South Africa’s Trade Strategy
and the BRICS
Dr Brendan Vickers
Head: Research and Policy
International Trade and Economic Development (ITED)
Email: [email protected]
Presentation to the dti’s Small Business Summit – Bloemfontein
12 October 2011
Policy Context
• NIPF, TPSF, NGP calls for “developmental” trade
policies
• Trade strategy and international engagements must
support industrial upgrading, employment growth and
increased value-added exports
• Within the context of profound global power shifts
• Accelerated by the global crisis…
• And reflected in the changed rankings of South
Africa’s trading partners
2
Industrial Policy Action Plan II
Key pillar of the New Growth Path
IPAP: value-added sectors with high employment and growth multipliers
5
Low employment multipliers &
strong backward linkages
High employment multipliers &
strong backward linkages
4.5
4
Motor vehicles, parts &
accessories
Total Backward linkages
3.5
Paper & paper products
3
Basic chemicals
Basic iron & steel
2.5 Basic non-ferrous metals
EGW
Business services
2
6
1
2
3
5
4
7
11
81
9
Leather & leather products
Textiles
Food
14
1
Other manufacturing
Transport & storage
Mining
Financial services
13
Wood & wood products
Excl. medical, dental & vet
Wholesale & retail trade
Wearing apparel
Agriculture
1. Other chemicals & manmade fibers
2. Furniture
3. Plastic products
4. TV, radio and comm equip
5. Electrical machinery and
apparatus
6. Paper and paper products
7. Rubber products
8. Non-metallic minerals
9. Beverages
10. Glass & glass products
11. Professional & scientific
equip
12. Metal products excl.
machinery
13. Machinery & equipment
14. Footwear
Government services
1.5
1
0.5
Low employment multipliers
& weak backward linkages
High employment multipliers
& weak backward linkages
0
0
7
Employment multipliers
14
Trade Performance: Exports
4
Source: Quantec
Trade Performance: Exports (2010)
5
South Africa’s export composition
Rank
2010
Product
Proportion
Growth
Name
%Total
1
Basic non-ferrous metals
39.40%
43.19%
2
Basic iron & steel
13.02%
23.75%
3
Motor vehicles, parts & accessories
10.27%
9.19%
4
Machinery & equipment
7.03%
9.91%
5
Basic chemicals
5.73%
11.34%
6
Food
3.67%
4.03%
7
Other industries
3.39%
-2.13%
8
Coke & refined petroleum products
2.55%
-8.67%
9
Paper & paper products
2.24%
8.03%
10
Other chemicals & man-made fibers
1.95%
-3.70%
Source: Quantec, 2011
2009-2010
1Q1990
2Q1990
3Q1990
4Q1990
1Q1991
2Q1991
3Q1991
4Q1991
1Q1992
2Q1992
3Q1992
4Q1992
1Q1993
2Q1993
3Q1993
4Q1993
1Q1994
2Q1994
3Q1994
4Q1994
1Q1995
2Q1995
3Q1995
4Q1995
1Q1996
2Q1996
3Q1996
4Q1996
1Q1997
2Q1997
3Q1997
4Q1997
1Q1998
2Q1998
3Q1998
4Q1998
1Q1999
2Q1999
3Q1999
4Q1999
1Q2000
2Q2000
3Q2000
4Q2000
1Q2001
2Q2001
3Q2001
4Q2001
1Q2002
2Q2002
3Q2002
4Q2002
1Q2003
2Q2003
3Q2003
4Q2003
1Q2004
2Q2004
3Q2004
4Q2004
1Q2005
2Q2005
3Q2005
4Q2005
1Q2006
2Q2006
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
4Q2007
1Q2008
2Q2008
3Q2008
4Q2008
1Q2009
2Q2009
3Q2009
4Q2009
1Q2010
2Q2010
South Africa’s Trade Balance
2,000,000,000
1,000,000,000
Manufacturing: double-whammy of currency overvaluation and crisis
Manufacturing,
Mining and Agriculture Trade Balance Q11990 – Q12011,
0
US$m
-1,000,000,000
-2,000,000,000
-3,000,000,000
-4,000,000,000
Agriculture, forestry & fishing
Manufacturing
Mining
7
Source: Quantec
South Africa’s leading trade partners
South African Exports 2010 – top 10
Rank
Country
2010
Name
1
China
Proportion
Growth
% Total
2009 - 2010
11.48%
20.28%
South African Imports 2010 – top 10
Rank
Country
2010
Name
1
China
Proportion
Growth
% Total
2009 - 2010
16.89%
14.22%
2
United States
10.08%
25.26%
2
Germany
5.45%
11.35%
3
Japan
9.08%
36.42%
3
United States
0.93%
7.14%
4
Germany
8.34%
31.49%
4
Japan
17.01%
5.34%
5
United Kingdom
5.13%
4.20%
5
Saudi Arabia
-11.01%
4.12%
6
India
4.36%
24.23%
6
Iran
4.04%
4.00%
7
Netherlands
3.35%
-7.15%
7
United Kingdom
2.30%
3.81%
8
Switzerland
3.28%
-21.29%
8
India
33.92%
3.58%
9
Zimbabwe
2.93%
12.53%
9
France
1.58%
2.93%
10
Mozambique
2.68%
5.53%
10
Nigeria
3.10%
2.80%
Source: Quantec, 2011
SA’s Current Global Trade
Footprint
Growth
Sustain and
Maintain
Sustain and
Maintain
•38%
•27%
•11%
•4%
Sustain and
Maintain
•17%
•2%
9
•9
•1%
BRICS in Perspective
• BRICS are among the fastest growing, largest
emerging economies and at the forefront of reshaping
the global economy
• BRIC will account for 61% of global growth by 2014
• Developing countries’ share of world trade will double
over the next 40 years
• BRICS aim to strengthen coordination for reform of
multilateral fora and build stronger economic links
amongst each other
• Joining BRICS at this early stage will help us shape the
priorities, strategy and work programme
10
SA-BRICS Trade
• Growing share of BRICS in SA total trade: 10% (2005)
to 17.4% (2010)
• Led by China and India, Brazil and Russia follow
• Relative decline of EU: 36% (2005) to 28% (2010)
• China:
– R40.2 billion (2005) to R142.6 billion (2010)
• India:
– R12.8 billion (2005) to R42.9 billion (2010)
• Brazil:
– R10.3 billion (2005) to R15.2 billion (2010)
• Russia:
– R1.1 billion (2005) to R2.9 billion (2010)
SA-BRIC Trade by Product: SA Imports from BRIC 2010
(US$ Thousand)
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
12
SA-BRIC Trade by Product: SA Exports to BRIC 2010
(US$ Thousand)
6000000
5000000
4000000
3000000
2000000
1000000
0
13
BRICS Tariff Profiles
Strategic Location on BRICS Routes
•
•
•
South – South Trade
Important to the BRICS countries
Vulnerability of the Suez Canal
• Political instability
• Somali pirates
Strengthening SA-BRICS Trade
• Still “foreign” markets for SMEs
• But emerging opportunities from growing demand,
including middle class consumption
• Focus on improving quality and standards!
• Role for the dti to support SME exporters?
–
–
–
–
Understanding the market (e.g. EMIA)
Market access (e.g. PTAs)
Reducing NTBs
Active export promotion activities, especially
exhibitions showcasing high-value products
– Encouraging cooperation on SMEs
16
• BUT SA also has trade deficit with each of the
BRICS, although declining…
• AND import competition impacting on local SMEs?
• Current pattern of trade and investment between SA
and China is unsustainable: commodities for high
manufactures
• SA is identifying ten value-added products for export
to China as well as key beneficiation projects for
inward investment from China
17
Examples of possible products to China…
• Agro-processing
–
–
–
–
–
–
Wines
Cereals
Fruit (Oranges, Grapes, Apples and Pears)
Canned fruit
Fish
Bovine meat
• Chemicals
– Butanol
• Plastics
– Polypropylene
• Steel
– Stainless steel
• Aluminium
– Alloys and Coils
• Automotive
– Tooling products
– Shock Absorbers
– Filters
• Capital Equipment
– Mining Safety Equipment
• Manufactured (Chapter 84)
– Industrial Pumps (mining, agricultural as well as fuel
pipelines, manufacturing process
• Electro-technical
– Power transmission related products.
• Paper and Pulp
– Wood pulp and Paper board
Way Forward
• Opportunity to build a new approach to relations
based on mutual benefit and economic developmental
principles
• Build complementarities to avoid competition
• Posited possibility of payments settled in national
currencies
• China signalled new import/consumption policy
• We need to position ourselves through exhibitions
promoting high-value products
• No “easy” wins for SMEs, but worth sustained
engagement supported by our BRIC Partners
Thank you
22