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.

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'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.