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S. Africa’s Rob Davies on the importance of BRIC

CAIRO: South Africa joined the BRIC summit in China in April as an ambassador for the entire continent. “The invitation recognizes that there is a steady and unmistakable convergence in the economic fortunes of BRIC and Africa,” according to a statement, reflected in the dramatic growth in BRIC-Africa trade, from $22.3 billion in 2000 to …

CAIRO: South Africa joined the BRIC summit in China in April as an ambassador for the entire continent.

“The invitation recognizes that there is a steady and unmistakable convergence in the economic fortunes of BRIC and Africa,” according to a statement, reflected in the dramatic growth in BRIC-Africa trade, from $22.3 billion in 2000 to $166 billion in 2008, and projected to reach $340 billion in 2015.

Africa’s combined consumer spending will rise to $1.4 trillion in 2020. Oil dominates the continent’s exports to the BRIC group (and to other countries, notably the United States); and has a future in renewable energy with untapped potential in biofuel production.

Africa’s “vast underutilized agricultural potential is hugely attractive to the BRICs, with their massive populations, rising incomes and appetites, and limited arable land. At the same time, Africa needs to reduce its reliance on food imports and feed its own people.”

The continent experienced average annual growth of 5.6 percent between 2000 and 2009 and sustained positive growth through the global recession. The continent’s output is projected to expand by 50 percent over the next five years.

The third summit of the BRICS leaders — heads of state and government from Brazil, Russia, India, China and South Africa — concluded in Sanya, Hainan Province, China on April 14 as participants expressed concern with the turbulence in Libya and across North Africa and the Middle East.

Trade and investment by BRIC has been a significant factor in Africa, a topic which South Africa’s Trade and Industry Minister Rob Davies speaks more about.

Q: At this moment in time, is South Africa’s participation at the BRIC summit on an observer status? In other words, is there a gestation ahead of full-scale accession?

A: While South Africa’s BRIC entry has yet to be formalized, our status in the interim extends beyond that of an “observer” situation. Indeed, our dealings with our BRIC partners have been tantamount to a situation of full membership. Since there is no chance of the arrangement falling through, it makes no sense to place things on hold until an official rubber stamp has been applied.

Unlike the EU or Asean, BRIC — or BRICS — is a grouping of nations and less of a trading bloc. Do you feel this comes in the way of it realizing its full potential?

Not at all; quite the contrary. Because BRICS is a group of nations striving to voluntarily optimize mutual benefits, the absence of any form of suasion is more motivational than a formal trading bloc. I suggest, therefore, that the manner in which BRICS is structured actually promotes the achievement of full potential

Now that South Africa has become a part of it, would the country — and you — be bringing something new to the BRICS table? Are there any specific initiatives that in your opinion BRICS should be taking on?

South Africa will bring a great deal to the table — else it would not have been invited to become a member of the BRIC club. South Africa’s affiliation to BRIC underlines two main points: firstly that the country is recognized as a developing economy of significance in its own right, but also that it is the gateway to the continent of Africa, the world’s next growth superstar.

South Africa’s membership is beneficial to BRIC not only economically but also politically. A new world order is unfolding, with economic and therefore political power shifting from West to East, from North to South. South Africa is an important catalyst in this paradigm shift.

In this context, bear in mind South Africa’s growing international role and its future significance for those who want to make use of the expanding African opportunities.

Huge new mutually beneficial opportunities will open up for South Africa and its BRIC partners on the investment and trade front. Brazil’s Vale offer for South Africa’s Metorex is symptomatic of what lies ahead. Partnerships with companies from the BRIC grouping are bound to materialize. This should become particularly important, as South Africa is already the biggest emerging economy investor on the continent, with its companies active in at least half of all African countries.

South Africa occupies a pivotal position as an emerging market. South Africa’s close connections with the continent allowed it to punch above its weight by linking it to hundreds of millions of consumers.

The Southern African Development Community (SADC) cannot be ignored. SADC boasts more than 250 million consumers, while the African market as a whole is projected to grow to two billion people over the next two decades.

Some of the BRICS nations and their companies will be competing against South African entities in winning over new projects in Africa, which has been your traditional domain. How does South Africa look to counter the challenges?

Africa is a large, developing continent, implying that there are many new business projects in prospect. In other words, there’s plenty to go around for those entities offering the best deals. I maintain that the heightened competition will be beneficial to the extent that South African companies will be called upon to sharpen their pencils. This observation aside, it is relevant that South Africa, by way of its location and strong familiarity with continental mores, enjoys an innate advantage that other nations would find difficult to replicate.

The grouping of African states is seen as more of a political association than an economic one. Do you feel there’s a need to change the agenda?

Several hundred South African organizations (from both the private and public sectors) are active in a great many African countries. In addition, there are a number of South Africa parastatal organizations, like the Development Bank of South Africa and the Industrial Development Corporation, that have long been advancing development funds to African undertakings.

As far as the Gulf states are concerned, South Africa continues to export its "soft" assets, i.e., its people. But commercial ties are still some way off from gaining full-fledged momentum. What, in your opinion, needs to be done?

We are well aware of the potential for closer commercial ties between South Africa and the Gulf states. What is needed, among other initiatives, is a heightened thrust (from both sides) to promote and encourage trade delegations in both directions. In the months ahead, we shall be promoting this thought to a more prominent position on our busy international schedule.

There also an opinion in this part of the world that South Africa has traditionally looked to the West and into the comity of African nations for commercial ties. Do you believe the opinion is a valid one?

Yes, the former arising from centuries of close economic and cultural relationships and the latter from geographical and cultural proximity. A recent departure from these phenomena has been South Africa’s exponential increase in trade relationships with China

The oil price gains could have a debilitating impact on the pace of global economic recovery this year. How do you think it will impact South Africa’s prospects?

The negative impact will be no greater than that being felt by the vast majority of nations. In fact, the impact is considerably cushioned by more than one factor: South Africa is as much as 40 percent self-sufficient by way of its world-renowned oil-from-coal facility. Advancing oil prices tend to go hand in hand with rising gold prices — and South Africa is one of the world’s leading gold producers; and unlike a great many nations, none of South Africa’s power generation plants rely on oil. South African power generation plants are fuelled by coal and nuclear power, with much work being done in the sphere of solar energy.

There’s still residual concern about the strength of the South African currency. Do you foresee any major monetary or fiscal initiatives?

South Africa’s rand has been one of the world’s strongest in the past 18 months. South Africa’s central bank has indicated that it is disinclined to interfere in the foreign exchange markets to influence the rand’s value. Yes, the rand’s strength obviously hurts South African exporters. However, by and large they have reflected impressive resilience. It is also worth commenting that the value of a country’s currency reflects the level of international confidence (or lack thereof). It is gratifying that the rand’s strength is indicative of the world’s high regard for South Africa economic and political outlook.

Double-taxation avoidance treaties serve a purpose. Do you feel the time is opportune to consider going for the same with some of the GCC economies?
It is under consideration.

This Q&A was provided exclusively to Daily News Egypt.


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