The government wanted to address structural imbalances in the trade relations between South Africa and Brazil, Russia, India and China, the countries which make up the Brics bloc, Minister of Trade and Industry Rob Davies said last week.
Davies said the objective of this process was to get the country to sell more value-added products to its Brics partners instead of exporting just the primary products. He said South Africa was well placed as a result of joining Brics, and it needed to reinforce its ability to become more important in the global arena.
Between 2006 and 2010, exports to those four countries quadrupled while imports doubled, with China becoming South Africa’s top trading partner and India placing sixth.
“We are relating as a supplier of primary products like iron ore and we import value-added products like cellphones,” Davies said.
“We have asked China how we can change the structural shape of trade relations and China has agreed to invest in beneficiation.
“We have been looking to take advantage of offers to have exhibitions in China in order for them to see more value-added products we can export. If we succeed in any of this, we can create a new dynamic partnership of trade.”
Davies said there were at least 250 items on a list of value-added products that were to be showcased in China. These items included foodstuffs and products from the motor industry.
Freddie Mitchell, an economist at Efficient Group, said the principle of selling value-added products was good because countries made more money from these.
“However, the problem here is whether South Africa is the best place to add value. Business is there to make profit but if we look at the labour system, it is very militant with the wage demands and there is a strike season. The labour structures are not similar to China and India,” Mitchell said.
“Then there is Eskom, there is the cost of electricity and also availability is uncertain. Value add is a nice concept and we have been talking about it for a long time but there are other things that you need to consider. It is easier and cheaper to import the final product than to make it here in South Africa.”
Goolam Ballim, the chief economist at Standard Bank, said there was clearly a mismatch in the nature of the trade that took place between Africa as a whole and many markets, including China.
“The solution lies in between to more meaningfully penetrate foreign markets, especially China with its rising consumer demand and the re-industrialisation of African markets,” Ballim said.
Ballim said Africa had many infant secondary markets and South Africa had seen a big industrial output shrink in the last 15 years, which needed to be reversed.
Ballim said South Africa, when it joined Brics, should have pushed hard for the entry of its products and those of Africa into these fast-growing emerging markets.
Davies noted that before the end of this year, the government would conclude the basis of transforming the Industrial Development Corporation in order to expand its reach and to cheapen its offerings. - Business Report