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Brics intends to upscale value-added goods trade

Published Aug 1, 2014


FOLLOWING Brazil’s successful hosting of the sixth Brics summit, it is opportune to reflect on some of the key outcomes from a trade and investment perspective and their significance for South Africa.

It is important to reaffirm that South Africa’s membership of the forum is a vital element of our global economic strategy. Brics offers a unique platform to promote closer co-operation between our countries to support our growth, development and poverty reduction objectives, building on our respective economic strengths.

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Our trade with the Brics countries continues to expand rapidly, with exports growing by 24 percent in 2013 to R155 billion. The bulk of these shipments were destined for China, with exports growing by almost 37 percent to R116bn in 2013, followed by India (R29bn). Trade with Brazil and Russia is steadily growing off a low base.

An important challenge that we need to address is the structure of bilateral trade between South Africa and our Brics partners. The country continues to export mainly minerals and commodities in return for finished manufactured goods. The government has consistently championed the need to promote more value-added exports in intra-Brics trade to diversify our export basket and support our industrial development and job creation objectives.

One of our priorities as the previous Brics chair was to co-ordinate a joint trade study, which empirically maps intra-Brics trade dynamics and makes recommendations on how to shift our trade onto a more sustainable basis.

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Using econometric modelling, the study identifies South Africa’s top 20 value-added products with a revealed comparative advantage in each Brics market. The list of potential products for export includes cars, trucks and motor vehicles for the transport of goods; vehicle parts and accessories, including tyres; structured iron and steel products; processed foods and beverages, including wine; capital equipment for the mining industry; machinery parts; and polymers and chemicals.

One of the study’s key recommendations is that we need to undertake more targeted trade and investment promotion activities and special initiatives in Brics markets to showcase these 20 products as a priority, and other high value-added products in future.

My department is elaborating an integrated national export strategy, which will give greater attention to issues of trade promotion, country branding and imaging, as well as enhancing export incentives and financing.

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Trade promotion activities need to be accompanied by measures to ensure effective market access for our high value-added products. Besides high tariffs on particular products of export interest, our exporters often confront various non-tariff measures) that impede effective market access. Working with business, we need to identify these measures and other regulatory hindrances and address them.

The study recommends further that the Brics increase trade in high value-added goods, especially their top 20, by introducing positive trade facilitation measures to ease customs processes and red tape. There is a work stream among Brics customs administration bodies and we will encourage them to deepen this co-operation.

The Brics should prioritise greater industrial, scientific and technical co-operation. Improving our positions in global value chains and promoting mutual competitiveness through enhanced industrial, scientific and technical co-operation will increase the value-added content in exports.

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In particular, Brics members should explore opportunities for technology transfer and exchange, as well as joint research and development projects to develop new products and industrial process technologies, especially “greener” technologies.

The study proposes that the Brics enhance their investment co-operation and facilitation, especially for the manufacture of high value-added products. South Africa offers many opportunities not only for investment in the domestic market, but also as a platform for Brics companies to access the dynamically growing markets of the African continent.

The way forward is to establish a working group of trade and investment promotion agencies to consider and implement the study’s recommendations. This will elevate the Brics partnership to a higher level of practical trade and investment co-operation.

Rob Davies is the Minister of Trade and Industry.

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