Expectations are on the rise as South Africa prepares to host the 5th BRICS Summit in just a few days’ time. Economist Evans Chinembiri from Trade & Industrial Policy Strategies (TIPS) shares his thoughts on what the business sector can expect. TIPS is an independent, non-profit economic research institution.
Q: What does the South African and African business community expect from the 5th BRICS summit? A: Led by China, BRICS economic activity in Africa has continued to grow, more so in recent years. BRICS –Africa trade has doubled since 20007 and is estimated to have reached US$ 340 billion in 2012, representing a tenfold increase since 2006 (Freemantle and Stephens, 2013). On this basis alone, the first and foremost, thing that one would expect is for business to be a part of this boom, and it goes without saying that we expect there to be a desire to increase bilateral trade with the BRIC nations. China and India relationships are the most important for a South African perspective, with the value of South African exports, in 2012, to China and India R 81.1 billion and R30 billion, respectively. The Brazilian and Russia linkages are still weak, R6.4 billion and R3.3 billion in 2012 respectively. There is potential for expansion of trade particularly with Russia. Preferential trade agreements should also feature given their perceived impact on trade between countries, consequently bilateral trade agreements will get attention. With the BRICS grouping mainly a political platform, issues around reform at world trade institutions (WTO, World Bank, IMF) and climate change forums (COP 18) will also be quite prominent. Q: What sort of engagement does Business South Africa hope to establish with BRICS member states? A: A lot of the discussion will be around investment issues (bilateral investment treaties, and joint investment – specifically the establishment of a BRICS Development Fund. Infrastructure investment will be topical, as will agriculture and food security. On the trade front is the matter of levelling of playing fields (e.g. SA exports have some trouble penetrating BRIC markets, but those countries have preferential market access) especially regarding technical barriers to trade. Q: Are there any major business opportunities you see being strengthened or made available due to this 5th BRICS Summit? A: We can expect the usual contracts on energy (oil and gas – maybe some renewables), transport (railways and ports) and minerals. Diversifying this trade mix is of upmost importance in creating sustainable trade patterns.
Industrialisation will feature prominently, increased manufacturing demand will be crucial for Africa’s industrialisation and employment drives
Does the fact that the BRICS summit is hosted here at home mean anything to South African business community or Africa as a whole? A: The attendance of other African Heads of States is very significant in that it shows South Africa as truly being the “gateway to Africa” and turning BRICS into “ABRIC” – Africa, Brazil, Russia, India, China. However, other analysts caution that Africa must be cautious in dealing with BRICS and avoid a new scramble for Africa centred on minerals extraction, gas and oil exploration and land acquisitions. For South Africa and Africa, the process of industrialisation will feature prominently – increased manufacturing demand will be crucial for Africa’s industrialisation and employment drives. Q: Some business analysts have said to the SABC that South Africa’s image internationally has been dented by the Marikana shooting, wild cat strikes and recent incidents of police brutality. And as a result of these events, relations with western orientated investors and companies are tense and frayed. The analyst added that this might lead to a shift towards China and other BRICS countries for stronger economic relations. A: World economic foundations have shifted. China is set to become the largest economy in the world, and it is South Africa’s single largest trading partner country.For South Africa, China espouses a new model for state backed economic development. Also, “new” ways of doing business are being heavily punted through BRICS (especially from China), which may put the western business block under pressure.Chinese firms seem more adept to working with local partners and providing funding with minimal requirements. Considering that growth is being driven by emerging markets, western corporations will need to rethink their approach given the emerging trends, especially around “South-South” co-operation. *Evans Chinembiri is currently working at TIPS as an Economist responsible for Quantitative Data analysis. He holds an Honors degree in Natural Resource management and Agriculture. He undertook a Postgraduate Certificate in Applied Economics at the University of Zimbabwe and is working towards the completion of his MSc in Agricultural Economics at the University of Pretoria.
– By Siphosethu Stuurman
