South Africa's national agenda is aimed at achieving inclusive economic growth for its people as well as the people of the continent. This objective is strongly complemented by the exponential and accelerator growth potential which BRICS engagement has delivered to the country and its neighbours. The potential for growing trade and investment, as well as intra-African trade and investment, must be further maximised.
South Africa will utilise its chairpersonship of BRICS in 2013 to vigorously pursue support for these goals. South Africa’s membership of BRICS will:
- promote trade and investment
- enhance industrialisation
- promote job creation.
South Africa will benefit and will continue to benefit from being a member of the BRICS bloc. The South African Government has pledged its commitment to continuously engage and support business in South Africa and also work tirelessly in tandem with its BRICS counterparts to forge stronger partnerships to deliver prosperity and progress to the people of South Africa. These relationships are also viewed as mutually beneficial for our BRICS partners.
- Regionally, South Africa provides direct access to the rest of the continent and is situated between the East, the Americas, Europe and the Middle East. South Africa has many geostrategic and related structural advantages, making it an excellent investment destination and ideal “gateway” partner in the African growth story.
- Complementary to this existing and strong consumer market are the exciting regional integration initiatives taking place on the continent. Negotiations are underway to establish a 26-country, US$1-trillion African Tripartite Free Trade Area (T-FTA) for East, Southern and Central Africa within three years, which will expand this market to 600 million people. This regional integration initiative will put us in the same market-size bracket as our BRICS counterparts.
- Another related and exciting new initiative is that of the Southern African Development Community (SADC) Regional Infrastructure Master Plan (RIMP), which could involve cross-border projects with a combined investment value of up to US$500 billion. The RIMP was finalised and presented at the SADC Summit, held in Mozambique, Maputo in August 2012. The plan proposes the development of regional power, transport, water, communications, tourism and metrology infrastructure over the 15-year period, from 2012 to 2027. The intention is to align the implementation of the plan with the establishment of a SADC development fund, or bank, with an initial capitalisation of between US$600 million and US$1 billion.
- At present, intra-regional trade comprises less than 20% of total trade and the bulk of that trade takes place between South Africa and the other 14 SADC member states. Once the plan has been officially endorsed, the SADC Secretariat will conduct roadshows in BRICS and other countries, targeting Brazil, China, Europe, India, Japan, the United Kingdom and the USA to expose potential investors to the opportunities available within the RIMP. The Project Preparation Development Facility has already been established at the Development Bank of Southern Africa.
- The growth rate for sub-Saharan Africa is estimated around 5,5 % for 2012; and The Economist of 6 January 2011 predicts that between 2010 and 2015, seven out of the top 10 fastest-growing economies in the world will be African. There are many reasons for this sustained growth. These include greater stability and the increasing prevalence of democracies, global demand for Africa's commodities and improved economic regulatory and governance regimes. South Africa is also cognisant that the African “demographic dividend” is already recognised by economists as the future locus for growth.
- According to Standard Bank's research, the five enduring factors driving this are a growing, younger and more affluent population; urbanisation; improved information and communications technology (ICT): sustained demand for Africa's natural resources; and a deepening financial sector as Africans take up financial services personally and for business. In 2010, BRICS accounted for 13% of global demand in the ICT sector, with spending of about €328 billion.
- As South Africa is one of the leading investors among developing countries on the continent, South African companies can take advantage of this unique position, through partnering with BRICS companies to explore commercial opportunities in Africa. For example, the Brazilian company Vale has partnered with South Africa’s Rainbow Minerals in an agreement worth more than US$1,2 billion to build a copper mine in Zambia. Tata Power has formed an equal joint venture with South Africa's Exxaro Resources, named Cennergi (Pty) Ltd,to develop and operate power-generation projects in South Africa initially and will later have projects in Botswana and Namibia.
- There certainly is a wide scope for cooperation in various projects within the existing BRICS structures. President Zuma addressed BRICS’ captains of industry prior to the last BRICS Summit and emphasised that South Africa’s participation in BRICS was designed to help the country achieve inclusive growth, sustainable development and a prosperous South Africa.
- The BRICS Business Forum’s joint statement called on the respective governments to deepen economic engagement of which trade and investment were identified as the pillars of such an engagement. The target for intra-BRICS trade was set to be enhanced from the present level of US$230 billion to at least US$500 billion by 2015. The business leaders called for improvement of the quality of trade by focusing on more value-added trade in the three sectors of manufacturing, services and agriculture. South Africa’s service sector comprises two thirds of our economy (65,9%), which compares favourably with our BRICS partners and provides niche opportunities.
- The BRICS Business Forum further cited opportunities in sectors such as, but not limited to, agriculture, energy, infrastructure, mining beneficiation and healthcare. The country already enjoys comparative advantages in these cited sectors. Domestic economic priorities, such as increased beneficiation at source, could be pursued through joint partnerships and ventures.
- At the Delhi Summit, other possible areas of cooperation, ranging from energy to construction and water provision, were also discussed.
- President Zuma urged in his State of the Nation Address that the triple challenge of poverty, unemployment and inequality required single-minded attention. The New Growth Path is geared at achieving inclusive growth and creating jobs. Six jobs drivers were identified to help the country achieve the much-needed growth leading to jobs. These are infrastructure development, agriculture, mining and beneficiation, manufacturing, the green economy and tourism.
- To facilitate the success of these drivers, business should focus on enhancing intra-BRICS business cooperation and coordination by promoting opportunities in the following areas:
Cooperation on economic opportunities in infrastructure development
- South Africa has begun working intensively on its infrastructure strategy through the Presidential Infrastructure Coordinating Commission (PICC). South Africa is on course to spend in excess of R860 billion on infrastructure by March 2014. Infrastructure is therefore at the heart of how the country will change the lives of its people in the next decade.
- Beyond the South African programme, is the NEPAD infrastructure programme that South Africa champions as mandated by the AU, especially the North and South road and rail projects.
Cooperation on skills development
- The PICC is developing a skills plan for each major project, setting out the number of engineers, artisans, technicians and technologists needed. Work is being done with universities and further education and training colleges to speed up the production of these critical skills.
- Business is urged to invest in skills development in their companies to promote youth training and empowerment through their engagement with BRICS countries.
The new development bank
- South Africa is excited by the plans for a new BRICS-led development bank, which would further facilitate cooperation among members of the BRICS business community. The bank will reinforce the BRICS grouping by utilising surplus reserves. It will also encourage investment in a more sustainable and productive manner.
- South Africa will co-chair with India the joint working group under the auspices of the respective BRICS Finance Ministers to ensure that this initiative’s feasibility be thoroughly investigated as well as benefit South Africa and Africa to the fullest extent possible.
- President Zuma has signalled that South Africa can negotiate new types of mutually beneficial developmental agreements with BRICS countries on infrastructure development.
Promoting intra-BRICS trade
- Agreements signed during the BRICS Summit under the auspices of the BRICS Inter-Bank Cooperation Mechanism include the Master Agreement on Extending Credit Facility in Local Currency and the Multilateral Letter of Credit Confirmation Facility Agreement.
- These measures are intended to increase commercial transactions, since currently, businesspeople have to convert local currencies into dollars before reconverting them into the currency of the trade partner, and this escalates transaction costs.
- Another exciting initiative that has been launched is the Alliance of Exchanges, which will entail cross-listing of equity index derivatives and trading in the local currency.
- Companies are encouraged to facilitate engagement with their counterparts in BRICS countries.
- South Africa seeks to increase its exports of higher value-added products and to encourage inward investment to support beneficiation and industrial development objectives. The work in BRICS is increasingly focused on cooperation to achieve these ends.
Cooperation on another crucial infrastructure project is underway
- The proposed high-capacity marine cable system linking the BRICS countries requires collective involvement. This will address the connectivity challenges which have featured as impediments to intra-BRICS trade.
