THE EQUATION of demand and supply is the most basic concept that all people concerned about the workings of the economy are introduced to.
Although in an incrementally complex manner, this basic equation holds true for the remaining economic fields, including such things as the government’s industrial policy and strategy.
In industrial policy terms, the increase of the supply side in the form of an expanding industrial base has to be matched by a greater expansion of market access (demand side) for those industrial outputs.
Since the beginning of the term of the fifth administration, we in government have committed ourselves to working towards the reindustrialisation of the South African economy in order to achieve high employment and economic growth rates.
This is within the context of the radical economic transformation that the ANC resolved upon and articulated in its elections manifesto.
In dealing with the reindustrialisation question one immediate question that emerges is about market security for the industrial outputs whose capacity we are intent on building. This derives from the understanding that the reindustrialisation of the South African economy also requires the building of sustainable and elastic markets for our industrial outputs. This market has to have both domestic and foreign dimensions if we are to have sustainable industrial growth.
Critical, then, in this regard is the need for our industrial strategy to be tailored to our international relations strategy in so far as the consolidation of trade relations is concerned.
These trade relations should be pursued in a manner that systematically improves our trade balance by yielding more export opportunities for South Africa. For this trade advantage to be realised also imposes on us the obligation to build an industrial base with diverse output that can appeal to various markets, domestically and abroad.
Firmly within this context, from October 25 to November 1, in my role as deputy minister of trade and industry, I will be at the head of a South African delegation to China as part of our efforts to promote our exports in foreign markets.
A part of the delegation will be government officials, including the director-general of our department, and the last leg of the trip will be headed by Trade and Industry Minister Rob Davies.
This work will be carried out through “export promotion expos” in five major cities of greater China, including Beijing, Hong Kong and Shanghai.
This is in line with the comprehensive strategic partnership agreement (CSPA) between South Africa and China that was adopted in 2010. The purpose of this agreement is to facilitate a more balanced trade profile between the two countries, encouraging trade in manufactured value-added products.
This also includes the promotion of cooperation between South African and Chinese businesses in infrastructure projects as well as Chinese investment in the value-adding industrial activities of South Africa. By implication, this suggests the need for us as a country to increase our production of value-added goods in order to meet the objectives of the CSPA.
In the context of these bilateral relations between South Africa and China, this year was declared the Year of South Africa in China and next year the Year of China in South Africa.
The central thrust of this declaration is the facilitation of systematic trade relations that will allow an equitable flow of both capital investment and industrial goods between these two countries. This is also critical in the context of China’s market opening in recent years, with its increasing demand for foreign investment and value-added goods.
The delegation will consist in particular of business people from the top 10 industries that export to China. These are agro-processing (wines, cereals, canned fruit and so on), chemicals, steel, aluminium, the automotive sector (tooling products, shock absorbers and filters), electro-technical, capital equipment (mining safety equipment), paper and pulp, and industrial pumps.
A total of 70 percent of the business delegation will be made up of black business people involved in these sectors. This is in line with our stated intentions of building a class of black industrialists in line with the broad objectives of our national agenda; that being the democratisation and deracialisation of virtually all spheres of social and economic life in South Africa. In this regard, a deliberate exposure of these industrialists, whom we intend on nurturing to market opportunities, is crucial.
This trip has as its objective the showcasing of South African products in Chinese markets and the mobilisation of Chinese capital towards the strengthening and improvement of other manufacturing sub-sectors. Similar undertakings in the past have yielded positive outcomes for the export industry.
Between 2009 and 2013, South African value-added products exported to China demonstrated impressive growth rates. Between 2011 and 2012 South Africa’s wine exports to China grew by 29 percent, while the five-year average growth rate of these exports to China between 2008 and 2012 was 57 percent. A total of 18.9 percent of our fish exports go to Hong Kong and mainland China. South Africa’s automotive exports to China have also been growing in recent times.
In broad terms these are part of the systematic trade relations that are implicit in the Brazil-Russia-India-China-South Africa (Brics) relations in the context of fostering the growth of economic blocs and markets outside the hegemonic international economic networks.
Already, the trend of inter-group trade among Brics countries is steadily on the increase. In 2002 the volume and value of inter-Brics trade was $20 billion (R223bn) and grew to $310bn in 2012.
Overall, the radical economic transformation project is a necessary intervention in resolving the historical injustice that underpins South Africa’s industrial patterns. Our ability to significantly dent the rate of unemployment, transform ownership patterns and place our economy on a sustainable growth trajectory will be realised if we radically alter the structure of our economy to promote diverse industrial activity with a wide market appeal domestically and internationally.
Mzwandile Masina is the Deputy Minister of Trade and Industry.