Through Brics, South Africa will bring a wind of change to the continent

South Africa has a strategic interest in extending BRICS co-operation to support Africa’s development agenda, particularly by enhancing measures for implementation as well as increasing financial aid to build infrastructure and industrial capacity, and increasing exports of value-added manufactured products from the continent.

Within this context the growing consumer power of Africa’s emerging middle class and high growth rates offer an opportunity to build a more sustainable and mutually beneficial relationship with BRICS in the next decades.

South Africa is generally viewed as the gateway to Africa for enhancing trade and investment links between Africa and the world inclusive of the BRICS countries.

South Africa’s engagement on a trade and investment level with BRICS countries focuses on enhancing bilateral trade through complementarity measures on trade and the attraction of foreign direct investment into the expansion of productive capacities.

It should be noted that in terms of trade, the focus is on diversifying the basket of trade away from commodities to value-added products.

In this context, South Africa has developed a top 10 product and investment list for engagement with BRICS member countries.

The BRICS countries are now becoming major players on the continent, which has not only changed Africa’s traditional trade and investment relations but created significant opportunities and challenges for Africa’s economies. There is no doubt that Africa’s growth is being influenced by its relationship with the BRICS.

For example, China is rapidly moving into higher end manufacturing with leading Chinese firms building, and, increasingly, designing, cellphones, cars, satellites, and jet planes. This transition is coming as wages rise, reducing China’s comparative advantage in the low-cost and labour-intensive sectors that powered China’s breakout into world markets.

According to Business Monitor International, it is predicted that, over the coming years, millions of jobs will be “exported” from China as industries such as textiles and light manufacturing relocate to lower-wage countries.

Massive infrastructure deficits will deter African countries from taking advantage of this investment even though we have a clear labour cost advantage.

One of the most important dimensions of this burgeoning relationship is foreign direct investment.

Over the past 10 years, FDI flows from the BRICS to Africa have increased consistently, only falling slightly in 2009 due to the global economic crisis.

While the bulk of the BRICS FDI to Africa has been concentrated in South Africa, Egypt and Morocco, the BRICS have recently taken a greater interest in investing in other countries across Africa.

A development that is adding impetus to the involvement of BRICS countries in Africa is the agreement between the heads of state and government of 26 African countries in October 2008 to establish a free trade area (FTA) – now referred to as the Tripartite FTA (T-FTA). This initiative will expand intra-African trade, promote collaboration between the Regional Economic Communities and facilitate joint resource mobilisation and project implementation.

To place the significance of the T-FTA into perspective in the context of emerging market benchmarks, the T-FTA will constitute an integrated market with a combined population of 600 million people (only China and India have larger populations), a total GDP of $1 trillion (which would put it on a par with Mexico and South Korea, the largest rapid-growth economies after the BRICS), and a long-term GDP growth rate in excess of 5 per cent.

One notable initiative already launched under the Tripartite Arrangement is the Tripartite North-South Corridor Investment Programme. With initial funding of $1.2 billion (a large proportion coming from the African Development Bank and the Development Bank of Southern Africa) and strong support from the South African government, actions are being taken to fast track this project.

This programme supports some of Africa’s busiest trade routes: Linking the port of Dar es Salaam in Tanzania to the copper belt in Zambia and on to Lubumbashi in the DRC, and then down through Zimbabwe and Botswana to Africa’s largest and busiest port, Durban, in South Africa.

In effect, the Corridor system, with its spurs, will service eight countries, Tanzania, the DRC, Zambia, Malawi, Botswana, Zimbabwe, Mozambique and South Africa. It is a step forward in physically connecting a critical mass of signatories of the T-FTA.

Deepening co-operation between BRICS countries, the leading emerging economies in the world, and Africa with its much improved development prospects, abundant natural resources, growing consumer power and favourable demographics offers enormous potential for building Africa-BRICS economic co-operation on a sustainable and mutually beneficial basis over the next decades.

This opportunity should be seized.

Rob Davies is Minister of Trade and Industry, Republic of South Africa