Every BRICS country is in the alliance to hard-headedly advance its strategic economic, trade and geopolitical interests. South Africa will only benefit from its membership if it drives a hard bargain to defend its economic interests, trade intelligently and build clever issue-based tactical alliances with individual member countries.
By William Gumede
Every BRICS country is in the
alliance to hard-headedly advance its strategic economic, trade and
geopolitical interests. South Africa will only benefit from its membership if
it drives a hard bargain to defend its economic interests, trade intelligently
and build clever issue-based tactical alliances with individual member
countries.
Image Attribute: Before the BRICS summit. President
Putin With President of South Africa Jacob Zuma./ Source: Kremlin, Russia
The challenge for South Africa is that BRICS may erode South
Africa’s domestic economy, because many products from BRICS countries directly
compete with those of South Africa, unless it negotiates adroitly. BRICS and industrialized
countries are all targeting Africa’s resources, which poses a direct threat to
South Africa’s economy. The growing Africa offers South Africa, based at the
Southern tip of the continent, with the most advanced economy and its
industrial and manufacturing sectors a once in a generation opportunity to
piggy-back on Africa’s growth to lift its own economy. Growing African
countries need stoves, fridges and trains—which South Africa produces.
Ideally,
a growing South African economy could copy the example of Japan whose economic
rise after 1945 lifted East Asia with it. However, structural obstacles, poor
economic and political policies, and lack of imagination in leadership have put
paid to that route of growth for South Africa. However, the alternative— South
Africa leveraging a growing Africa to lift its own growth levels—is a real
option. South Africa’s unemployed are mostly black and low-skilled and young. A
growing manufacturing sector could soak up these unemployed. South Africa’s
manufacturing sector is ailing. Former manufacturing areas such as the East
Rand are now virtually ghost towns.
Chart Attribute: South Africa Global Competitiveness Ranking, Selected Categories w.r.t. other BRICS nations / Source: World Economic Forum
Any inroads old industrial powers and
emerging powers make into Africa may undermine South Africa’s efforts. Other
BRICS countries are already exporting manufacturing goods to Africa, including
the inputs to Africa’s planned infrastructure programmes such as railways,
supposedly SA’s strategic advantage. This is hurting the manufacturing sectors
South Africa identified as key to job creation in its 2010 Industrial Policy Action
Plan (IPAP).
Revitalizing manufacturing—and boosting these exports to Africa—is
at the heart of South Africa’s attempt to create five million jobs by 2020.
Vast new mineral, gas and oil deposits are being identified across Africa, and
South Africa is uniquely positioned to provide the skills, finance and
experience to exploit these. This is due to its own extensive mining
industry—with its associated specialised manufacturing base—which is
acknowledged as the world leader in deep-level mining in complex terrains.
Being in Africa as it is, South Africa should have a competitive advantage over
BRICS countries or the West, as it knows the continent better. It also has a
large population of African immigrants—from Nigerians, Congolese and
Zimbabweans to Somalis and Rwandans—whose talents could be mobilised as a
competitive advantage in its trade and its negotiations with the rest of Africa
and BRICS.
While the SA’s manufacturing sector is coming out of a deep
crisis—with some sectors in decline, others having migrated to industrial
countries taking their research, development and innovation capacity with
them—the manufacturing sectors of most of the country’s BRICS partners are
buoyant.
Many South African manufacturers say that while products from BRICS
enter South African markets relatively easily, high tariff barriers make it
difficult for South Africans products to enter BRICS markets. Nomaxabiso
Majokweni, of the umbrella business organization BUSA, summed up what SA needed
from the BRICS countries when she said “The balancing act is to ease business
transactions while protecting the interests of industry and manufacturing. We
are not seeking preferential or free trade agreements. Rather, we should be
driving for more transparency from our partners, especially on tariff schedules
and hidden internal taxes.”
China is aggressively promoting the use of the
yuan for international trade and lending with its developing country partners,
particularly in Africa, rather than using the US dollar. Standard Bank of South
Africa predicts that China’s yuan will replace the US dollar as the main
currency to finance trade between China and African countries sooner than
expected. Standard Bank predicted that by 2015 up to 40 per cent (or $100
billion) of China’s trade with Africa will denominated in yuan.
The South
African rand is the accepted currency in many African countries. The real
danger is that the Chinese yuan will replace the rand in Africa. By localizing
the yuan in Africa, China will not only be able to reduce the currency risks
inherent in many unstable African currencies, it may also be able to circumvent
non-tariff barriers in Africa. Successfully localizing the yuan in Africa will
also speed up Chinese lending to Africa and free Chinese cash to finance the
selling of Chinese manufacturers and infrastructure inputs to Africa.
About The Author:
William Gumede is Associate
Professor and Convener: Political Economy at the Graduate School of Public and
Development Management at the University of the Witwatersrand in Johannesburg.
He is the founder of Democracy Works, a new foundation promoting democracy in
South Africa and other African countries, as well as in developing countries in
the rest of the world.
Gumede is a former lead advisor of
the Development Bank of Southern Africa and former deputy and managing editor
of The Sowetan newspaper. He has started a number of
successful public, private and non-profit entities; and chaired the boards of
several local and international organisations.
Before the end of apartheid, Gumede
held leadership positions in South Africa's student, trade union and civic
movements. He is a bestselling author and prolific writer who regularly contribute
columns and articles to local and overseas publications. His most recent
publication is an eshort entitled South Africa in BRICS: Salvation or
Ruination and Restless Nation (2012). His book Thabo Mbeki and
the Battle for the Soul of the ANC was published to great acclaim in
2005.
Publication Details:
This article is an extract from a
research paper titled – “The BRICS Alliance: Challenges and Opportunities for
South Africa and Africa by William Gumede” and is published under Creative
Commons License. Download The Paper - LINK
