12 Apr 2012

SA can unlock global trade for Africa

Written by  Dawn Nagar

No. 211: SA can unlock global trade for Africa / Dawn Nagar / Business Day
12 April 2012

It is important and urgent that SA addresses and reforms its current policy on clothing, textiles and agricultural imports to prevent the Balkanisation of its own industries and the region at large

The leaders of Brazil, Russia, India, China and SA (Brics) attracted the world's attention when they met in New Delhi, India on March 29. Their emerging economies account for about 40% of the global population, 25% of the world's economic output and 50% of international growth. Businesses, civil society and Africa at large hope this meeting will result in greater economic development, more job opportunities, expanded trade and improved investment.

The meeting tackled major issues, including how to respond to US President Barack Obama's pressure to cut ties with Iran and stop buying its crude oil. However, the headline item on the agenda was the debate about the creation of a "Brics Bank". The western-dominated World Bank has been unable to meet the growing demands of developing countries for access to capital and support for infrastructure projects. A Brics Bank is a potential financial revolution for global development. The implications for SA are great. Trade and Industry Minister Rob Davies said recently that SA is increasingly viewed as the "gateway to the continent". Its role in accelerating economic integration in Africa and globally is crucial. However, national and regional infrastructure needs to be developed to support this.

In his state of the nation address in February, President Jacob Zuma focused largely on the New Growth Path, outlining how the country's industrial base could be improved by boosting infrastructural development — particularly sea, rail and road transport — capitalising on intraregional trade and addressing technical barriers to imports and exports.

The fact that SA accounts for 80% of Southern Africa's economy highlights the importance of developing a more strategic vision to promote regional integration. In addition to its membership of Brics, SA also belongs to a number of other regional and global integration initiatives and schemes. These include the Southern African Development Community (Sadc); the Southern African Customs Union (Sacu); the European Union (EU) Trade and Development Co-operation Agreement; and the Sadc/East African Community/Common Market for Eastern and Southern Africa tripartite agreement.

However, not all of these schemes are seen as effective. For example, SA's unilateral decision to sign a trade agreement with Brussels is viewed negatively in the region. The deal's favourable tariffs for EU goods entering SA's market are seen as a major threat to regional development by Sacu's other members, Botswana, Lesotho, Namibia and Swaziland. Europe's dumping of highly subsidised beef in SA accounts for as much as 80% of canned meat in stores. Southern Africa's beef producers are struggling to compete against such imports, which are sold at a quarter of their European market value.

As the new kid on the Brics block, it is uncertain how successful SA will be in protecting national and regional interests in the group. The prospects for Southern Africa's farming sector look gloomy after the recent influx of Brazilian agricultural products into SA. A big increase in Chinese textile imports has led SA to impose tariffs in this area. Meanwhile, huge western agricultural subsidies continue to hamper Africa's development prospects, particularly given that 70% of Africa's population works in this sector. In 2001, rich countries' agricultural subsidies amounted to $311bn, exceeding sub-Saharan Africa's total income of $301bn. The EU's Common Agricultural Policy continues to be financed to the tune of $50bn a year; and US farm subsidies amount to $100bn a year.

For SA, global integration is as important as regional integration.

Last month, Zuma officially opened the Ngqura port in Nelson Mandela Bay, in the Eastern Cape.

The port will serve as a major trade conduit and has the potential to enhance south-south imports and exports.

In the medium term, it can form part of an emerging shipping route between China and Brazil.

In the longer term, it could help SA and the region to establish a trade corridor with southeast Asia and South America.

However, as SA blazes its global economic trail and opens its markets to more trade, it is hoped that it will not leave Southern Africa and Africa behind.

In this regard, it is important and urgent that SA addresses and reforms its current policy on clothing, textiles and agricultural imports to prevent the Balkanisation of its own industries and the region at large.

Nagar is a researcher at the Centre for Conflict Resolution in Cape Town

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