Johannesburg: Africa’s improved growth trajectory has clearly manifested in South Africa’s commercial relations with continent. Last year, SA’s trade with the Rest of Africa (RoA) exceeded ZAR220 billion (bn) (approx. USD30bn), 17% of SA’s total trade with the world. In 2010, SA was the RoA’s third-largest EM10 trade partner—behind only China and India. Importantly, SA exports to the RoA are predominantly of value-added goods. In 2011, SA ran a ZAR40bn trade surplus with the RoA (excl. SACU), compared to a ZAR68bn deficit with Asia.
As both a cause and consequence of elevated trade, SA’s investment stock in Africa has swelled, from ZAR14.7bn in 2001 to ZAR121bn in 2010 (21% of its total outward FDI stock). In a recent survey, 94% of SA CEOs interviewed expected their businesses in the RoA to grow in the next 12 months.
SA’s success in securing market share within key SADC economies has been powerful. Last year, SA was the largest import partner for nine out of thirteen current SADC states; more than 50 large JSE-listed firms are active in Namibia, Botswana, Zambia and Mozambique.
Yet, despite these advances, SA’s commercial prospectus in the RoA remains constrained:
First, insufficient product complementarity, pervasive logistical hindrances, and SA’s own dwindling competitiveness, mean that trade growth with the continent has lagged. Since 2001, SA-RoA trade has expanded three-fold, compared to a sixteen-fold increase in China-Africa trade.
Second, SA’s trade and investment profile in Africa is geographically limited: last year, almost 90% of SA exports to the RoA were absorbed by SADC economies. SA is poorly aligned to most of Africa’s largest and/or fastest-growing markets. In 2011, 0.5% of SA exports to Africa were directed to Egypt, and 4% to Nigeria.
This contrasted with China’s focused export strategy—in 2011, 16% of Chinese exports to Africa were directed to Nigeria, and 13% to Egypt. Of the continent’s ten fastest-growing economies, South Africa enjoys strong access in Zambia and Mozambique, but gains are moderate across North, West and much of East Africa.
Third, SA’s weak economic diplomacy hinders more fluid commercial gains. The state-led penetration of African markets by leading emerging economies, such as China and Brazil, has shone a torch on the manner in which the historical misalignment between SA state and private sector objectives and strategies on the continent has tended to subordinate the country’s commercial advantages outside of its immediate environment.
These shortcomings shine a torch on South Africa’s ability to act as the continent’s commercial “gateway”.
SA’s arc of competitiveness currently includes its neighbouring countries, as well as Zambia, Malawi, and, to some extent, Angola, southern DRC and Tanzania. Beyond these markets, SA’s real competitive edge wanes. Meanwhile, alternative regional hubs are emerging - firms realise the need for a multi-entry strategy to access deeper Pan African gains.
Much of SA’s long-term competitiveness rests on the tone, scale and scope of engagement with the rest of the continent. In essence, Africa must be placed at the centre of SA’s foreign and commercial policies. Meanwhile, a realistic stance on the country’s gateway status should be adopted, manufacturing competitiveness must be elevated, and a wider arc of economies incorporated in SA’s bid to align more clearly to the nexus of Africa’s growth potential.
* The report: EM10 and Africa: South Africa in Africa - a steady, yet narrow, ascent, written by Simon Freemantle and Jeremy Stevens, can be accessed here.