with ‘know your customer’ requirements.”

“Credit bureaus in some of these countries are generally not in existence, or are not reliable yet as a reference point, to provide customer information on which credit decisions can be based,” he told IPS.

Brown said that the different regulatory environments in different states “present a challenge in managing regional operations, by limiting the economies of scale that can be achieved across the border.

“For example, some countries require banking technological systems to be located in that particular country. This results in the need to duplicate infrastructure across a number of countries and increases the operating costs and eventual costs to customers,” Brown said.

He noted that some countries are changing their regulatory rules, and that this can provide both challenges and opportunities.

“For instance, Zimbabwe and Zambia have increased the minimum capital requirements for banks. An unpredictable regulatory environment contributes to the complexity of managing operations in multiple countries, particularly if this is combined with an unclear level of indigenisation.”

He said that one would expect that as the ease of doing business in the various countries improves, and the operating environment is harmonised, this would result in greater investment across the borders and more substantive regional strategies.

* Additional reporting from Michelle Chifamba in Harare.

Ajegunle, a low-lying slum in Lagos, Nigeria. Analysts say that the Nigerian market itself is huge and under-served. Credit: Sam Olukoya/IPS

By John Fraser
JOHANNESBURG , Jun 17 2013 (IPS)

If a Free Trade Area were to be negotiated between Africa’s two largest economies, South Africa and Nigeria, it would have a powerful effect on trade across the sub-continent and would challenge other countries to respond.

“In my view it would bring substantial economic benefits to both sides in terms of exports, investment, competition enhancement and, ultimately, productivity,” Peter Draper, a senior research fellow at the South African Institute of International Affairs, told IPS.

The countries have already entered into an informal agreement of cooperation. In May, South African Trade and Industry Minister Rob Davies announced during a visit to this country by Nigerian President Goodluck Jonathan that South Africa pledged to help Africa’s most populous nation make the automotive sector the West African nation’s flagship industrial sector.

However, there are concerns that an FTA would give one-sided benefits to the South Africans, who have a developed manufacturing sector, at the expense of the less-industrialised Nigeria.

“That is not to say South Africa is not favourably disposed, but rather to suggest that to the extent there is political will behind the idea it would be in favour of a limited trade arrangement and not a comprehensive one,” Draper said.

Johannesburg-based businessman R J van Spaandonk has the official licence to import Apple computers, phones, tablets and other products into both the South African and Nigerian markets. He told IPS that the proposed FTA would send a very positive signal, as the two governments seem to be getting closer and closer all the time.

“But in practice the benefits may be limited. Many South African companies operate in Nigeria through non-South Africa entities, so it is not clear if they could be considered as beneficiaries of such an FTA.”

However, he did suggest that it would be a welcome move if it were to make it easier to trade between Nigeria and South Africa.

“I would welcome more transparency on what rules and regulations apply – in terms of import restrictions, product certification, visas, and so on – and faster execution and processing. On both sides, probably.”

Jabu Mabuza, president of Business Unity South Africa, said that there is big potential for closer relations between the two countries, but said he would need more time to decide whether or not an FTA was the best approach.

“I personally welcome the coming together and reigniting of the relationship between our two nations.

“To the extent we can have mutual socially and politically-rewarding relations, we should do all that it takes.”

Jabu Mabuza, president of Business Unity South Africa, said that there is big potential for closer relations between the South Africa and Nigeria. Credit: John Fraser/IPS

However, Dianna Games, the chief executive of consultancy ‘africa @ work’, told IPS that she believes there is enough current and future trade between both nations to look at the issue of an FTA. However, she is concerned about the lack of non-oil trade from Nigeria to South Africa.

“The manufacturing sector in that country is still at a fledgling stage, partly because of serious power shortages,” she explained.

“Although Nigeria is one of South Africa’s main suppliers of crude oil, there is almost no non-oil trade taking place.”

The South African Revenue Service reported that in the first three months of 2012 Nigerian exports to South Africa were worth 750 million dollars, with 740 million dollars made up of mineral products, mainly oil. In the same three months, South African exports to Nigeria were worth 150 million dollars.

“The Nigerian market itself is huge and under-served so what capacity exists is easily swallowed up by the local market itself, with some trade into the West African region. There is nothing to suggest that South Africa will be a market of choice for Nigerian goods and services for some time to come,” she said.

This caution was echoed by Foluso Phillips, the chairman of Lagos-based Phillips Consulting, a business consultancy of branding advisors.

“There is much that South Africa can offer Nigeria, but there has been a problem of attitude and lack of trust as well as divergent objectives by both parties,” he said.

“However, there must be a strong spirit of win-win, as the track record and perception makes it all look one-sided in South Africa’s favour.”

He said that any agreement between both countries had to be on real technology transfer and of value to Nigeria. He added that if an FTA were negotiated, “South Africans (could) not come to the table with a ‘smarter by half’ attitude.”

He insisted that there would need to be a focus on bringing value to Nigeria and not on making his country a dumping ground for South African goods if his country’s borders were to be thrown open to South African exports.

“Nigeria cannot continue to fund imports paid for by oil – so if the value proposition from South Africa is predicated on local input but joint ownership, then we are on to a winner.”

Games said that while there was recognition of the importance of both countries to each other and the continent generally, Nigeria would need to be persuaded of the benefit to its market.

“Such a move has positive spinoffs in terms of South Africa assisting Nigerian companies to build industrial scale and capacity.

“The discussion about developing linkages between South Africa and Nigeria in the auto industry (which took place when Jonathan was in South Africa) is an example of something that could be replicated in other sectors.”

She also believed that it would be important symbolically to highlight a greater level of cooperation between the two countries, which she sees as the two pivotal states in Africa, both politically and economically.

“The economic success of each is important not just to their respective hinterlands but also to the broader development of the continent, and if an FTA proved to be politically acceptable – not just to politicians but also other stakeholders such as business – it would help to cement ties between the countries,” she concluded.

Meanwhile, Draper said that if Nigeria and South Africa were to bring their regional neighbours into the negotiation “it could lead to a juggernaut effect of competitive liberalisation incorporating southern and western Africa. Managing this would be, to say the least, challenging.”

The Victoria Falls (pictured) is a strong selling point of tourism in southern Africa. Credit: Zukiswa Zimela/IPS

By John Fraser
JOHANNESBURG , Jun 3 2013 (IPS)

Competing players in the tourism industry in southern Africa are putting aside their rivalry in pursuit of a common goal – a big boost in tourist numbers to the region.

Mmatsatsi Marobe, the chief executive officer of the Tourism Business Council of South Africa, told IPS that South African tourism players “are well aware of the regional Africa dimension and have been active in this market for years, although restricted within the confines of the Southern African Development Community (SADC) countries.

“In recent years, we have seen a growing interest in markets beyond the SADC region – as shown by the increasing number of operators in the hotel and tour operating businesses expanding beyond South Africa’s borders,” she said.

The central message from the Tourism Indaba, a tourism conference held in May in Durban, was that neighbouring countries must work more closely together in marketing and promotion to sell southern Africa – and not just its individual nations – as a destination.

Marobe argued that the benefits of greater regional cooperation would extend far beyond the business of tourism to conservation as well.

“Moving from a perspective that Africa’s unique offering to the world is the variety and integrity of our biodiversity, then as a continent, we need to all do what we can to protect this heritage – because in this lies our global competitive advantage,” she said.

She added that the private and public sector needed to join hands to address the ongoing scourge facing South Africa’s rhino species. Last year, poachers killed 668 rhinos in South Africa.

“There is also the power that lies in packaging our natural and cultural heritage and offering it to the world – that combination is hard to be rivalled anywhere in the world, adding the warmth and welcoming of the people of Africa,” Marobe said.

Glenn Stutchbury, the president of the Zimbabwe Council for Tourism, argued that many visitors do not distinguish between the different countries in southern Africa.

“Southern Africa is long-haul travel for most of its visitors. No one really travels that kind of distance for a single destination, so packaging various options is essential – and cross border, given the various options, makes for a more attractive offer to the visitor,” he told IPS.

He said that the private sector must lead the process in marketing the region as a whole.

“And it is already happening, where like-minded owners work together with operators to promote their products alongside others with whom they share common service and product values. It is about integrity for the client.

“The rivalry exists and is healthy, but there is a need for sharing if one is to compete with other area destinations, such as East Africa.”

Stutchbury said that Cape Town in South Africa, the Chobe National Park in Botswana and Victoria Falls in Zimbabwe and Zambia packaged together, for example, could outsell Kenya’s Maasai Mara and coastal town of Mombasa.

Robin Brown, a partner in the tourism news site victoriafalls24.com, agreed that multi-destination tourism is on the rise.

“More and more itineraries suggested by tour operators, and others being booked direct by tourists, are including multiple-country destinations, with camps and lodges, hotels and resorts, in nearby countries,” he told IPS.

“We need to portray an image to the market that the entire region – Zimbabwe, Zambia, Botswana, Namibia, Mozambique and others – is a good, safe and reliable option for 14-day and longer itineraries – with good access options, safe travel options and a world- class product that links together seamlessly across borders,” he said.

Brown said that in reality, the combination of these countries was an “absolute dream” for potential tourists.

“By selling a region we reduce the risks of having countries pinpointed for safety issues, which are often misconceived – and also the impact of marketing a region seems to have more depth than a lone country,” he explained.

He emphasised the need for key players to work more closely together. “I am already involved in a regional news awareness campaign, and I am finding that there is interest, but there are also hang-ups.

“We need to educate one another to the fact that our real opposition is other regions around the world, not our next-door neighbour country. Engagement is required.”

Noel De Villiers from Open Africa, an NGO that encourages conservation of natural resources and aims to promote job creation, said that he believes there are huge potential benefits if the countries in Africa work more closely together

“First of all, regional tourism is burgeoning and ripe to grow more, so neighbouring states have great potential to feed off each other,” he told IPS.

“Secondly, the strongest brand for overseas travel to Africa is Africa itself. It is the birthplace of humankind, there is the mystique of the place, it is the custodian of most of the world’s animal and plant species, and it is magnificently diverse and spellbinding.

“Thirdly, with the cost of long-haul travel, most people look to numerous stops.”

Lastly, he said, the dollar spends by regional states on advertising would go much further, be more effective, and offer a more attractive product, if they were to be combined.

Stutchbury suggested that there is an important role for the tourism authorities and politicians in the different countries of the region to work together to make it easier for visitors to enjoy multi-destination holidays.

Michael Tatalias, the chief executive officer of the Southern Africa Tourism Services Association, told IPS that cooperation between neighbouring countries on tourism “is often on an issue by issue basis.”

He explained that cooperation was usually on issues such as common problems with border posts, such as not getting busses and passengers through in time.

“An example is the Chirundu border post between Zimbabwe and Zambia.  They redesigned the border post to separate trucks from passenger vehicles, so they have only one search of the (tourist) vehicle – with officials from both countries doing the one search side-by-side.

“This saves huge amounts of time. There is a similar effort on the crossing through Komatipoort between South Africa and Mozambique.”

He suggested that air access was a major issue where more action and cooperation was needed, and if more licences were to be issued for flights between destinations within Africa “that could do wonders for tourism growth.”

South Africa has pledged to help Nigeria make the automotive sector the West African nation’s flagship industrial target. Currently German car manufacturer BMW has a plant at Rosslyn near Pretoria. About 80 percent of the BMWs produced there are for the international market. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, May 22 2013 (IPS)

The lack of economic diversification throughout sub-Saharan Africa means that despite South Africa’s pledges to help Nigeria make the automotive sector the West African nation’s flagship industrial target, it may be difficult to do so, experts say.

Earlier this month, South African Trade and Industry Minister Rob Davies announced the initiative during a visit here by Nigerian President Goodluck Jonathan.

It is a move that is seen as an important milestone in inter-African industrial cooperation. However, Peter Draper, a research fellow at the South African Institute of International Affairs, questioned whether this collaboration would develop into economic integration.

“The real question is whether such cooperation could ultimately evolve into meaningful, broader, economic integration rather than the network of mostly hollow shells that currently masquerade as free trade agreements,” he told IPS.

“I think that Nigeria and the Southern African Customs Union should negotiate a complementary Free Trade Area agreement to promote closer economic relations – as the complementarities are strong, and it would bring the two countries closer together politically.”

Draper said that the African Union (AU) has already developed a number of initiatives for specific sectors, but more needs to be done.

“Actually there are quite a few sectoral policies covering, inter alia, energy, communications, transport, and various other integration initiatives. The problem remains implementation, not a lack of plans,” he said.

He said that it seemed to be commonly accepted that the AU’s role was to develop and coordinate implementation of a continental “master plan” that integrates these various initiatives.

“I think there is a role for a broader continental perspective, but I prefer the notion of ‘subsidiarity’ – pioneered in the European Union – where implementation is left to the lowest possible level of government.”

Draper said that the cooperation between South Africa and Nigeria could be an important mentoring initiative for South Africa.

“South Africa has been (involved in) auto industry policy development since the mid-1920s and has a lot of experience to draw on and share,” he explained.

“It reminds me of cooperation in Latin America, which historically evolved through sectors, involving the auto industry particularly. The European Community (which became the EU) also started out through a network of sectoral collaboration – iron and steel in particular.”

Minister Davies told the Business Day newspaper that discussions on automotive cooperation with Nigeria were still at an early stage.

But while some manufacturers, such as Nissan, might be willing to set up plants in Nigeria, others are more cautious.

Bodo Donauer, the managing director of BMW South Africa, said that in his group “production follows the market” and he does not currently envisage a BMW plant being established in Nigeria.

“Local production plants make it easier to access and develop new markets with long-term growth potential. Having a local plant also makes the company a ‘local player’ and boosts acceptance of the products locally and underscores our good corporate citizen approach,” he said.

“The success of this strategy has been proven by positive sales trends since the ramp-up of production plants, for example in the Unites States, in China, in the United Kingdom and, of course, in South Africa.”

He said that around 20 percent of BMWs produced at the Rosslyn plant near Pretoria are sold on the local market in South Africa “with more than 80 percent exported to markets around the world, including one percent to certain markets in the rest of Africa.”

“Given the current size of the new premium car market in the rest of Africa, we believe the BMW Group is well-placed with its current global production network to meet any additional demand in markets like Nigeria without the necessity for additional production locations,” he said.

Peggy Droidskie, an advisor to the South African Chamber of Commerce and Industry, said that the initiative between South Africa and Nigeria was very welcome, as regional integration in Africa remains high on the development agenda.

“Nigeria is a large market, and it is closer to Europe. This proximity to Europe implies that it would be logical for European connections to be used.

“The fact that South Africa is preferred (as a partner for Nigeria) indicates that South Africa is very competitive and can accommodate the requirements of Nigeria. It also provides South African manufacturers with an additional footprint in Africa,” she said.

Droidskie predicted that some manufacturers who currently operate in South Africa would become interested in setting up in Nigeria.

“Agreements of this nature are driven by politicians,” she noted. “The politicians believe that the agreements that they enter into benefit the private sector, which is often, but not always, the case.”

She said that South African vehicle manufacturers are already exporting a significant number of vehicles to Nigeria.

“Last year, the number was nearly 15,000. Nigeria is therefore currently a lucrative market for South African vehicle manufacturers. It is therefore very likely that the manufacturers will take advantage and come to the party.”

And she predicted that this cooperation could expand to other industrial sectors.

“If the profile of Nigeria’s imports is taken into account, there is considerable room for an increase in South African exports to Nigeria. For instance, there is room for greater trade in electrical and electronic equipment and machinery.

“With the development of the Tripartite Free Trade Agreement between the three regional economic blocs in sub-Saharan Africa, there is considerable potential for cooperation to expand to other countries and to other sectors.”

South Africa is one of the most unequal societies in the world. It is estimated that nearly 40 percent of the population lives below the poverty line. Credit: Kristin Palitza/IPS

By John Fraser
JOHANNESBURG, May 17 2013 (IPS)

Commentators and business leaders in South Africa believe that the recent announcement of an end to the United Kingdom’s aid programme to South Africa may be the start of a new trend to cut back on aid to this country, and possibly to the rest of Africa.

“This British announcement was not entirely unexpected,” Neren Rau, the head of the South African Chamber of Commerce and Industry, told IPS.

“There is currently a lot of discussion of Africa as a whole being vulnerable to less aid – the funding just isn’t there.”

The announcement in April by the U.K.’s International Development Secretary Justine Greening that her country’s direct aid to South Africa, which is currently worth 19 million pounds a year, will cease in 2015 has drawn widespread criticism in the U.K. and elsewhere, not least because there was no prior dialogue with the South African government.

“There is a high probability of other donors following suit,” Rau said.

“The (possible) loss of aid from the European Union and the United States is something we have been debating for a while. I think that African countries should have planned for this, and expected this. It is very naive to expect aid to flow indefinitely.”

Former Belgian ambassador to South Africa Jan Mutton, who is a research associate in the Department of Political Sciences at the University of Pretoria, told IPS that it would be wrong for any country to depend forever on handouts.

“South Africa is a perfect example to consider for a mixture of trade and aid together,” he suggested.

“There is a classical opportunity to see how we can work together in a new way. So what the U.K. is doing is most appropriate – to look at the most appropriate way of helping South Africa.”

Pretoria-based economist Dawie Roodt of the Efficient Group told IPS: “I have plenty of sympathy with the U.K.’s decision. It doesn’t make sense that a recipient has to agree before aid is halted. That decision is the prerogative of the donor only.

“But apart from that, I am very sure there are, in the view of the British, more urgent aid cases than to give money to South Africa.”

Spokesman at the EU Embassy in Pretoria Frank Oberholzer told IPS that currently EU aid is continuing as planned, but that there are discussions on how best to handle longer-term assistance to South Africa.

“The current EU programme in SA is 980 million euros (1.2 billion dollars), from 2007 to 2013,” he told IPS.

Head of the South African Chamber of Commerce and Industry, Neren Rau, says the U.K.’s cutting of aid to South Africa was not unexpected. Credit: John Fraser/IPS

“While all commitments under this programme come to an end this year we expect to continue disbursing on average some 100 million euros (129 million dollars) per year until 2015.

“Discussions on future assistance in terms of funding and the areas of cooperation are currently ongoing at European Parliament, European Commission and European Council of Ministers level – it is too early to predict an outcome at this time,” Oberholzer said.

“While I do not believe there is debate on development assistance, there is a discussion on how best to assist middle income countries, South Africa being one of these,” he added.

Britain’s opposition Labour Party has been fiercely critical of the aid decision, with a leading Labour member of the European Parliament, Michael Cashman, attacking it in a statement on his website.

Cashman, the chair of the European Parliament Delegation for Relations with South Africa, protested that the decision “was taken unilaterally”.

“It is clear (Greening) is either ignorant of the depths of poverty in South Africa or she is badly advised. Either way she should review this decision immediately, or at the very least work a solution bilaterally with her South African counterpart.”

He confirmed that the EU is reviewing its own development cooperation strategy and stated that “fights have begun to differentiate countries who should still benefit from aid and those who should not, South Africa being one of the most controversial cases.”

“The country is somewhat of a development success story and is the continent’s largest and most developed economy,” Cashman said.

“However, it remains one of the world’s most unequal societies and is blighted by high unemployment and widespread poverty. It is estimated that nearly 40 percent of the population lives below the poverty line,” he added.

Privately, some diplomats in Pretoria suggested that one reason for the U.K.’s decision to end aid to South Africa has been the inability of some government departments to handle it, and to report back efficiently to the donor on how the aid has been spent.

There is also a suspicion that South Africa’s recent enthusiastic alliance with the Brazil, Russia, India and China grouping of leading emerging nations might have sent the wrong signals to traditional development partners such as the U.K.

The newly completed African Union building in downtown Addis Ababa. Credit: Mekonnen Teshome/IPS

By John Fraser
JOHANNESBURG, May 7 2013 (IPS)

As the African Union celebrates its 50th anniversary this year, it is still younger and less integrated than the 56-year-old body that is now the European Union, and, according to politicians and diplomats, has a big advantage over the Europeans as it charts its own path of integration.

Africa can see where Europe has tried to move too far, too fast.  But it can also see where the Europeans have succeeded, as it plans its own path towards greater integration.

“Africa in particular has a need to integrate to take advantage of its massive resource economies of South Africa, Angola, Ethiopia, the Sudans and probably the whole Sahel area – and growing populous economies such as Nigeria and the Democratic Republic of the Congo,” former South African Trade and Industry Minister Alec Erwin told IPS.

Erwin negotiated his country’s trade, cooperation and development accord with Brussels, and has extensive experience in dealing with the EU.

There can be no doubt that the EU is willing to share the lessons it has learnt, and there is a regular dialogue between the European and African Unions.

European Commission President José Manuel Barroso and six of his commissioners travelled to Ethiopia’s capital Addis Ababa from Apr. 25 to 26 to meet their AU counterparts as part of the preparations for the EU-Africa Summit that will be held next year.

While the themes of cooperation and partnership will no doubt ring out, the recent crisis over the Euro, when Greece and some other members needed bailouts to keep their economies afloat, serves to highlight the way integration between sovereign nations can bring pitfalls as well as benefits.

However, while Europe has succeeded in many technical areas, the recent Euro crisis shows how political goals were pursued without the necessary backbone of economic and financial integration.

“The greatest caveat has emerged only recently and it came from the macro and monetary integration process,” Erwin said.

“Despite attempts to force a degree of harmonisation – with the Maastricht Treaty which established the European Union – it became clear that in fact the economies were too disparate in size, efficiency, and economic stability to survive a crisis.”

He said there is a clear lesson for Africa in that there has to be a systematic plan toward economic integration.

“We run the risk of running into problems with trade liberalisation,” he warned.

“Whilst this is important, it can backfire seriously if handled incorrectly. Trade liberalisation requires good trade facilitation between the economies and responsive economies.

“Both of these requirements essentially revolve around affordable and accessible energy, logistics and communications. In addition, there are a host of institutional trade facilitation reforms that have to be made.

“So like the EU at the outset we should be focusing on infrastructure and trade facilitation as key projects.”

Erwin said that in the past, Nigeria, Algeria, Ethiopia, Tanzania and South Africa cooperated more closely, and big progress was made in African development.

“It is this cooperation that is now most glaringly absent,” he said. “It requires diplomacy and tact since no one likes to think that the African world is going to be ruled by its giants.”

EU Ambassador to South Africa Roeland van de Geer told IPS: “If there is anything to be learnt from European integration it is that the road to union is a bumpy one – integration does not take place in isolation, and internal as well as external factors will place obstacles along the path.”

Former South African Ambassador to the EU Professor Eltie Links echoed this message, telling IPS: “My caution to Africa is to not try and emulate the Europeans in every aspect of the integration path.

“We have the benefit of their experience over the last couple of years and especially the last few months in trying to understand fully the way to manage the vast, enlarged EU in all of its spheres.

“These clearly point us to be more cautious in our own need to integrate, especially with regard to the speed and the depth of integration that we as Africans talk so easily about.”

Links said that the levels of development were so different in Europe, let alone in Africa, that talking of lumping countries together in an economic or monetary union without the necessary and thorough preparation would be a grave mistake.

Former South African diplomat John Mare, who served in his country’s Brussels Embassy, suggested that a lot of the more detailed harmonisation of standards and rules, which the EU has undertaken, could serve as a model for Africa.

“The AU has much to learn from the EU in terms of various forms of technical integration – such as getting similar standards for educational qualifications, road signs, environmental standards, food safety standards, infrastructural roll-out and so on,” he told IPS.

“It can learn how to delegate coordinated activities aimed at improved regional integration to sub-regional entities that firstly produce improved results, and secondly cut out duplication.”

However, Links suggested that Africa could learn not just from the practices of the EU, but also from its values.

He said three had stood out during his dealings with Brussels, namely respect for human rights, respect for the rule of law, and good governance, with the latter basically referring to corruption.

“Living in South Africa today these principles of democracy have become very obvious and imperative in our struggle to achieve our full potential as a democracy,” he said.

“Sometimes the source from where the advice comes clouds our willingness to accept it as good for us. We can do a lot more for the people of Africa if we strive diligently towards respecting and practicing these fundamentals in our society.”

Mare suggested that the AU should focus on areas of cooperation which are realistic and which will bring benefits.

“A key lesson is for the AU not to waste too much time on regional topics such as coordinated foreign affairs for the AU, or on a common monetary union – just think of the Euro,” he concluded.

Wine on Sale in a South African Supermarket. Wine is one of the product ranges which could benefit from a new liberalising trade deal between the EU and Southern Africa. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, Apr 19 2013 (IPS)

There is growing optimism that the countries of Southern Africa are within months of concluding negotiations with the European Union on a major new trade deal, after years of hesitant progress and frustration.

The EU ambassador in Pretoria, Roeland van de Geer, told IPS that the agreement would form part of the bloc’s strategy of clinching regional trade pacts, known as Economic Partnership Agreements or EPAs.

“This could be the breakthrough year,” he said.

He recalled that once South Africa became a democracy under Nelson Mandela’s African National Congress, the EU negotiated an accord, which took a major step towards free trade with the African nation. This was done in a deal known as the Trade, Development and Cooperation Agreement (TDCA), which entered into force in May 2004.

Meanwhile, there are different EU trade arrangements for South Africa’s neighbours, depending on their degree of development, with the greatest access accorded to the least developed states.

Some of these arrangements are due to expire towards the end of next year, and will need to be replaced. And the EU is also hoping to update its trade relations with South Africa, going further down the road of trade liberalisation, while also ensuring that there is a more coherent accord covering the Southern African region as a whole.

If a deal is struck, there will be provisions to ensure that the poorest Southern African nations, which currently enjoy the best export access to the EU market, would retain such access.

The European Union ambassador in Pretoria, Roeland van de Geer says they are within months of concluding negotiations with Southern Africa on a major new trade deal. Credit: John Fraser/IPS

Van de Geer predicted that if there is a deal this year, it will boost South Africa’s access to the EU for fruit and vegetable products, some of which are excluded from the free trade provisions of the TDCA.

He said that agriculture is a labour-intensive sector of the South African economy, and any benefits that can be given to it will translate into more employment.

“If I could give South Africa two things, it would be jobs and basic education,” said Van de Geer.

“At the moment 90 percent of what South Africa exports to Europe is quota and tariff free, and we want to see how much farther we can go.”

The negotiations are currently very detailed, with product-by-product discussions.

“We are also looking at other related issues, such as Geographic Indications (GIs),” Van de Geer said.

GIs are a way of protecting niche agricultural products such as specialty meats, cheeses, wines and teas, and have not figured largely in South Africa’s trade strategy to date, outside the wine sector.

“We in Europe have more GIs than South Africa, as we are a far larger market of 500 million people,” explained Van de Geer.

“South Africa has fewer GIs, but can protect them in a larger market (the EU market) for products such as rooibios tea, honeybush tea and lamb from the Karoo region.”

The EU has traditionally found it difficult to make trade concessions because of its strong farm lobby. Van de Geer suggested that this is also the case in South Africa, where farmers are nervous about large surges in imports from the EU, and he gave the example of the South African poultry producers, who are calling for more protection against imports from Europe and elsewhere.

He stressed that the EU remains South Africa’s largest trading partner, accounting for around 25 percent of the country’s exports.

“If you take all of South Africa’s BRICS (Brazil, Russia, India, China and South Africa) partners together, you are still not at the level of the EU (in terms of exports from South Africa),” he stressed.

The deputy director-general for International Trade and Economic Development at South Africa’s Department of Trade and Industry, Xavier Carim, would not endorse the prediction that trade talks with the EU will wrap up this year, but he did not rule it out.

“We have made steady progress in the negotiations,” he told IPS.

“We have systematically been dealing with all the outstanding issues and have narrowed the gaps quite well. There are still a lot of outstanding issues, but the EU recently has been a lot more constructive in its approach.”

He confirmed the painstaking, detailed nature of the discussions, and said that there is a range of issues on which there is discussion.

“We are trying to improve South Africa’s market access to the EU, mainly in agricultural products – fruit, vegetables, wine and sugar.  There are 21 or so products we have been requesting,” Carim explained.

“The EU is prepared to consider this, but they want improved access to the markets of South Africa and the Southern African Customs Union.”

Carim said that if such access were given to Europe, it would be on the condition that action could be taken if there is a surge in exports from the EU.

There are also discussions on trade classifications known as rules of origin – which cover goods where one or more inputs come from outside the country of manufacture – and also on how to handle EU insistence that if South Africa gives any other trade partner better access than that currently enjoyed by the European bloc’s exporters, the concession would also extend to the EU countries.

Catherine Grant, the programme head for Economic Diplomacy at the South African Institute for International Affairs, a Johannesburg think tank, said it is in the interests of South Africa and of its regional neighbours to seek a better trade deal with the EU.

“South Africa has its own agreement with the EU; others have different arrangements,” she told IPS.

“This is a useful opportunity to get all our ducks in a row as one bloc.”

She said that South Africa stands to win better access to the EU market for its exports of processed agricultural products, such as canned food, when a new deal is struck with the EU.

She pointed out that the EU has a more generous trade regime towards Chile than it does with South Africa, and said South Africa should aim to close the gap.

“That would mean better access for South Africa, and I hope it will not be terribly opposed by European lobby groups,” she concluded.

South Africa’s motor manufacturing sector is highly automated and workers often need to be highly skilled and trained. Courtesy: Toyota South Africa

By John Fraser
JOHANNESBURG, Apr 17 2013 (IPS)

If job creation is South Africa’s major social and economic priority, the country should be investing in people rather than in robots that populate the country’s highly-automated automotive manufacturing sector, according to local economists.

South Africa’s automotive manufacturing sector is the country’s flagship industrial support sector, with about two billion dollars having been pumped into it through a series of subsidy schemes. However, as the industry is capital intensive, some commentators are worried that the South African government has been assisting a sector that does not do enough for job creation.

“If we look at the big picture, there are other industries which would do more for job creation than the automotive sector – such as textiles, agriculture, food processing, furniture making and tourism,” independent economist Mike Schussler, chief executive officer of the consultancy economists.co.za, told IPS.

Aid has traditionally been channeled through the long-established Motor Industry Development Programme, which was updated and re-branded as the Automotive Production Development Programme (APDP) in 2013.

“The capital requirements of the motor industry are very high, and so we need to give a lot of subsidies to attract investment. It is a problem when you have an industry where you employ assembly-line robots, not people,” Schussler said.

He explained that while automotive workers often need to be highly skilled and trained, there are other industries where a less sophisticated workforce is needed.

“We can create jobs more cheaply, and in rural areas where they are really needed, in sectors such as tourism,” he said.

While trade and investment consultant Duane Newman of Cova Advisory told IPS that it was important for South Africa to have a globally respected automotive sector, and that the government was right to retain a support scheme for the industry, he said it could be argued that the industry was given more support than it should be.

He said support for the industry was around two billion dollars a year – about 20 percent of the support the South African government gives to all local industries.

“Clearly, the automotive sector does not account for 20 percent of the GDP of South Africa – it’s nearer to six percent – so it could be argued that the industry is being given three times the support it should receive.

“However, key players in the automotive sector say that the industry is far larger than just its car assembly element, and that its importance to the country goes far wider than its role as an employer,” he said.

Johan van Zyl, president of Toyota in South Africa, chief executive officer of Toyota Africa and president of the National Association of Automobile Manufacturers of South Africa, told IPS that government support has been critical for the expansion of the industry since the end of apartheid in 1994.

“We believe that government support – regulatory and otherwise – was critical in enabling an inefficient and inwardly-focused sector to modernise and compete on a global stage. Much of the inefficiencies of the pre-democratic era were the result of regulation,” he said.

“The auto industry is the largest manufacturing sector in South Africa. It is a key source of new technology and investment and, importantly, of skilled employment,” Van Zyl said, adding that this aligns perfectly with the government’s goals of developing the economy away from traditional areas where there is little local knowledge transfer and value addition.

Johan van Zyl, president of Toyota in South Africa and the National Association of Automobile Manufacturers of South Africa, says that government support has been critical for the expansion of the industry. Credit: John Fraser/IPS

He rejected Schussler’s suggestion that too few jobs are being created in the industry.

“Jobs and opportunities are created up and down the value stream. One should also consider the fact that employment in this industry has remained stable despite the economic downturn, so I would say the criticism is unfounded.”

Jeff Osborne, the chief executive officer of the South African Retail Motor Industry Association, which represents car dealers, panel-beaters and other consumer-focused branches of the automotive sector, shared this view.

“We have seen high levels of investment by automotive manufacturers in South Africa, and this can be seen as a vote of confidence in the country,” he told IPS.

“Fourteen percent of South African exports are made up of automotive and related goods – and that’s higher than the value of our gold exports,” he argued.

He said that while auto manufacturing accounts for around 25,000 jobs, the auto component sector employs 60,000 people, and the retail side of the motor trade gives employment to a further 30,000 workers.

“You need to look at the whole of the industry when you discuss job creation, and not just limit this to manufacturing,” he insisted.

A major challenge, which the APDP was intended to address, is the degree to which South African-produced components are used in vehicle assembly, making up what is known as local content.

“At the moment we use 60 percent imported components and 40 percent local contents, and that should be reversed,” Osborne argued.

“This is also good for jobs, as component manufacture involves a lot of smaller businesses, and these tend to be less automated.”

Jonas Mosia, industrial policy coordinator for the Congress of South African Trade Unions, agreed that the automotive sector should be looked at from a wide perspective, and not just in terms of its manufacturing arm.

“We need industrial investment, and therefore in terms of industrial policy you identify sectors to anchor investment,” he told IPS.

“That will revive other linked sectors, such as the automotive component sector. We are talking of leather seats for vehicles, electronics and so on. That sector has a lot of local content and therefore we are creating jobs in South Africa.”

However, Roger Pitot, the chief executive officer of the South African Automotive Components Industry, expressed concerns, in a written analysis to industry members, that there were insufficient incentives for auto manufacturers to boost local content.

He said that while he supports the incentivisation of vehicle assembly in South Africa through the APDP “there is little incentive for (manufacturers) to increase localisation of components.

“Without higher localisation, it may become increasingly difficult to justify producing some vehicles in South Africa, and thus the target of continually increasing production may be unachievable, particularly with the scenario of lower global vehicle volumes likely to remain for the foreseeable future.”

South African rooibos (Afrikaans for red bush) is caffeine-free, high in anti-oxidants and minerals, and traditionally grown in the Cederberg region, 250 kilometres to the north of Cape Town. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, Apr 15 2013 (IPS)

A trademark system which is used to protect Europe’s finest wines, cheeses and hams could soon brew up benefits for a humble tea from a remote region of South Africa.

The trade protection system called Geographic Indications (GIs), which is highly favoured by the eurocrats of Brussels, could be used to protect a South African red tea, locally known as rooibos (Afrikaans for red bush) as French firm Compagnie de Trucy is trying to secure the exclusive rights to market it in France.

“GIs are increasingly important in the global trade arena, although it is wrong to think they offer enormous bulk trade opportunities,” Pretoria-based trade consultant John Maré told IPS.

This form of food copyright already applies widely to specialty products, which can be linked to a specific region – such as French champagne, Parma ham and many types of cheese.

“They (GIs) open-up niche markets for increased value add products, which taken together can total something significant.

“In addition, they involve cutting-edge frontiers in trade that largely rely on intellectual property rights for value, and are also linked to trade issues regarding brands and logos,” he said.

South African rooibos is caffeine-free, high in anti-oxidants and minerals, and traditionally grown in the Cederberg region, 250 kilometres to the north of Cape Town.

It is growing in popularity worldwide due to its healthy properties, which helps to explain Compagnie de Trucy’s move to obtain marketing rights.

The issue has been elevated to diplomatic level between the European Union and South Africa at a time when both parties hope to finally conclude negotiations on updating their wide-ranging trade framework, after more than a decade of discussion.

While China as a country is South Africa’s biggest trading partner, the EU as a bloc is more important in value terms, and there are powerful arguments that both sides should expand GIs in their future relations.

Soekie Snyman, the spokeswoman for the South African Rooibos Council, which represents rooibos producers, told IPS that the red tea needed to receive official trademark status in South Africa itself before it could qualify as a GI.

“We have heard from the EU ambassador in Pretoria that they support the protection of indigenous crops,” she said.

“Their main requirement is that the product must be protected in its country of origin, and we are nearly ready to file for trademark protection in South Africa.”

She argued that rooibos is part of South Africa’s heritage. “It is a unique plant, coming from the Cederberg mountain area. It is a caffeine-free beverage.”

The EU ambassador in Pretoria, Roeland van de Geer, confirmed in a news release in March that he received a request from South Africa’s Minister of Trade and Industry Rob Davies “for the protection of South African food product names as Geographic Indications in the EU.”

As well as rooibos, there have been requests for Honeybush, which is another type of tea, and for lamb from the Karoo desert region.

“The development of a GI system for South African farmers will reinforce the uniqueness and quality of South African products,” he said in the statement.

“South African wine makers have used the GI system for many years and have found it an effective way to protect famous names like Paarl and Stellenbosch.”

Maré noted that the GI system has enabled EU countries “to clinch niche markets for brands such as champagne, which have enormous growth potential on a global basis.

“As specialised high value items they have been linked to an EU strategy in global marketing of quality rather than quantity.”

He suggested that South Africa should expand its GI portfolio “to help give new opportunities for South Africa to diversify current exports into new added-value products, also to grow such products.

“It helps growth in rural regions, and they help strengthen a good perception of all South African products as ones having quality and differentiation in the international globalised economy.

“They help drive prices of South African products upwards and improve overall perceptions of South Africa.”

Snyman said that the current problems with the French market have wider implications, and that is why it is important for rooibos to secure global GI protection. She recalled that there had been a similar problem in the past in the United States market.

“This could affect South African exporters in any international market,” she warned. “But I believe we will achieve our goal.”

Trade consultant Francois Dubbelman, who specialises in trade protection issues, agreed that there is a global aspect to the issue. “A GI name should be protected,” he told IPS.

“If you neglect it, you could lose it forever, so you do need to put up a fight.”

There is a range of other South African products that might also be eligible for GI protection, such as ostrich and springbok meat, and the marula fruit from which the Amarula liquor is made. Meanwhile, the same criteria could apply to produce from other countries of the Southern African region – such as Mozambican prawns, Botswana beef and Namibian oysters.

“It is important for South Africa to penetrate world markets, and we must look at niche products like rooibos,” Dubbelman said. “That’s the future of trade – it’s where you make your money. Rooibos is important for the rural economy, and it is a health product, so there is a growing market for it.”

Congress of South African Trade Unions says a BRICS Development Bank must promote development and industrialisation and job creation in the country. Pictured here is Pal Mfunzana, a resident from the poverty-stricken township of Diepsloot, in Johannesburg. Credit: Chris Stein/IPS

By John Fraser
JOHANNESBURG, Mar 28 2013 (IPS)

Although leaders of the Brazil, Russia, India, China and South Africa group agreed to launch a new development funding institution, giving the club a major infrastructure boost, some here are sceptical about the potential impact of the new bank.

“I don’t think it will have much impact in South Africa, where capital is not the problem, but policy is,” Frans Cronje, deputy chief executive officer of the South African Institute of Race Relations, told IPS. The fifth BRICS summit was held in Durban, South Africa from Mar. 26 to 27.

There are concerns that some of the key details still remain to be agreed upon and announced, and also because the operation of the new BRICS Development Bank will need to be closely monitored if it is to convince observers that it will have a real impact on funding development.

“This new bank will be way smaller than the World Bank or International Monetary Fund (IMF), so it will have a marginal impact compared to those institutions,” Cronje said.

It has been suggested that all BRICS nations will initially be paying 10 billion dollars towards the seed capital of the bank, and Cronje said that it is “odd” that South Africa should be paying its full share when it has just two percent of the GDP of the BRICS.

“Is this a vanity project for South Africa?” he questioned. “Is shifting the balance away from the World Bank and the IMF simply ideological romanticism

It is already clear that the bank will focus on infrastructure projects, but there is still uncertainty about several details, including the geographical footprint of the bank, its site and the currency or currencies in which it will operate.

“The first focus of the bank is on infrastructure, which is as it should be,” independent Johannesburg economist Mike Schussler told IPS.

“There will be discussion on where you put the money, as South Africa, Brazil, Russia and India all need infrastructure, and there will be a shortfall of funds.

“So the challenge will be on how to commit the initially inadequate resources.”

Memory Dube, a senior researcher at the South African Institute of International Affairs, a non-governmental research institute, described the agreement to go ahead with the bank, which was taken by BRICS finance ministers in Durban on Tuesday Mar. 26, as “significant” in the evolution of the BRICS grouping into a solid and sustainable alliance.

“It provides an institutionalisation for the BRICS. Until now, it has been a loose grouping, but this new bank will glue the members together.

“This is an actual institution that belongs to the BRICS and will be run by the BRICS. There is now no doubt that the BRICS will exist 10 years from now, 20 years from now – there is something tangible,” she told IPS.

Spokesperson for the Congress of South African Trade Unions, Patrick Craven, was guarded about the new bank.

“It is too early to assess it,” he told IPS. “We want a lot more detail on how the bank will operate and who will be in charge of it.”

“We will insist its mandate is very different to that of the World Bank and the IMF – which are used to reinforce the domination of the North American and Western European economies and have had a very negative effect on developing countries, by imposing constraints on lending.

“A BRICS Development Bank must promote development and industrialisation and job creation.”

Entrepreneur Sandile Zungu is one of the five South African delegates who sit on the new BRICS Business Council, which was also launched at the Durban summit.

“Often infrastructure projects in South Africa and in the rest of Africa have the potential to benefit one or more of the BRICS countries,” he told IPS in a telephone interview from Durban.

“With the new BRICS Development Bank, these projects will have a better chance of getting funding than they would have done from the World Bank. There will be a wider pool of funding.”

Dube said she was keen to learn about the site of the new BRICS Development Bank, as this had not been announced at the time she spoke to IPS from the summit on Mar. 27. South Africa has been keen to host it, but China is also a strong candidate.

However, Zungu said that he believes South Africa is the strongest candidate among the BRICS nations to host the new institution.

“Arguably, South Africa has the best financial services system of all the BRICS countries, and the World Bank says we have the best.

“We are also closest to the area of greatest need for infrastructure development.”

Dube also expressed an interest in seeing a lot more detail on other issues concerning the new bank. “If they structure it right, it might make a real difference,” she suggested.

“But the devil will be in the detail.”

She said it would be important to see the funding structure of the new bank.

“We have heard each BRICS country will contribute 10 billion dollars,” she said. “But will that be enough?  Will further funding be raised on the open market? I also want to see more detail on the BRICS Development Banks’ decision-making structure.

“We also need to see the regions in which it will operate – will it be for all developing nations, or for the BRICS members only?

“Then we need to look at spending priorities, and what currency it will operate in. Will it be the United States dollar, or will the BRICS nations decide it must operate in their own currencies?”

The political hurdle has been overcome with the decision in Durban to found the BRICS Bank.

However, the credibility of the bank itself and of the BRICS alliance now rests on the skill and efficiency with which it is brought to life and on the degree to which it can make a real difference to development in the BRICS nations and beyond.

The newly-completed African Union building in downtown Addis Ababa. Ethiopia may be one of Africa’s poorest countries but its economy is expected to grow at a rate of seven percent for 2012/13, according to the International Monetary Fund. Credit: Mekonnen Teshome/IPS

By John Fraser
JOHANNESBURG, Mar 11 2013 (IPS)

There is growing resentment in Africa about the way in which South Africa professes to speak for the rest of the continent in its role as a member of key developing nation blocs, researchers and experts have warned.

South Africa is a member of the India, Brazil and South Africa (IBSA) developing nations grouping, as well as the fledgling Brazil, Russia, India, China and South Africa (BRICS) club.

But international relations and trade consultant John Maré told IPS that South Africa might be walking “a political tightrope.”

“I think many African leaders, political and business, are resentful of South Africa having too great a role in the leadership of Africa,” he said.

While he added that there may be an increased pragmatism that accepted the strengths which South Africa has in many fields, it could soon become tiresome.

“The pragmatism may wear thin if South Africa overplays its hand, especially in such contexts as BRICS where other African countries do not enjoy parallel forms of special relationships,” he said. He added that other African countries did, however, have special relationships with the European Union, even though South Africa had originally been chosen as a special strategic partner with the bloc.

“The manner in which South Africa acts in the BRICS context becomes especially relevant and, given perceptions (outside Africa) that Africa wants South Africa to be its leader, it will not go down well – although voiced disapproval may be slow to emerge and will do so in a varied pattern,” he said.

He added that the growth of regional economies in Africa also helped undermine South Africa’s right to be the key gateway for the continent.

The African Development Bank (AfDB) predicted that despite the global economic slowdown, sub-Saharan Africa is expected to see economic growth of 6.6 percent in 2013. According to the World Bank’s “Africa’s Pulse” report, released in October 2012, “new discoveries of oil, gas, and other minerals in African countries will generate a wave of significant mineral wealth in the region.” In addition, Ethiopia may be one of Africa’s poorest countries but its economy is expected to grow at a rate of seven percent for 2012/13, according to the International Monetary Fund.

Memory Dube, a researcher at the South African Institute for International Affairs, an NGO that focuses on South Africa’s and Africa’s international affairs, suggested that South Africa needed to consult more to strengthen its credentials to speak on behalf of Africa.

“What South Africa needs to embark upon is a proper consultation process, particularly with the other key states such as Nigeria, Algeria, Kenya, Egypt and Ethiopia,” she told IPS.

“The BRICS leaders are going to engage with African institutions such as the New Partnership for Africa’s Development, the African Union (AU) and the AfDB as well as regional economic communities,” she said, adding that it would be a good move, especially if African priorities, as defined by South Africa, are drawn from a continental dialogue.

“However, bilateral relations still remain key and engagements with institutions should be complementary to these bilateral relations with other key African champions,” she said.

But South African Minister of Foreign Affairs Maite Nkoana-Mashabane dismissed suggestions that the country was not properly consulting its African neighbours.

“I sit in meetings where I know we truly and faithfully engage with all the independent countries on the continent,” she told IPS.

“They all have individual policy perspectives, but we all belong to the AU, and take decisions together. We have friendly and cordial relations with them and take none for granted,” she said adding that South Africa was an integral part of the continent.

“What we wish for South Africa, we wish for all the countries in the continent. We champion Africa’s cause, as Africa took the struggle for South Africa (against apartheid) as their cause.”

Nkoana-Mashabane was unrepentant about South Africa’s links with its BRICS and IBSA partners and gave her firm support to the developing nation economic blocs.

“We also champion South-South cooperation, and this is what our forefathers envisioned,” she explained. “Because of our history, we don’t ignore our historic links with countries of the north either.”

The minister suggested that there would be benefits for all from the BRICS summit, which will be hosted in Durban, South Africa from Mar. 26 to 27. She said that ahead of the summit, for the first time “BRICS leaders will be meeting in a retreat with about 20 heads of state of Africa.”

“The BRICS member states know investing in Africa is not charity – there is no better place to be but in Africa,” she emphasised. “They know they will get good returns for their investments, and on their own they have chosen Africa as a partner.”

Nkoana-Mashabane added that South Africa would call for investment in Africa’s infrastructure at the summit.

Sandile Zungu, the Secretary of South Africa’s Black Business Council said there is no doubt that the BRICS Development Bank will be a welcome development. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, Feb 28 2013 (IPS)

Emerging market leaders want their Brazil, Russia, India, China and South Africa club to be taken seriously, and next month they are expected to make a decisive move towards setting up a development bank to give it real substance and credibility.

“There is no doubt that the BRICS Development Bank will be a welcome development,” Sandile Zungu, the Secretary of South Africa’s Black Business Council, told IPS.

“The need for the bank is fairly obvious if you look at the growing trade among the BRICS countries and the frustrations these countries have had with existing development financing institutions like the World Bank and the IMF,”  he said.

Zungu particularly pointed to existing bureaucracy, the criteria for lending, the conditions attached to loans and the slow pace in processing applications.

“Then there’s the fact these countries have such massive infrastructure roll-out programmes, which gives all the more reason to create this bank – the need is there.”

Infrastructure financing within BRICS will indeed be a key focus of the bank, along with alternative models of cooperation to finance such projects, according to Hannah Edinger, head of Research and Strategy at emerging-markets consultancy group Frontier Advisory.

South African Finance Minister Pravin Gordhan earlier this week told parliament that the the bank’s establishment is “intended to mobilise domestic savings”  to co-fund these infrastructure projects in developing regions.

Talking to IPS, Edinger said that at least 15 trillion dollars is required in the BRICS countries over the next 10 to 20 years to finance such projects, especially in India and South Africa.

At a recent press briefing, Lynette Chen, Chief Executive Officer of the New Partnership of Africa’s Development Business Foundation, estimated that there cirrently is a 480-billion-dollar deficit in funding for infrastructure in Africa, which the new BRICS bank should help to tackle.

“The BRICS Development Bank could become the lender of choice for Africa,” Chen said.

“Other areas of finance include green technology projects, biofuels, dams and nuclear power plants in Africa,” according to Edinger. “Yet, financing to the African continent is expected to be a smaller share of total financing extended to the BRICS.”

While there will be some scope to fund environmentally friendly projects in Africa,  this will not initially be the prime focus of the new Bank, the strategist said.

Projects with a focus on sustainable development and climate change will be part of the mix particularly where they concern “larger and cross-border infrastructure-type projects in the transportation and power sectors, to promote regional integration and regional market building,” according to Edinger.

While the upcoming BRICS Summit in Durban at the end of March will be the first to be hosted on African soil,  officials have been holding a series of meetings in countries to ensure that the political club is given a real economic backbone.

Zungu predicted that the new bank would “cement” the BRICS spirit of co-operation by giving a tangible institutional foundation.

Edinger agreed. “The establishment of the BRICS Development Bank will be an important milestone for the BRICS grouping as it would add credibility, substance and ownership of the BRICS concept as the first institution coming out of this club.”

She said that while a number of working groups and forums exist as part of the BRICS mechanism, the establishment of the bank would signal a move away from just being a political discussion forum that proposes reforming the international financial system, creating a vehicle that is more attuned with the interests of the BRICS emerging markets, as well as the interests of the greater Global South.

Experts at South Africa’s Standard Bank believe that the BRICS Development Bank will initially be capitalised at 50 billion dollars, with 10 billion dollars from each of the BRICS members.

“The bank would also give a sense of assurance to private financiers,” according to Chen. She agreed that many infrastructure projects in Africa would be cross-border, involving “development corridors.”

Eyes on Durban

Economist Jeremy Stevens of South Africa’s Standard Bank, who is based in China, told IPS that more clarity about the bank would emerge in Durban.

“The main ambition of the bank is to direct development in a manner that reflects the BRICS’ priorities and competencies. Therefore, the bank will focus on infrastructure development and providing auxiliary support for project preparation, like feasibility studies,” according to Stevens.

“Later the working group will establish technical commitments and governance structures.”

The BRICS Development Bank provides an institutional underpinning to the group,  Stevens said,  while “contributing constructively to the development of more robust and inter-dependent ties between the BRICS members.”

He predicted that the scope of the bank’s activities might initially be limited, but could expand as it grows over time. He also asserted that its role would not be as a rival to existing development financing institutions, but as an auxiliary source of funding.

The symbolism of Shanghai

China is the largest economy in the BRICS and is expected to press for the new BRICS Development Bank to be headquartered in Shanghai, and for it to operate in the Chinese currency, the yuan.

“As part of its development process, China needs to deepen its financial markets,” John Cairns, currency strategist at South Africa’s Rand Merchant Bank, told IPS.

“One part of this is to have a stronger and more flexible, market-determined, exchange rate. This, in turn, requires that the currency be traded openly like any other currency, and therefore be internationalised.

“China’s authorities hope that the currency will become as important as its economy, so as to allow local (Chinese) companies and investors the ability to quote in their own currency.”

He said that progress on this has been “slow but steady” but was not convinced that the benefits to China from its currency being used by the BRICS Development Bank would go much beyond the symbolic.

“I’m not sure that it means very much,” he said.

“This would just be the currency of denomination – practically, the yuan would have to be converted into dollars or another international currency when transactions with third parties are being made.”

South Africa is determined to promote its tourists destinations to the emerging nations of Brazil, Russia, India, and China. Pictured here, a giraffe in the Madikwe Game Reserve in South Africa’s North West Province. Credit: Nalisha Adams/IPS

By John Fraser
JOHANNESBURG , Feb 26 2013 (IPS)

As tourism between the emerging nations of Brazil, Russia, India, China and South Africa starts to increase, South Africa is determined to weld the iron while it is hot.

“Given that tourism was identified and committed to by our government as a key driver for job creation, South Africa needs to secure every opportunity to promote higher levels of tourism to our country,” head of the South African Chamber of Commerce and Industry, Neren Rau, told IPS.

“The BRIC nations hold substantial potential for encouraging tourism to South Africa, given that our conventional tourism markets were substantially impacted by the global economic crisis.”

Head of the South African Chamber of Commerce and Industry, Neren Rau, says South Africa needs to secure every opportunity to promote higher levels of tourism to the country. Credit: John Fraser/IPS

But since 2012, South Africa has seen successful growth in the industry, with rates at twice the global average, according to Rau.

As the industry expands, India, China and Brazil are important tourism targets, chief executive of South African Tourism, Thulani Nzima, told IPS.

“The organisation invests significantly in growing awareness of destination South Africa in those markets, and in implementing marketing campaigns there,” he said.

Fellow BRICS member Russia, meanwhile, remains somewhat sidelined in South Africa’s ambitions, largely because of the long distance and the lack of no direct air links between the two countries.

The upcoming BRICS summit hosted in Durban, South Africa, in March will provide an opportunity to showcase the country as a tourist destination, while also bringing immediate benefits to the tourism industry, Nzima suggested.

“It will enjoy significant editorial coverage in the BRICS nations, raising awareness about South Africa’s capability, beauty, accessibility and warm, welcoming, friendly culture towards tourists.”

The latest figures for tourism arrivals in South Africa show healthy growth from the other BRICS nations for the first nine months of 2012.

Tourist arrivals in that period showed a 51.7-percent increase of travellers hailing from Brazil, and a 62.8-percent rise in Chinese tourist. Indians and Russians, meanwhile, increased their travel to South Africa by 16.8 percent and 34.6 percent, respectively.

However, the combined BRICS travel into South Africa still does not surpass that of United Kingdom, which highlights the growth potential still to be realised in the emerging markets.

The Zimbali Lodge, a popular international tourist destination in KwaZulu-Natal Province, South Africa. Credit: Nalisha Adams/IPS

Michael Tatalias, the chief executive officer of the Southern Africa Tourism Services Association, SATSA, told IPS that the first step to boosting tourism between BRICS partners is by increasing air links – which will be good not just for tourism, but for trade as well.

“An initial key goal for South Africa would be to become an airline hub between South America and Asia,” he said.

He added that currently about one million people a year travel from South America to Asia via the Middle East and Europe and that South Africa could divert some of that air traffic.

“Where air links open up, business travellers follow, deals are made, and cargo and sea trade follows,” he said. “With increased air access, business and trade increases. But crucially, tourism gets economy class seats to use for leisure travel.”

“The tourism ministry has spoken strongly about the importance of opening the skies into Africa,” agreed Nzima. He added that making the visa application processes as easy as possible, and removing as many impediments as possible to visiting South Africa are crucial additional steps that are “receiving considerable Government priority”.

South Africa’s Tourism Minister Marthinus van Schalkwyk visited China in January to see how recent growth in tourism can be sustained, while emphasising the importance of this BRICS partner for tourism development.

“We are confident of continuing our exciting growth in a market set to become one of the world’s most important tourism markets in the future,” he said.

Van Schalkwyk has worked for a number of years to create a tourism component of the G20, called the Tourism-20 or T-20, a working group of the tourism ministers of the G20 nations.

“Similarly, we should work towards a T-5 grouping, to reflect the five partners in the BRICS,” suggested Tatalias. “This would focus on resolving bottlenecks and hindrances.”

Rau, meanwhile, warned that promoting tourism in South Africa faces some of the challenges as the promotion of the country itself.

“If tourism growth is to be sustained, it must be supported by strong redress of the inhibitors to tourism growth in South Africa, such as perceptions of rampant crime and widespread violent protest activity, as well as insufficient promotion of the facilities that South Africa has to offer,” he warned.

Now the challenge for the BRICS leaders is to move beyond the exchange of pleasantries – to a far greater exchange of tourists.

Maite Nkoana-Mashabane, South Africa’s Minister of International Relations and Cooperation has praised the Chinese for their decisive role in gaining South Africa membership to the BRICS club. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG , Feb 15 2013 (IPS)

African nations and other emerging countries are expected to soon outperform the developed world, and South Africa wants to take advantage.

South Africa is planning to improve business dynamics within the Brazil, Russia, India, China and South Africa (BRICS) club of emerging national economies, and also with other African nations, at the BRICS’ first African summit in Durban next month.

“Emerging and developing economies are already playing an important role in the global economy,” the chief executive officer of South Africa’s First National Bank (FNB), Michael Jordaan, told IPS.

“The Chinese economy is already the second largest in the world, with a nominal GDP above seven trillion dollars, (and) growing at between seven and eight percent,” he said. “There are also several emerging market economies that have GDP levels above one trillion dollars, including Brazil, Russia, India and Mexico.”

He added, “The outlook for advanced economies, in contrast, is mediocre, given that they are largely encumbered by high debt burdens.”

Jordaan said that there are opportunities at the summit for promoting some of the innovative banking products that South Africa has developed.

“For example, mobile cash and banking facilities, such as cell phone banking, have great potential in Africa and other developing countries – as this technology is most applicable in emerging markets,” he explained.

Preliminary meetings

Preparations for the summit are accelerating: Russian Foreign Minister Sergey Lavrov travelled to Pretoria earlier this week and met with Maite Nkoana-Mashabane, South Africa’s Minister of International Relations and Cooperation.

The two agreed that there are a number of important global issues in which the BRICS should co-operate, such as pushing for reforms in the United Nations, the International Monetary Fund and other global institutions.

Their Chinese counterpart, Foreign Minister Yang Jiechi, is slated to make a pre-summit trip to South Africa next week.

Nkoana-Mashabane has praised the Chinese for their decisive role in gaining South Africa membership to the BRICS club.

“I do believe that China’s key role in securing South Africa’s membership of the BRICS was the correct initiative to create a nexus between Africa and the BRICS,” she said.

“South Africa is deeply grateful for the role that China has played in this regard,” she added.

Taking Care of Business

When they attend the Durban summit, each of the BRICS leaders will be accompanied by a sizeable business delegation – and a lot of work is taking place behind the scenes to ensure that there will be productive business dialogues.

A big challenge for South African President Jacob Zuma and the other leaders will be to make it easier for business leaders, like Jordaan, to further shift their focus toward working with emerging nations.

Trade ministers from the five-nation club will hold a special joint session with business delegations from the member nations on the eve of the summit, and a permanent BRICS Business Council is due to launch after the summit.

“This business council will be a more permanent mechanism for business interaction,” Xavier Carim, deputy director general at the South African Department of Trade and Industry, told IPS.

But there has been concern in South Africa that many members of business delegations, who have in the past accompanied Zuma to BRICS gatherings, have been chosen because they are his close supporters, and not necessarily because their presence would help forge new business links.

Beijing-based South African business consultant and CEO of the Beijing Axis, Kobus van der Wath, has been part of the business delegations at two BRICS summits. However, he is not convinced that there has been enough value for the business delegates.

Business events staged on the fringes of past BRICS summits have not always been well prepared.

“I hope we can organise it well, to allow proper networking with a digital database of who is there, and then it could be very worthwhile,” he told IPS.

Jordaan said his bank and its parent Rand Merchant Bank (RMB) are already involved in India and China, but South Africa’s membership to the BRICS may help to strengthen these links. He welcomed efforts to give the BRICS a business backbone.

“We do believe that South Africa’s membership is important and will benefit our growing operations in these countries,” he said. “We support our government’s initiatives to create new avenues for growth via BRICS-related partnerships.”

However, Jordaan emphasised that while the BRICS relationship is important, Africa will remain his main external growth priority.

“We are strongly focused on growth opportunities across Africa as a primary strategy for the expansion of our banking services,” he stated.

Van der Wath suggested that China’s activities in Africa would be happening anyway – with or without the BRICS.

“China has certain objectives in global markets in terms of investment, trade and alliances – and the investments I have seen so far in Africa are not BRICS-related,” Van der Wath said.

“However, BRICS is helpful in networking, in government-to-government linkages,” he added.

According to experts, the Durban summit will be judged on its success in strengthening ties between the BRICS club and Africa.

However, the politicians will not be able to fully capitalise on these closer political ties unless they can also add a practical dimension to the relationship, by bringing BRICS business on board – something the South African hosts are working hard to achieve.

First National Bank’s CEO Michael Jordaan was forced to deny he had resigned after the ruling African National Congress took exception to bank ads criticising the government. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG , Jan 30 2013 (IPS)

Hindsight is a wonderful thing. Nonetheless, it is difficult to miss the irony in the following sentence from a news release, sent out by South Africa’s First National Bank on Jan. 17.

It reads:  “At 18:57, on 17 January 2013, FNB launched a new brand campaign with a live broadcast to South Africa. The broadcast carried a message from the voices we don’t often hear, the children of our great country. A message we believe will inspire the nation.”

It is debatable whether the nation was inspired, but certainly the governing African National Congress (ANC) party was incensed.

For, as well the messages from the children of South Africa in the advertisement itself, there were far more outspoken video clips posted by FNB on YouTube with children expressing strong criticism of government, and of one government minister – to which the ANC took strong exception.

On Friday Jan. 25, the bosses of FNB and of its parent company Rand Merchant Bank (RMB) were summoned to the ANC’s headquarters in downtown Johannesburg – which is just a few minutes stroll from FNB’s own headquarters.

The bankers apologised, fully aware that the ANC and the South African government at national, provincial and municipal level, is a multi-billion dollar customer of FNB.

The apology might have been intended to end the matter, but it didn’t. Controversy raged on.

First National Bank’s charismatic CEO Michael Jordaan was forced to deny he had resigned over the issue, and the bank still insists its campaign – entitled “You Can Help” – will continue.

As discussion has raged on the media and elsewhere, there has been debate about whether the criticism of the politicians by the children who appeared in the YouTube clips had been scripted.

The bank said the TV commercials were scripted, and the child actors were paid for these, but the more outspoken interviews which the bank posted on YouTube were not. These have been characterised by FNB as “research clips.” First National Bank has been keen to point out that its apology was specifically related to the YouTube clips, and that it stands by the TV campaign, which it does not believe is offensive.

However, the incident has highlighted once again the uneasy relationship between business and government in South Africa, and the extent to which business needs to tread carefully if it wishes to avoid irritating the ANC government.

The current clash has brought back memories of February 2007, when the then head of RMB Paul Harris was forced to axe an anti-crime advertising campaign because it was perceived by the politicians to constitute an attack on government.

Petrochemical and synthetic fuels company Sasol has also been at the receiving end of ANC anger for appearing to criticise black economic empowerment in South Africa, in a document which it filed with the New York Stock Exchange.

And there have been frequent tensions between the mining sector and ANC ministers, with London-based mining house Anglo American having been a target for particular criticism.

Helen Zille, the head of the opposition Democratic Alliance party, in a statement on Jan. 30 suggested that: “FNB buckled and withdrew the video clips after the ANC argued they could deter investment.

“That is deeply ironic. The ANC’s bullying of a private company, its apparent ability to influence state tenders, and its failure to understand the constitutional right of free speech, will do far more to kill investment than anything a child might have said in a YouTube clip.”

Zille suggested that the ANC put pressure on the bankers, by threatening to withdraw government business, a suggestion that was dismissed by ANC spokesman Jackson Mthembu.

“It is only people like her who have such a simple-minded approach,” he told IPS.

And FNB’s head of corporate communications Virginia Magapatona also shrugged off the suggestion.

“To date, it’s been business as usual,” she told IPS.

Jordaan himself was unwilling to continue discussing the issue when he was approached by IPS.

“After nine days of discussion on one advertisement, we consider the matter closed,” he stated.

Mthembu also insisted that the matter is now over, despite the continuing flurry in the South Africa media and social media.

“We are done,” he said. “The matter is closed. We have resolved the matter and we are happy.”

Pretoria-based businessman Mario Pretorius, who is CEO of JSE AltX listed telecommunications company Telemasters, told IPS that he believes there has been permanent damage to relations between business and government from the FNB-ANC clash.

“I think the ANC has over-reacted,” he said. “The constitution allows freedom of expression, but if there is something which breaches the law, the ANC should say what it is.

“If not, the law allows us the right to express our opinion.”

Pretorius suggested that following the apology from the bank to the ANC “the ANC now thinks it can get anyone to run away.”

He agreed with Zille that FNB has put its business interests above principle.

“I am appalled you can put the expediency of having (a government) account above principle,” he said.

“I think business is now on the back foot, and maybe in a permanent way.”

However, the head of the Johannesburg-based Brenthurst Foundation research and advisory body, Greg Mills, suggested that tensions exist elsewhere in Africa between governments and business.

“Of course this will happen elsewhere in Africa – as elsewhere in the world – but usually in those countries with autocratic systems, where governance and choice is subject not to law, but to political whim,” he said.

And when asked whether such a clash would have been as public elsewhere in Africa, he responded: “In some other countries, yes.

“But it’s also an indication of South Africa’s great strength in its free press, civil society and business community.”

There have been few signs of the debate dying down just yet, with the relationship between business and government in South Africa also being highlighted in the recent election of businessman Cyril Ramaphosa as deputy president of the ANC.

If he can provide an effective bridge between the politicians and business people in South Africa there may be fewer public spats.

And in the short-term, it is almost certain that business will tread more carefully, having seen once again how sensitive the Pretoria government is to criticism.

“There isn’t a complete understanding of how business operates,” said Neren Rau, the CEO of the South African Chamber of Commerce and Industry, a business organisation.

“What is sometimes lacking is an understanding of the objectives of business, the manner in which businesses are governed and performance-managed.

“I believe the ANC’s reaction could have been more restrained.  It would be foolish for FNB to compromise their relationship with a key client (government) so there can be little doubt that they had bona fide intent in eliciting views toward a better South Africa.”

Rau said that initially the clash has had a negative impact on relations between government and business.

“But it was positive in respect of how this was amicably resolved,” he added.

“The ANC at least is becoming sensitive to investor perception and business confidence, which was sometimes discounted in the past.  It will remain a positive outcome if business does not lose heart in continuing to pursue constructive engagement toward a better South Africa and if we can more actively engage on matters of investor and business confidence.”

South African Trade and Industry Minister Rob Davies announced plans to increase tariffs where there is scope for this on chicken imported from Brazil and other countries. Courtesy: Department of Trade and Industry.

By John Fraser
JOHANNESBURG, Jan 30 2013 (IPS)

South Africa has denied that it is taking a protectionist stance to protect its own producers against foreign competition, but says it is justified in boosting tariffs where this is allowed under international trade agreements.

Trade and Industry Minister  Rob Davies spoke to IPS in Pretoria about the current trade landscape and the challenges the country will face in 2013.

He recently announced plans to increase tariffs where there is scope for this on chicken imported from Brazil and other countries, a move that was questioned by some South African trade experts, who had expected measures just against Brazil.

Excerpts of the interview follow.

Q: South Africa is to host the BRICS (Brazil, Russia, India and China) Summit in Durban in March, and you have been preparing for this through meetings with some other BRICS Trade Ministers at the World Economic Forum in Davos? What are the big issues on which you are focusing?

A: There will be a World Trade Organization (WTO) ministerial meeting in Bali at the end of the year.

A process is going on about a small package of issues for agreement at Bali, starting with trade facilitation, which will be easier for developed countries to meet. Many developing countries have resource issues. There is concern in the BRICS group that this is not self-balancing – many developing countries may have to take measures, but what are the benefits to them in other areas?

There is also the Doha Round (a wide-ranging WTO negotiation which has been going on without conclusion for over a decade). The BRICS say the Doha mandate is still valid, while some forces see that agenda being surpassed by an agenda on trade facilitation.

Q:  Given the slow progress to date on the Doha Round, do you still see the WTO as relevant?

A: Through the WTO, there is a set of rules which are in place which are very important, and which set the parameters for any member country. As the negotiation of the Doha Round remains a slow task, the (WTO’s) dispute mechanism is becoming rather over-loaded.

I think there is an attempt to get developing countries to remove the space between their applied (actual) tariffs and bound rates (the higher tariffs which could be applied). The gap allows us space for implementing policy, and is something which was not in place in the 1930s.

Q: You recently announced that instead of imposing targeted anti-dumping measures against chicken imports from Brazil, you would apply a general tariff increase which would mostly impact those countries which do not have a specific free trade agreement with South Africa. Why this approach?

A:  This is an issue which is covered by WTO rules and there are quite tight rules. We imposed provisional anti-dumping measures and then did an investigation. Brazil indicated they had concerns, which seemed enough for them to go to a (WTO) dispute settlement mechanism. We put a team in place to look at this.

We were well aware the Brazilians were going to fight this all the way through, as they do not have any anti-dumping duties against their chicken exports and this could have become a precedent.

Who knows if we would have won or not? We looked at the impact of the provisional duty (which South Africa imposed early in 2012 against chicken imports from Brazil). It was not that local production took the place of allegedly dumped Brazilian chicken. It was other imports (that filled the gap). The issue is imported chicken from all parts of the world. There is space to increase (the general tariff) and this will probably deliver better results for South Africa.

Chicken on sale in a South African supermarket. South Africa’s major current trade spat is with Brazil and other nations over cheap chicken imports which local producers claim are threatening their livelihood. Credit: John Fraser/IPS

Q: Aside from the issue of Brazilian chicken, South African trade officials have said recently that tariffs may be increased on other imports. This is been interpreted as a move towards protectionism. How do you respond?

A: What we are saying is common sense. We haven’t set zero tariffs for everything across the world. We say there are ceilings on tariffs, but we never said tariffs can’t increase. With the onset of the recession, there are calls that we should use that space (between actual tariffs and the ceiling). We say protectionism is when you act against the rules, because the rules govern the status quo.

We haven’t seen a breaking of the rules, which has been a contribution to seeing that the crisis didn’t end in a great depression. We have seen a triple-dip recession in parts of the world – but that has little to do with tariffs.

Q: South Africa is hosting the BRICS Summit at the end of March.  What can we expect?

A: This is the first time we will have hosted a BRICS Summit in Africa, and we are building a relationship between BRICS and Africa. Our ambition is to take the establishment of the BRICS Development Bank further forward.

There will also be a Trade Ministers’ meeting, linked to a business forum.  There will be the launch of a BRICS Business Council to strengthen inter-BRICS relations. There will also be a BRICS’ co-operatives meetings. We are starting to define a programme of inter-BRICS cooperation.

We will use this as a platform for building cooperation with other countries, for example the African countries. The BRICS Development Bank isn’t just for the BRICS countries, but we also have an ambition to see it play a role in financing infrastructure in Africa, outside our borders.

Q: There is an overlapping organisation to the BRICS, known as IBSA (India, Brazil, and South Africa). Does the BRICS grouping make this smaller grouping irrelevant?

A: IBSA continues – there are some very important programmes. We have, for example, a strong set of co-operative agreements between small business agencies. These have been very valuable. The IBSA partnership was the basis on which we engaged in serious learning about industrial policy from Brazil, which was the basis of our own industrial policy action plan. This is not replicated in the BRICS.

By John Fraser
JOHANNESBURG, Jan 19 2013 (IPS)

A leading South African economist and investment strategist has warned that national priorities may be a more compelling factor influencing business decisions in the BRICS group of countries – Brazil, Russia, India, China and South Africa – than the prospects of increased market access through the alliance.

Chris Hart, economist and chief strategist of the Johannesburg-based asset manager, Investment Solutions. Credit: John Fraser/IPS

IPS correspondent John Fraser sat down with Chris Hart, economist and chief strategist of the Johannesburg-based asset manager Investment Solutions, to discuss his visits to two of South Africa’s four BRICS partners – Brazil and India.

Hart, together with his colleague and Investment Solution’s chief investment officer, Glen Silverman, is planning to visit China and Russia to better assess possibilities for South Africa’s membership in this club of the world’s leading developing economies.

The experts also plan to gather data on what drives investment among and between the BRICS members.

Excerpts from the interview follow:

Q:  What are you trying to achieve from these visits?

A:  We are trying to understand the emerging market investment landscape, and we are also trying to understand the relevance of the BRICS in the investment world. Clearly, the investment conditions in each of the BRICS countries needs to be understood, and we want to see what we can learn that is relevant to South Africa.

You won’t gain a full insight through desktop research, so our starting point is to explore conditions on the ground.  I won’t pretend that a single visit can give you a complete insight into a country, but it does give you a glimpse. We talk to business leaders, a number of specific companies, as well as economists, investment strategists and social analysts. And since our trip to India we are also seeing academics and policy makers, with plans to talk to geo-strategists on our visits to China and Russia.  We also look at conditions on the ground through slum tours – we don’t want a sugarcoated view. We plan to visit China in May, and Russia within a year after that.

Q.   What do you do with the information you gather?

A: We advise and feed back into our investment processes – on how to allocate assets. We have already increased our weighting towards emerging markets, from the developed countries. We also share our findings in formal presentations to our client base and to the asset management community in South Africa.

Q:  What have you discovered about business attitudes towards the BRICS group?

A:   If you ask a Brazilian company, the response is that it is absolutely irrelevant. In Brazil, language is a huge issue. Brazil is self-contained as a country; it’s huge. If you live there, you have little reason to speak anything other than Portuguese.  Your average Brazilian corporate still doesn’t have a full footprint within Brazil, so the complete focus is on (internal issues) – it’s very introspective.

It is very difficult for outside companies to compete because of the language and legislative complexity – there are a lot of barriers to entry.  BRICS is not relevant from a corporate point of view, with the one exception of the government, because they are involved in the establishment of a BRICS development bank.  The key question is: will business follow the political lead?

Q:  What about India?

A:  India’s policy is to move away from development banks, which are not as effective there. India is similar to Brazil with few companies having a full national footprint. An internal focus will keep Brazilian companies busy for decades, whereas in India they are quite open and accessible to global opportunities.  They will go where they can leverage their corporate strength in other countries, and in that sense they are much more entrepreneurial. They are more globally aware and focused than the Brazilians.

But when Indian companies look at global opportunities, BRICS is not relevant.  They are not trying to follow the political lead. Indian companies are not trying to enter Brazil because of BRICS – they would rather go to Kenya or Ghana, or even the UK.  Unlike companies in Brazil, Indian ones are diversified conglomerates, and will go into any business when they see an opportunity.

Q:   You talk of the concept of a “national scar”. What do you mean by that, and how is it relevant to BRICS?

A:   In South Africa, apartheid is our scar, and the redress of apartheid becomes relevant. Brazil’s national scar is inflation, and in a way it’s parallel to the German experience. Inflation is a fear because of the hyperinflation of the late 1980s and early 1990s.

In India it’s more complex. A businessperson’s scar is red tape and corruption.  However, your older civil servants cite colonialism as the national scar, and blame that for corruption. Academic types would cite poverty and inequality.  When it comes to policy makers, you can’t just site a business in an urban area without thinking of doing something in a rural area. National scars distort best practice and have an impact on policy making. They may be a more important deterrent to involvement with a BRICS partner than any political (consideration).

(END)

Excerpt:

South African Trade and Industry Minister Rob Davies speaking at the World Economic Forum. Credit: World Economic Forum/CC-BY-SA-2.0

By John Fraser
JOHANNESBURG, Jan 12 2013 (IPS)

As the five members of the BRICS group of emerging economies – Brazil, Russia, India, China and South Africa – tighten ranks and seek to expand their global influence, the inevitable trade spats have begun.

A decision last month by South African Trade and Industry Minister Rob Davies to pursue a general tariff increase on chicken imports in response to concerns that Brazil is “dumping” the product could also hit Argentina, a leading trade expert here has warned.

Duane Newman, director of the Johannesburg-based Cova Advisory, explained that Argentina and Brazil, both of which export significant quantities of chicken to South Africa, are the main countries without free trade agreements with Pretoria to protect them from the planned tariff hike.

“There could be some unintended consequences from Minister Davies’ decision not to target just Brazil with anti-dumping duties, but to raise the tariffs,” explained Newman.

Report reveals systematic ‘dumping’

An investigation of the chicken trade between the two countries from 2008 to 2010, conducted by the International Trade Administration Commission (ITAC), confirmed allegations that Brazil was dumping whole chickens and boneless cuts of chicken on the South African market.

The ITAC’s findings made a strong case for Pretoria to slap ‘anti-dumping’ duties on the South American nation.

According to the ITAC’s report, anti-dumping duties can be imposed when there is a price difference between sales in a producer’s own market and prices charged on exports, when there is material injury to producers in the importing country and when there is a causal link between the imports and the damage.

Duane Newman, director of the Johannesburg-based Cova Advisory. Credit: John Fraser/IPS

The report found that with regard to whole chickens, price undercutting by Brazil caused material injury to South African producers, a loss of market share and a loss of potential growth.

Similarly for boneless chicken cuts, the report found evidence of price undercutting, suppression of South African producers’ ability to increase their prices, and a drop in sales volume, output, market share and growth.

The investigtion found that between 2008 and 2010 whole chickens from Brazil accounted for 36 percent to 44 percent of South African imports, while boneless cuts took between 94 percent and 97 percent of the South African import market.

According to Francois Dubbelman of the specialist trade consultancy F.C Dubbelman & Associates, who acts as advisor to the South African Poultry Association, “At that stage Brazil was the largest exporter to the Southern African Customs Union (SACU) of these chicken products, causing SACU producers injury.”

“Thus the industry received no relief against the unfair trade from Brazil for at least five years – although ITAC found there had been dumping and material injury,” he added.

South Africa’s response

In January 2012, South Africa slapped provisional payments of between six and 62 percent on chicken imports from Brazil but failed to take the next step of imposing targeted anti-dumping duties on Brazil, shifting instead to a general imposition of higher tariffs on all chicken imports.

Newman called the decision a “rare” one, adding, “It will be interesting to understand the detailed reasons for the minister’s decision as it seems as if he is disagreeing with ITAC.”

Newman noted that the increase in general duties on chicken to up to 82 percent from the current 27 percent “will impact all imports of chicken, apart from (trading partners) with which South Africa has a preferential trade agreement like the European Union (EU), the European Free Trade Association (EFTA) and the Southern African Development Community (SADC).”

He said the countries that would be caught by the tariff increases include Brazil, Argentina and some Asian nations. There are existing anti-dumping duties against chicken imports from the United States into South Africa.

Some experts believe that Davies’ decision came in response to Brazil’s June 2012 complaint to the World Trade Organisation (WTO) about the provisional payments imposed by South Africa.

Had Davies opted to convert those provisional payments into anti-dumping duties, experts say, Brazil would have pursued its challenge through the WTO.

But Dubbelman dismissed this theory, arguing, “Countries go on a regular basis to the WTO with disputes. Brazil is known to follow that avenue on a regular basis, whether it has a foot to stand on or not.”

A more likley explanation, he said, is that Davies’ decision to spare Brazil from individual anti-dumping duties – announced in a letter to the ITAC on Dec. 21 –  was a strategic one, in keeping with the two countries’ joint membership in BRICS.

According to Dubbelman, Davies justified his actions on the basis of increased chicken imports from several countries, claiming that South African producers require a comprehensive response to deal with the intensified competition.

But South Africa’s shadow Trade and Industry Minister Wilmot James told the Business Day newspaper of Johannesburg that Minister Davies’ chosen strategy will not do enough to support South African chicken farmers.

“Instead of fighting the Brazilians for dumping chicken in our local and highly competitive market, Mr. Davies chose the soft and blunt option of hiding behind general tariffs without providing compelling factual reasons for his actions,” according to James.

Dubbelman warned that the real challenges facing South African poultry producers will remain unless some action can be taken against the EU.

He predicted that Davies will not impose as high a duty as the 82 percent that is currently allowed under international trade rules.

While some options cannot be pursued because of the trade agreement between Brussels and Pretoria, he added, there are provisions for so-called safeguard measures to be imposed on chicken imports from Europe, and he urged the minister to explore this possibility.

(END)

Smoke billowing out from a nuclear testing facility. Credit: National Nuclear Security Administration/CC-BY-ND-2.0

By John Fraser
JOHANNESBURG, Jan 8 2013 (IPS)

Not many nice things can be said about the apartheid regime in South Africa. It was racist, violent in the brutal oppression of many of its own citizens, and was despised around the world.

However, in the dying days of apartheid, the South African authorities took a step that has had major implications for the country and for the African continent: it scrapped its nuclear weapons programme.

“The first stage involved the dismantling of South Africa’s six complete (and one partially assembled) nuclear devices,” reported Greg Mills, who heads the Johannesburg-based Brenthurst Foundation, a research body that acts as an advisor to African governments.

“A decision to this effect was taken by then President F.W. de Klerk in February 1990, shortly after the release of Nelson Mandela from prison and the unbanning of the African National Congress, the Pan Africanist Congress and the South African Communist Party.”

South Africa acceded to the Non-Proliferation Treaty (NPT) on Jul. 10, 1991.  Seven weeks later, on Sep. 16, the country signed a Comprehensive Safeguards Agreement with the International Atomic Energy Agency (IAEA), allowing for frequent IAEA inspections of its facilities.

“South African authorities co-operated fully with the IAEA during the whole verification process, and were commended by the then director-general of the Agency in 1992, Dr. Hans Blix, for providing inspectors with unlimited access and data beyond those required by the Safeguards Agreement,” added Mills.

“The second step involved the scrapping of South Africa’s ballistic missile programme, which commenced in 1992, and took around 18 months.

“This process culminated in its admission to the Missile Technology Control Regime (MTCR) in September 1995, after the destruction of the last of its missile engines had been verified.

“The third stage involved the conclusion of SA’s biological and chemical warfare programme.”

Mills concluded that South Africa “thus occupies a unique position in the world as being the first country to have voluntarily dismantled its nuclear weapons capability.

“The (South African) experience does point to the importance of creating the right environment in which regimes can be made to feel confident enough to disarm and stay that way.”

While South African apartheid leaders’ actions were certainly worthy of praise – for once – there is some suspicion surrounding their motives.

Did they dismantle the country’s nuclear weapons because they believed in a vision of an Africa free of nuclear weapons?

Or was their motive more cynical? Realising that black rule was inevitable, did they dismantle South Africa’s nuclear weapons to keep them out of the hands of Nelson Mandela and his looming ANC administration?

Mills’ colleague Terence McNamee, deputy-director of the Brenthurst Foundation, wrote in the Johannesburg Star newspaper that the country that dismantled nuclear weapons “was not (current President Jacob) Zuma’s South Africa, but another country, an international pariah, mercifully now extinct.

“Zuma doubtless believes, like most of his senior colleagues who were active during the transition to democracy, that the people who built South Africa’s nuclear arsenal – the apartheid regime – destroyed it because they didn’t want the ANC to get their hands on it.”

He noted that de Klerk waited until March 1993 to tell the world of the dismantlement of South Africa’s nuclear weapons, and until that time “no one, not even Nelson Mandela, had been informed that the programme had been abolished (let alone that it even existed).”

While nuclear weapons no longer have a place in South Africa, or on the African continent, there is a growing expectation that nuclear energy will be required to help provide a growing part of the energy mix on the Continent.

“Nuclear power could help to answer the extraordinary energy backlog of African countries, where the continent produces about the levels of Spain, though with 20 times as many people,” Mills told IPS.

“But the concerns about the use of nuclear power in Africa go to the heart of the very reason why there is this backlog in the first instance: governance.”

Branding expert Jeremy Sampson believes the South African government received rewards for its decision to dismantle its nuclear arsenal. Credit: John Fraser/IPS

Branding expert Jeremy Sampson, executive chairman of the Johannesburg-based branding consultancy Interbrand Sampson, notes that in image terms the South African decision to scrap its nuclear weapons programme has boosted its moral authority on the issue of non-proliferation.

“The last couple of decades have seen a dramatic rise in the importance of brand and reputational issues,” he told IPS.

“This no longer applies simply to companies, products and services, but today embraces people, even countries.”

Questioning the real reason for scrapping South Africa’s nuclear weapons programme, Sampson speculates that the regime may have received rewards for this decision, which have not yet come to light.

“Did South Africa really develop a nuclear device, who helped them, was there a dummy run in the deep South Atlantic, and how would they have used it?” he wonders.

Sampson also suggests that South Africa’s decision to voluntarily given up its nuclear option raises many questions.

“Was the apartheid regime really desperate? Were sanctions biting? What was bartered, what guarantees were given, were slush funds really set up around the world for escaping members of the regime, as happened in Germany at the end of the Second World War?

“Has any other country voluntarily given up its nuclear option, which would have taken years and billions to develop?”

Sampson argues that whatever the rewards, they must have been “very, very significant. Military activity in Angola and the propping up of (Angolan rebel leader) Jonas Savimbi must have been high on the agenda.”

Frans Cronje, deputy CEO of the South African Institute of Race Relations, another Johannesburg-based think tank, suggests that the apartheid regime came under strong pressure from the West, and possibly from Russia as well, to renounce its nuclear weapons programme.

“The whole thing was dressed up as an honourable retreat from a nuclear Africa,” he told IPS.

“It is likely that Western countries and Russia as well had concerns about an independent African state having nuclear weapons.”

He also believes South Africa would today be stronger on the international stage if it had retained a nuclear arsenal.

“A nuclear African state would be taken more seriously and would have a stronger leadership role – it forces people to take you seriously,” he said.

“In leadership terms, renouncing nuclear weapons does the opposite – it reduces your influence in foreign affairs and international politics.

“If renouncing nuclear weapons grows your influence, others would be falling over themselves to surrender their nuclear arsenals.”

We may never know all the reasons why, but South Africa’s scrapping of its nuclear weapons did win moral benefits that have endured today.

It gave the country a voice globally on non-proliferation issues and the moral authority to develop its own nuclear electricity industry without attracting international suspicion, as has most recently been the case with Iran.

(END)

By John Fraser
JOHANNESBURG, Dec 28 2012 (IPS)

Africa presently only contributes about three percent of global GDP, with South Africa contributing around one percent.

And for the last five years the European Union has been negotiation Economic Partnership Agreements with the Africa, Caribbean and Pacific states, which will replace the current trade order.

Johannesburg-based independent analyst Ian Cruickshanks told IPS that he welcomed the prospect of South Africa facilitating a closer link between Africa and the Brazil, Russia, India, China and South Africa (BRICS) alliance.

“But Africa has the potential to advance faster than the developed world, provided that there is better access to capital, and this could be tapped through the BRICS industrial powerhouses,” he said.

Photos and captions: Kristin Palitza/IPS

Xavier Carim, deputy director general at the Department of Trade and Industry, said that ways must also be explored to get a better balance in trade with South Africa’s BRICS partners. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, Dec 27 2012 (IPS)

South Africa plans to boost links between Africa and its partners in the Brazil, Russia, India and China alliance at a landmark summit, which will be held in this country in March, Xavier Carim, deputy director general at the Department of Trade and Industry, told IPS.

“The summit theme is BRICS and Africa – a partnership for development, integration and industrialisation,” explained Carim of the meeting to be held in Durban, South Africa.

“We want to align our interests to support the integration agenda in Africa, not just to focus on access to resources.”

There have been suggestions that because South Africa is the smallest of the BRICS nations in terms of population and GDP, it therefore may not deserve a place in this club of leading developing nations.

However, one answer to this criticism is that South Africa can offer its BRICS partners better access to the mineral-rich African continent and hence plays not just a national role, but a regional one, in the BRICS.

The heads of government who will be attending the BRICS summit will be invited to a meeting immediately after the main event with the New Partnership for Africa’s Development (NEPAD) Steering Committee.

“This will be at presidential level and will help to link the BRICS with Africa,” explained Carim.

Pretoria-based international affairs consultant John Maré welcomed the plan to boost relations between Africa and the BRICS grouping at the Durban summit.

“This is important. In particular, it means South Africa is facilitating an Africa-China business dialogue.

“It is important that business deals ensure there is no exploitation of Africa by the Chinese,” he told IPS.

He emphasised the importance of China in particular for Africa, suggesting that the Asian giant is the key member of the original BRIC grouping from Africa’s perspective.

“The BRIC grouping invited South Africa to join, making it the BRICS, as we are seen as the most suitable gateway to Africa,” he said.

“If there is this emphasis on Africa at the Durban summit, it will mean South Africa is playing the role everyone assumed we would play when we were invited to join.”

Maré suggested that the BRICS should seek a new dialogue with Africa along the lines of this continent’s existing one with the European Union (EU).

“The EU has a specific dialogue with Africa, through the African Union Secretariat,” he noted.

“This linkage between NEPAD and the BRICS could be a mirror image of that – and would give the BRICS a relationship with Africa which neither the United States nor Japan has.

“I am sure this Durban meeting will be the first of a regular dialogue.”

Johannesburg-based independent analyst Ian Cruickshanks also welcomed the prospect of South Africa facilitating a closer link between Africa and the BRICS.

“I welcome any extension of South African influence in global economic and political groupings,” he told IPS.

“The BRICS is seen as a new vibrant group with political and growing economic clout, access to capital, able to influence new fixed investment in Africa – which is the last frontier in exploitable energy and industrial commodity reserves.”

Cruickshanks noted that Africa presently only contributes about three percent of global GDP, with South Africa accounting for around one percent.

“But Africa has the potential to advance faster than the developed world, provided that there is better access to capital, and this could be tapped through the BRICS industrial powerhouses,” he predicted.

He noted that South African resources are already significantly exploited, but questioned whether shale oil might provide new energy reserves, with the possibility of these reserves being developed through partnerships with BRICS partners, with export potential to the rest of Africa.

“South Africa’s advanced financial sector could provide the basis of a gateway to Africa for the BRICS, bringing a huge economic boost, and contributing to funding President Jacob Zuma’s promised 900-billion Rands in infrastructure development plans,” said Cruickshanks.

In another development, Carim said that there was work underway to try to anticipate and defuse trade friction within the BRICS.

He gave examples of applications for South African anti-dumping duties against chicken imports from Brazil and against paper imports from China.

“These things do come up, and it’s inevitable when you see how our trade is growing,” he explained.

“The more you trade, the more frictions – it’s a normal part of the relationship.”

However, he said that in dealing with BRICS partners “we are looking at ways of taking the sting out of these matters, before they happen.”

Carim insisted that companies which believe they are the victims of dumped goods – goods sold in a foreign market at lower prices than they are sold domestically, and which do damage to foreign rivals – do have the right to apply to their governments for protective measures.

He said that ways must also be explored to get a better balance in trade with South Africa’s BRICS partners.

“When South Africa’s imports go up, there is an impact on our domestic industries,” he argued.

“There has to be some way to alleviate the pressures, to find outlets for our exports and to find ways to support our exports – such as wine to Brazil.”

However, Carim said that the conditions are not yet ripe for a Free Trade Area among the BRICS nations.

“No one is talking of a Free Trade Area (FTA), because with an FTA you open your markets, and you can lose sectors,” he explained.

“India is vulnerable with its agriculture, and if you look at manufactured goods, the Chinese are extremely competitive. Meanwhile, Brazil is extremely competitive in agriculture.

“You run risks from a free-trade perspective.”

He emphasised that there is a lot of scope for the BRICS nations to learn from one another, and gave the example of the ways in which Brazil has an effective development finance institution – from which South Africa’s Industrial Development Corporation can learn lessons.

Meanwhile, the Chinese and Indians are good at developing Industrial Development Zones – an area in which South Africa has yet to excel.

“We should look at sharing experiences, rather than destructive competition,” Carim concluded.

Peter Draper, one of South Africa’s leading experts on international relations and trade, says that since the BRICS emerged IBSA has slipped below the radar. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, Dec 24 2012 (IPS)

China’s presence in the leading developing nations alliance of Brazil, Russia, India and China has given the bloc an advantage that another developing nations club, India, Brazil and South Africa, has hitherto been lacking, according to Peter Draper, one of South Africa’s leading experts on international relations and trade.

“There seems to be substantial business interest in the BRICS, which has perhaps ironically become a marketing label for each member state government to use to propel trade and economic ties among their respective business communities,” Draper, a senior research fellow at the South African Institute of International Affairs, who just returned home from a series of G20-related meetings in Moscow, told IPS.

Excerpts of the interview with IPS follow:

Q: Is it commerce and economics, or mainly politics, which was behind the creation of IBSA and the BRICS?

A: Politics is the primary driver of both. IBSA was established with the express purpose of lobbying for United Nations Security Council seats for each member. Along the way it has morphed into broader foreign policy and, of course, economic realms. The fact that each of its members is a significant democratic developing country power gives it an extra “glue”, but it is not obvious to me that this can sustain the grouping.

Indeed, there is a view that one of China’s principle aims in supporting South Africa’s BRICS membership was to undermine IBSA, thus bringing each country closer to its authoritarian/state capitalist mode of governance. Having said that, I think that the principle driver of the BRICS is geo-economic, particularly the reform of the international financial and trade systems.

Q: Do we need both IBSA and the BRICS, and are they sustainable?

A: From a South African point of view I think we do. The discussion among democratic developing states is important; otherwise we risk being too influenced by the big Eurasian authoritarian powers of China and Russia.

Geographically we are also closer to these two countries – India and Brazil – and we are in some currently small measure well placed to facilitate trade and economic links between ourselves. In other words, we have more in common with India and Brazil than with Russia or China.

But leveraging China’s weight in particular, in international geo-economic discussions, is a good goal to aim for even if it is challenging to deliver in practice. Hence that is where I would push the BRICS discussion.

Q: What is the next step in the evolution of either or both blocs? A move to a Free Trade Area, or the establishment of a full-time secretariat?

A: Neither. I think they will both remain informal groupings for the foreseeable future, coordinated by member state governments. In this light I wouldn’t call them “blocs” per se, rather “clubs” or “groupings” – to convey their informal and non-binding nature. More like the G7 or G8 in design.

Q: Do you foresee greater coordination of policy, and thus negotiation clout by these developing nations, in global fora on economics, the environment and so on?

A: There is already quite a lot of coordination on the international stage, with varying degrees of success. I expect this to continue, to the extent that key targeted organisations, such as the UNFCCC (United Nations Framework Convention on Climate Change) and the WTO (World Trade Organization), or groupings, and especially the G20, are actually advancing.

Q: Do you think there is any conflict between South Africa’s relationships with other leading emerging markets and its ambitions in Africa?

A: If the primary focus is external economic diplomacy, as I described earlier, then not really. In fact, SA can leverage its relationships with these powers – especially China – to support African development and even moderate its partners’ behaviour at the margins. At the business level there is obviously substantial competition, but also an emerging set of partnerships oriented towards African markets, such as the relationship between South Africa’s Standard Bank and China’s ICBC (Industrial and Commercial Bank of China).

Q: Is much notice being taken in Brussels, Washington and Tokyo of the BRICS and IBSA?

A: The BRICS have attracted a lot of attention, much of it deeply sceptical. IBSA attracted considerable attention when it was formed, but since the BRICS emerged it has slipped below the radar, in my view. Obviously any formation that includes China will be closely scrutinised in the West.

Q: You have just returned from Moscow. What is your current assessment of Russian backing for the BRICS? 

A: I get the sense that they take the BRICS seriously, and they see value in the BRICS for coordinating policy in international negotiations and as a way to support efforts to replace the dollar in global transactions. However, I don’t see them supporting a BRICS Development Bank, which has been suggested, as they have already set up a Eurasian Development Bank, and their reserves are being dedicated to that. When it comes to big, grand projects, BRICS has its limitations.

The port of Pecém in Brazil's impoverished Northeast region received a large order to unload and store cement factory equipment imported from China. Credit: Mario Osava/IPS

By John Fraser
JOHANNESBURG, Dec 19 2012 (IPS)

The five leading developing nations grouped in the BRICS alliance – Brazil, Russia, India, China and South Africa – are planning to intensify efforts to collect accurate trade data, so they can get a better picture of trade flows.

The exercise will help with economic planning, and will give improved insight into the economic links between the five members of the club.

“We can never agree on what our trade is,” Xavier Carim, deputy director general in South Africa’s Department of Trade and Industry, told IPS.

“We collect statistics differently, and we will seek to see why they don’t match. It’s a technical exercise.”

The statistical review is expected to be given a boost at the BRICS summit in Durban in March 2013, which will be attended by heads of government and economy ministers from the five member nations.

“Obviously it is always good to have better data,” Pretoria-based economist Dawie Roodt of the Efficient Group told IPS.

“The better the data, the more efficiently economists can identify trends – and the better they can advise on policy.”

Another leading South African economist, Mike Schussler of economists.co.za, agreed on the need for accurate data.

Leading South African economist, Mike Schussler of economists.co.za, agreed on the need for accurate data in the BRICS alliance. Credit: John Fraser/IPS

“You must have proper data,” he told IPS. “If you give advice based on data which is wrong, this will have led you to the wrong conclusions.”

He gave the example of South Africa’s trade deficit with China, which appears larger if Beijing’s data is used, and smaller if based on South African numbers.

“Meanwhile, our surplus with some African trade partners may be bigger than the records show,” Schussler suggested.

“The South African Reserve Bank needs accurate data when it is deciding what to do about interest rates.

“It is only fair that we look at data from both sides.”

A South African trade expert, who asked not to be identified because he is not authorised to speak to the media, told IPS that one reason for differences in the numbers may be because there is an incentive to undervalue imports, and to boost the value of exports.

“The customs value of a shipment being imported is the trigger for the import duties which you pay,” he said.

“Therefore there is a strong incentive to under-declare the value of your goods, because you will then pay less duty. Say the goods are worth 100,000 dollars and you declare their value at 50,000 dollars. You pay only half the duty.”

He noted that while most countries have import duties on goods which arrive at their borders, there are far fewer export duties on goods leaving a country.

“As a result, customs authorities pay less attention to exports, and indeed some countries may wish to inflate the value of their exports, as this gives them the appearance of a better trade balance.

“And some countries pay export incentives, which are based on the value of the goods, and this means there is every incentive for the exporter to make that value as high as possible, to maximise the incentive. There tend to be very few checks.”

The trade expert said that when government officials are looking at trade data, there is a standing joke that if the numbers tally exactly, something must be wrong.

“But there are ways of getting a more rounded view of what is going on,” he argued. “What you can do is look not just at the trade statistics but at the flows of money as well.

“It is the job of a Central Bank to look at money flows, while the country’s statistics department will look at the trade flows.”

He said that even if all trade data is collected rigorously, there is still scope for legitimate differences between the data in two trade partners.

“In South Africa we value goods based on a shipping term Free On Board (FOB),” he noted.

“We are one of only a handful of countries to do this. In most countries around the world, the value is calculated on the term Customs, Insurance, Freight (CIF). You can’t assume you will get the same result from these two different methods, as CIF will invariably be larger than FOB.”

Carim said that as well as looking at better coordination of trade data, BRICS governments are working on other initiatives. These will be discussed at a meeting of trade and economy ministers, which will take place alongside the main BRICS summit in Durban.

He said there will be a discussion of areas of “inter-BRICS collaboration, with coordination in multilateral fora such as the G20 and the WTO.”

There will be a discussion on how to promote trade.

“Our trade with all the BRICS is growing, especially with China and India,” said Carim. “Trade with Brazil and Russia is off a lower base.”

He said South Africa tends to export minerals and commodities to its BRICS partners, and would like to diversify this profile “with higher-value manufactured goods.”

Discussions at the summit are also expected on customs cooperation, support for small business, and boosting investment.

While the BRICS grouping has no secretariat or formal structures, it is clear that efforts are underway to give an economic and trade backbone to the club, and one test of the success of the Durban summit will be the extent to which concrete measures on all this can be put in place.

South African trade lawyer Emile Myburgh, of Johannesburg law firm Bowman Gilfillan, has not detected much response from the Brazilian and South African companies with which he deals. Credit: John Fraser/IPS

By John Fraser
JOHNNESBURG, Dec 17 2012 (IPS)

Politicians in the leading developing nations have been active in boosting mutual ties, as one way of counterbalancing the influence of the developed world. But the economic success of the Brazil, Russia, India, China, and South Africa and the India, Brazil, and South Africa groupings will depend on the extent to which businesses take advantage of the new opportunities which are being created.

South African trade lawyer Emile Myburgh, of Johannesburg law firm Bowman Gilfillan, has not detected much response from the Brazilian and South African companies with which he deals.

“I have not seen any evidence or heard any of my clients say that business among BRICS countries is any easier than with non-BRICS countries,” he told IPS.

“Philosophically one might think the countries might promote business or attempt to attract more investments from fellow BRICS countries, but so far the practice does not show that.” 

Myburgh noted that the challenges of conducting business between Brazil and South Africa are numerous, “but fortunately they are not insurmountable.

“The language issue is always important, but it is becoming less of an issue as a new generation of (Portuguese-speaking) Brazilians, who are fluent in English, enter the market.

“Brazilian tax and compliance are still major issues for South African investors, just as for any other foreign investor, but with business opportunities abounding many companies face up to the challenge and do their best to adapt.”

He has observed that South Africa presents its own problems to Brazilians.

“The first one is unnecessary hurdles put in place when Brazilians apply for work permits to work in South Africa,” he complained.

“The South African Department of Home Affairs has an unfortunate tendency to impose internal requirements for work permits which are not published and not based on law, and then to turn down valid applications for work permits.

“This is a political issue because the Department of Home Affairs seems to be under the impression that, by being unduly difficult with work permits, they protect South African jobs.”

However, he warned that the reality is that these practices destroy South African jobs “as the disgruntled investors would rather not hire a South African, invariably citing the same reason each time: the lack of capability and of suitable South African candidates.”

Two of South Africa’s regional neighbours – Angola and Mozambique – share the Portuguese language with Brazil, and Myburgh suggested that it is not surprising that “Brazilians do more business with Angola and Mozambique – not only because of the language, but because there are more opportunities there.

“Brazilians have traditionally invested strongly in infrastructure projects in those countries, and there are fewer infrastructure opportunities in South Africa than in Angola and Mozambique.

“However, Brazilian companies do invest heavily in other non-Portuguese speaking African countries, like Ghana, the DRC, Nigeria, and Tanzania, so language is definitely not the only factor,” he said.

Myburgh concluded that in future a county’s membership of the BRICS or IBSA clubs may affect where businessmen choose to form partnerships. “This may change in the future, but it is regrettably not the case today.”

Johannesburg-based consultant on developing nations Martyn Davies agreed with Myburgh that to date the business element of South-South partnerships has yet to reflect the more advanced political relationships.

“I believe these loose associations may offer benefit but most often – and due to the disconnect between business and the state – these opportunities are insufficiently exploited,” Davies, the CEO of the Frontier Advisory consultancy, told IPS.

“IBSA is primarily designed as a south-south developing grouping focused on trade liberalisation. With the prominence of the G20 and BRICS, it has lost its lustre somewhat.

“Also, without China being part of the grouping, IBSA does not have the necessary clout to drive through its policy proposals.”

Davies reported that the BRICS grouping is “undoubtedly generating the most interest and excitement amongst our clients.

“They are aware and interested, but while the macro-economic enabling environment of these emerging-market associations is obvious, the practical benefits to business are not always that apparent.

“There has been a great deal of hype around BRICS, which is generating excitement, but beyond the realm of the state and state-owned enterprises, private business is not easily able to leverage the geopolitics for commercial advantage,” he said.

Davies called for far greater and closer connections to be made between the business communities of each BRICS member state.

Johannesburg-based business leader Neren Rau, who is the CEO of the South African Chamber of Commerce and Industry, agreed on the need for more work in exploiting the opportunities presented by the BRICS and IBSA alliances, and he complained that there has not been enough strategising to date.

“The chamber’s concern is that South Africa did not have a defined strategy going into these relationships,” he told IPS.

“The securing of South Africa’s standing within these arrangements was considered as an end, or victory, in itself. For South African Business to leverage real value, an established strategy to support South African business within these arrangements would be required.

“That being said, membership of these arrangements does create a platform, which would have otherwise not existed, for businesses which seek to pursue opportunities with other member countries.”

Davies suggested that as the BRICS grouping becomes more institutionalised, more opportunities will emerge for private companies.

South Africa is hosting a BRICS summit meeting in Durban next year, and Davies said there will be a business forum for approximately 250 companies from the BRICS nations, with 50 firms from each of the BRICS members.

“There will be a great deal of media interest in the outcomes of these business discussions and the sizeable deals that will be announced by the attending heads of state of each BRICS country,” he predicted.

“I notice a great deal of interest amongst the Chinese business community in the BRICS meeting, buoyant interest from India and Brazil and perhaps less interest coming out of from Russia.

“Arguably, South Africa is embracing the BRICS meeting with the most enthusiasm.”

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.

South Africa's BRICS positioning should be an immediate and massive boost to the wine industry. Credit: John Fraser/IPS

By John Fraser
JOHANNESBURG, Dec 4 2012 (IPS)

South Africa and China are partners within a club of leading emerging markets, and it would seem natural that exports of South African wine to the Chinese market should be surging.

However, there is a feeling within the wine industry that not enough of the right support is being made available by the authorities.

Governments have made the political move to form the Brazil, Russia, India, China and South Africa (BRICS) alliance, but it could be argued that they should also be working just as hard to ensure that trade grows alongside political activity.

“South Africa’s BRICS positioning should be an immediate and massive boost to the wine industry – but it isn’t even felt as far as I can see,” warned Mike Ratcliffe, owner of the Warwick wine estate in Stellenbosch, in the heart of the Cape Winelands.

“An optimist might point out that there has been an increase in the number of litres of wine sold to China, but this would be misleading, as there is very little in the way of solid branded product with a reasonable expectation of sustainable growth.

“The majority of South African wines are priced at the cheap end of the pricing spectrum – giving rise to a risk of low-end perception formation, and doing damage to South Africa’s quality reputation,” he told IPS.

Ratcliffe was dismissive of the current activities by South Africa’s Department of Trade and Industry (DTI) in boosting wine exports to China, and he argued that instead all efforts should be focused through the industry export body: Wines of South Africa (WOSA).

Mike Ratcliffe, owner of the Warwick wine estate in Stellenbosch,says that the majority of South African wines are priced at the cheap end of the pricing spectrum – giving rise to a risk of low-end perception formation. Courtesy: Mike Ratcliffe

“The DTI -sponsored trips to the Chinese market are poorly planned, poorly received, oft mocked by Chinese importers, and what I would consider an irrational use of state funds,” he complained.

“The DTI should be providing these funds to WOSA, who are professionally involved in specifically promoting the wine industry, and would be able to ensure that the funds are effectively and efficiently utilised.”

Cape Town-based TV chef and wine consultant Michael Olivier told IPS that there must be a more coordinated effort among all the South African role players for better sales of South African wine in China.

“I would hope that BRICS would assist, but it takes consistent marketing to break through,” he stressed.

“I think the industry has the clout, separately rather than collectively. WOSA needs to put their oar in too.”

Ratcliffe is worried that the industry “has yet to open a Chinese office, appoint a Chinese representative or commence any kind of effective media or marketing campaign in China.

“This ridiculous and laughable state of affairs is not entirely due to a lack of political will, but mainly due to a lack of funding.

“Generic export marketing funds should be forthcoming from Provincial and National coffers to support a labour-intensive industry.”

Johannesburg-based branding consultant and wine writer Jeremy Sampson agreed that the South African government’s support for the wine industry is not enough, and is not in evidence.

He stated: “Apparently they are busy, but where is the evidence?”

Sampson told IPS that there must be more imagination in promoting exports, and pointed to the growth in auctions of premium wine in Hong Kong, saying this is one platform which should be better explored.

Mike Ratcliffe remained convinced that exports to China can and must be boosted.

“For South Africa to be a recognised as a world-class wine producing nation, we have to have international exposure,” he explained.

“South African wine has the ability to be an effective national marketing tool which is positioned on the top wine lists of the world and on every supermarket shelf in the world.

“What better way to get a little piece of tangible South Africa to the world effectively and cheaply.”

Ratcliffe is convinced that the rewards could be massive, as China has virtually unlimited potential as a market for wine.

“Demand is enormous, interest in SA wine is untainted by historical perceptions, and quality is revered,” he said.

“South Africa has a unique opportunity to cash in on this demand and it would not take a massive stretch to achieve this.”

However, he said that South African wines have failed to make significant inroads into the United States “and we must be wary of missing and wasting the Chinese opportunity. Unless something changes, we will allow all of our competitors to bypass us in China.”

This view was shared by Sampson.

“The Chinese market is huge, and everyone else is there already,” he noted.

One challenge arises because there are hundreds of different South African wine producers and brands, but Ratcliffe argued that this is not unique to his country, and should not be a barrier to success.

“There are only a handful of South African winery operations that are sufficiently organised and sufficiently scalable to take advantage of the Chinese opportunity,” he argued.

“It should be these companies who enter China and create a beachhead which the rest of the industry can use as a platform.”

South African wines do not currently benefit from the advantageous import duties that many of the country’s competitors have negotiated through their free-trade agreements with Beijing, with Ratcliffe noting that, for instance, Australian wine exporters pay far lower duties than those from South Africa.

“The difference in import duties paid by South African wine compared to Australian wines is shocking and embarrassing,” he protested.

The vista of Porto Alegre in Brazil. Indonesia and Turkey may be asked to join BRICS, the alliance of leading emerging nations. Credit: Alejandro Arigon/IPS

By John Fraser
JOHANNESBURG, Nov 20 2012 (IPS)

Will the BRICS expand into the BRICSIT?

One expert on emerging markets believes this will happen, with the BRICS nations – Brazil, Russia, India, China and South Africa – extending invitations to Indonesia and Turkey to join the club, as it expands its footprint into new regions.

“I was in Moscow recently and there was talk of the BRICS expanding to the BRICSIT, with the new members being Indonesia and Turkey,” Martyn Davies, the chief executive officer of Johannesburg-based emerging markets consultancy Frontier Advisory, a leading research, strategy and capital advisory firm that specialises in emerging markets, told IPS.

“There are sound geo-political and geo-economic reasons for this.”

He outlined why Turkey and Indonesia would be best placed to be at the front of the queue of potential new members, by explaining that an Indonesian addition to the BRICS alliance would extend the club’s reach to Southeast Asia, while Turkey would also add geographical diversification.

“There would be no regional conflict with the current membership, as Russia is the only current BRICS member which straddles more than one region (Europe and Asia),” he suggested.

And he noted that the BRICS group is an alliance which has no elaborate secretariat or infrastructure.

This would mean new members could be speedily admitted – as South Africa was in 2010 – by a consensus among existing BRICS members, rather than by time-consuming negotiations.

“There is no prescriptive process; it is easy to do this,” said Davies.

This would be in strong contrast, say, to admitting a new member to the European Union, where candidates have to sign up to a raft of existing legislation, and need to win the formal approval of the European Parliament and of national assemblies.

Analyst Chris Gilmour of ABSA Investments, the investment and wealth arm of one of South Africa’s largest banks, told IPS that the current South African government has made relations with other emerging nations a priority.

“I see the BRICS becoming a central plank of South Africa’s foreign policy,” he stated.

“South Africa in isolation is too small and insignificant to make an impact globally, but allied to countries with similar interests it can make an impact.”

However, he cautioned that there are still questions about South Africa’s credibility as a BRICS member.

“One danger I see is South Africa’s ability to remain in BRICS, as it is a bit of an impostor – a developed economy with high unemployment,” Gilmour argued.

“Our growth rate compared to other BRICS countries is very low, it’s utterly derisory. So we have a long way to go to justify our inclusion in this grouping,” he said. South Africa’s GDP growth is expected to be below three percent for 2012.

Davies argued that there has been a “dramatic shift, real or perceived” in South Africa’s foreign policy in favour of closer ties with emerging nations, since Jacob Zuma took over as president from his predecessor Thabo Mbeki.

“Mbeki was very foreign policy-focused as head of state,” he said. “He was always very comfortable in Washington DC, or London or Paris or Tokyo, but less so in the developing world.

“Africa and the developing world were relatively neglected.”

In contrast, Davies observed that Zuma is “much more comfortable” among colleagues from emerging and developing nations.

“This is driven by South Africa’s relationship with the Chinese, which is the most important bilateral relationship for South Africa inside the BRICS grouping,” he said.

He suggested that there is a more comfortable ideological fit for this since the most recent global economic crisis, which has hit the credibility of free markets and made it more natural for South Africa to align itself with China and Russia.

“The BRICS are the first tier of emerging markets, and represent the new global reality,” Davies stated.

South Africa is to host the next BRICS summit in Durban in March 2013, and Zuma is expected to use the occasion to dispel any doubts about his country’s place in the grouping.

There may also be some progress at the summit on the existing economic initiatives which have been launched by the BRICS.

The most elaborate of these is the concept of a BRICS bank, which could involve a pooling of foreign reserves to support a fund for the BRICS nations themselves and for other developing nations.

Davies suggested this could act as a “counterweight to the International Monetary Fund.”

The summit would also be likely to review progress on the cross-listing of stock market indices among the BRICS nations.

Additionally, there is the prospect of progress on a currency swap initiative.

This is a Chinese idea and could mean that trade between BRICS members would take place without using dollars or euros, funded instead by the currencies of the BRICS bloc.

Or the BRICSIT bloc, should Indonesia and Turkey be admitted any time soon.