Is the BRICS relationship equal?

Jeanette Clark | 2013-03-26 15:07:46

Busa president highlights skewed balance of trade; Minister of Trade urges for value-add.

DURBAN - There is no denying that trade flows between the BRICS countries have picked up substantially in the last decade.  South African Minister of Trade and Industry Dr Rob Davies highlighted this growth in trade during the fourth BRICS Business Forum on Tuesday, where trade and industry ministers and business representatives from all five nations were present. He said that South Africa has seen an increase of 11.6% in total trade with Brazil, Russia, India and China in the last year.

“This was actually a bad year,” Davies stated, as the increase for the previous year was around 27%.

Davies said that his department was currently tracking 31 projects from BRICS countries that would amount to about R12.6bn in investment.

However, simply using growth in total trade can hide all manner of sins - as the balance of trade is definitely skewed in favour of the first four letters of the acronym. Trade statistics coming in from the South African Revenue Service for 2012, looked like a horror story for those who prefer balance in the order of things, with the cumulative deficit for 2012 at R117.7bn, compared with only R16.9bn in 2011. A lot of this can be ascribed to some of the country’s major export destinations (Europe) struggling with sluggish economic growth, but that is why exports to the fast-growing BRIC partners could be beneficial.       

“South Africa remains the most open economy within the BRICS group,” Busniess Unity South Africa (Busa) president Jabu Mabuza told the delegates, by way of explanation of the balance of trade situation. He also stated that the export basket mix was not ideal for South Africa.

When looking at the BRICS countries, it is clear that there are some “resource-needy” countries (a term used at the forum by Naina Lal Kidwai – president of the Federation of Indian Chambers of Commerce and Industry), while others are rich in resources.

Ndaba Ntsele, president of the Black Business Council of South Africa, clearly showed this when he mentioned that South Africa is the number one producer of platinum, chrome, vanadium and manganese in the world. If South Africa does not engage in beneficiation of these minerals, however, many of the value-added products are simply imported again from the buyers of the original exported resources.

Davies used his slot in the first session of the Business Forum to make it quite clear that South Africa and Africa needs to add more value and focus on beneficiation and that the next wave of growth on the continent should come from industrialisation. He also emphasises the need to develop agro-processing on the continent and to look at establishing a strong local pharmaceutical industries.

Davies made it clear that while the other BRICS members have very large domestic markets, the African continent is unfortunately cut up into more than 50 different countries. He said regional integration and trade agreements were key to unlocking some of the potential of these markets. He said that, added on to Comesa (Common Market for Eastern and Southern Africa) and SADC (Southern African Development Community), the negotiations for a free trade agreement in East Africa is on track to be completed next year.

In all of this Davies highlighted that South Africa was still the largest economy and the most industrialised economy on the continent and that the partnerships South Africa is looking for from its BRICS ties are partnerships that will help strengthen productive activity in Africa.