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Lack of planning makes SA a victim to global whims
June 25, 2009
By Tseko Nell
On June 16 the advanced emerging economies of Brazil, Russia, India and China (Bric) formally agreed to promote trade among themselves and position themselves strategically on the global political economic scene.
They seek to boost their economies and leverage their comparative economic advantages to access sources of raw materials and markets for their manufactured goods.
The exclusion of South Africa from this group left a bad taste, as this country is a member of the India, Brazil and South Africa (Ibsa) group, which seeks to promote trade among the developing countries of the southern hemisphere. Now Brazil and India have joined Russia and China to formally launch the Bric group.
Ibsa was established to promote south-south trade through the respective strategic regional roles played by its members: India in the Asian subcontinent, South Africa in southern Africa and Brazil in Latin America. These advanced emerging economies fall between developed economies and economies in transition. They have good economic infrastructure serving their domestic markets and the regional neighbour markets, and they enjoy a good measure of political stability.
South Africa's economy is underpinned by a well-established mining industry that generates substantial export revenues and has led to a vibrant financial services sector and a growing manufacturing industry.
South Africa is a bridgehead to the mineral-rich African markets south of the equator. The rand is the sixth-most traded currency globally and often serves as a proxy for investors' sentiment towards emerging markets.
South Africa's trade is largely with the developed countries of the West and Japan, with major exports being raw and semi-processed mineral resources. In turn, South Africa imports high-value-added manufactured products such as cars, electronic equipment and industrial machines.
Minerals contribute substantially to our export revenues and foreign currency reserves. Volatile inflows of portfolio and foreign direct investment come on the back of the existence of extensive mineral reserves in sub-Saharan Africa.
Our balance of trade and current accounts tell a story of a nation of consumers of imported high-value-added goods, rather than producers of goods and services to supply our own demands as well as those of our neighbours. The recent economic growth trend of about 5 percent a year was on the back of growth in consumption expenditure of households, rather than increased productive capacity. Part of that consumption has to be met through imports, including even food.
As a country we have not successfully leveraged our strategic role in sub-Saharan Africa. It is not clear where the fault lies in this failure. Is it government foreign policy, or the private corporations invested in South Africa failing to seize opportunities?
Through international trips undertaken by our government delegations, at times including business representatives, it seems that the government has done its best with the volumes of memorandums of understanding, bilateral and multilateral agreements that seek to promote trade and investment among the signatories.
South African companies have not taken advantage of these opportunities, either by accessing export markets for their manufactures or importing equitably priced industrial machinery to increase the productive capacity of the economy. Instead, South Africa and southern Africa have become a dump for Chinese textiles, cars and high-value-added white goods.
India and Malaysia have also accessed the local market to sell their cars and information technology products.
China has caught up with the multinationals of the West and now has a good presence through banks, car makers and mining companies. India's Tata and Mittal have arrived, and Malaysia's Proton is here. Where are patriotic South African companies in these countries that we have agreements with? Why are local firms not playing a role in leveraging South Africa as a global or serious regional player?
There is something terribly flawed in our economic growth model. It lacks a sustainable economic development plan for future generations of South Africans. There is no long-range planning; our economic activity is defined by the whims and fancies of multinational companies in a one-sided globalisation play.
South Africa's national interest is subservient to the agendas of the West, Japan and China. Our government and business representatives are content to be wined and dined in the global cities of money and power. We are mere suppliers of raw materials and consumer markets for their manufactures. The world order needs to change economically, not just politically.
Black economic empowerment (BEE) is a feeble attempt to scrape something out for South African nationals, but has had the unintended consequence of breeding a class of comprador elites that serves the powerful institutional investors and rich family investors of the developed West.
The chosen few BEE elites are happy to be socially empowered. They unashamedly engage in conspicuous consumption and flaunt their wealth in the eyes of poor and unemployed South Africans. They all seem to have no clue what to do with their empowered status, as far as advancing the national interest and informing productive investment decisions that create sustainable growth for South Africa is concerned.
They are mutually envious and compete with each other for commissions and fees on facilitating deals. They have no qualms about fronting for foreign interests.
The majority of South Africans are becoming impatient under the grind of poverty and unemployment in the wake of the global economic meltdown and laissez faire, free market policies that have fallen short of promoting equity and shared growth and redressing past imbalances. It is in this vein that we are hearing calls from the working class for the establishment of national mining firms to arrest plunder and corruption and thereby contribute to sustainable economic growth and put the national interest on top of the agenda.
The signatories of Bric, Ibsa and others are driven by the motive of securing national interests and economic benefits for their peoples. Private and state corporations support and complement their governments' efforts through aggressive execution and implementation of bilateral and multilateral agreements.
As I write, Russian President Dmitry Medvedev is visiting Egypt, Nigeria, Angola and Namibia following last week's Bric summit in Moscow. What does this say about South Africa being the champion of African solidarity? Are we going to be devoured piecemeal by the modern predators and plunderers of our natural resources? I do not know. Nkosi sikelela iAfrica.
Tseko Nell is the chief economist in the Department of Minerals and Energy. The views expressed are his own
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