SOUTH-south co-operation in trade and economic relations might not be the magic bullet SA hopes it will be, a leading trade economist has warned.
Fired by the global downturn, which has hit advanced economies the hardest, SA’s appetite for expanded north-south partnerships has given way to a desire for stronger ties with high-growth markets such as India and China. These countries have shown more resilience .
The state’s strategic change in geopolitical focus has the backing of the broader business community, with Business Unity SA president Jerry Vilakazi last week pledging to undertake active research and trade and investment promotion initiatives with countries such as Brazil, China and India in the coming months.
However, deeper analysis of what the implications would be of stronger ties with other countries in southern regions was required before changing industrial and trade policy. Trade Law Centre of Southern Africa associate Colin McCarthy warned that closer ties with the south might not be a panacea for SA.
Citing the heterogeneity of the south, McCarthy said African economies, dominated by primary products, were no comparison to the likes of Brazil, China and India, which were economically diversified with sophisticated manufacturing sectors. Even SA was small in comparison and lacked diversified manufacturing capacity and the formidable skills pool of countries such as India.
African economies needed to diversify economic growth to stop their dependence on the export of primary commodities. However, larger, industrialised economies of the south had a competitive advantage in exactly the products that would be the prime candidates for export-oriented African industrialisation.
“Can any African country compete with the capacity and ability of India and China to produce low-cost, labour-intensive goods? Even if nominal wages are lower in Africa, productivity enters the equation, setting much lower levels of unit labour cost in India and China that will severely impede exports to these markets.”
McCarthy said SA was unlikely to be able to compete with the likes of China and India in anything other than niche markets, citing extensive state support for domestic producers in these countries.
But there are also concerns about a lack of co-ordination in trade and industry policy objectives and a lag in the implementation of SA’s national industrial policy framework.
Vilakazi said SA needed to have greater alignment between these policies. Business Unity SA was also concerned that limited progress had been made with the implementation of the industrial policy and its action plan.
Trade and Industry Minister recently said a revised version of the industrial policy would be released next year.
lerouxm@bdfm.co.za