South Africa has succeeded to reinsert its economy back into world trade following a long period of internal political difficulties and international reactions to the apartheid regime. The ratio of trade in goods and services to GDP rose from 41% in 1994 to 53% in 2011, indicating that the international exchange of goods and services has been an ever more important element of economic activity in South Africa in the post-apartheid era.
But since the mid-1990s, the trade sector has not been able to keep up with developments in world markets — especially in intermediate goods. South Africa‘s position in the global trade architecture has remained constant or even deteriorated slightly since 1995.
This flat trend contrasts with the performance of its Brics partners (Brazil, Russia, India and China) who continued to deepen their integration into world trade supply chains after 1995.
South Africa has significant interests in the Southern African Development Community (SADC) region and in regional integration. Our country dominates the region economically, accounting for 41% of SADC’s total trade and about 63% of SADC’s GDP.
South Africa also has the requisite economic capability and levels of diversification that are required to drive economic integration in a manner that is mutually beneficial to the region — technology transfer, reduce poverty, foster social development and promote collective protection of the environment, particularly in the case of shared (trans-boundary) natural resources.
Our nation has more importantly also emerged as a key player in global institutions.
In addition to regional and continental membership, South Africa is a member of the International Monetary Fund, the World Bank, the World Trade Organisation and the United Nations system.
With other emerging markets, our country is playing a pivotal role in re-shaping global governance and financial and trade architecture. South Africa’s membership of the G20 group of advanced and emerging economies is in line with the shifting balance of global economic power. In 2011, South Africa also became the fifth partner of the Brics block.
The strategic role of these emerging economies cannot be overstated.
The early 21st century has seen the beginning of a considerable shift in the global balance of power. Major international governance challenges can no longer be addressed without on-going co-operation of the large countries of the global south.
Since emerging market countries, especially the Brics countries, began their steady climb, international cooperation has been faced not only with new opportunities, but also with a number of specific challenges. In the past decade south-south trade has expanded more quickly than north-south trade.
South-south investment too has shown unprecedented dynamism driven by complementary structures in the two regions — African raw materials for industrial, manufacturing and service industries. Investors from the south often have important regional know-how, use appropriate technologies and prove more willing to take business risks in a difficult political environment. A further indicator of the increased importance of south-south cooperation is the fact that countries in the south have become an additional source of official development assistance.
While the positive sides of the current south-south dynamism are to be seen primarily in the increased inflows of resources, especially to the benefit of poor developing countries, many African states face major challenges because of increased dependence on raw materials and the greater pressure of competition from Asian countries in the case of light manufacturers.
An important initiative resulting from the Brics grouping is the proposal for the creation of a Brics bank.
In essence this would be a development-focused finance institution to support and drive commerce between Brics economies and south-south cooperation. While it may be necessary to develop a financial institution to support trade and development within the Brics, the strategic question for the Africa continent is how the Brics bank will benefit African business and the African development and integration agendas.
The key mandate of the proposed Brics bank is that the bank will direct sovereign wealth to serve the development needs of the developing economies. In essence, a south-south bank.
The multi-lateral bank may emulate Brics financial institutions such as Development Bank of South Africa, China Development Bank and the Brazil Development Bank, which have direct capital to designated “strategic” projects in the domestic economies as well as projecting commercial interests abroad.
South Africa’s economic weight and growth spillovers to the rest of the region have traditionally underpinned its key role in trade and economic integration initiatives in the region. Besides its important role in the Southern African Customs Union, South Africa is also engaged in on-going liberalisation efforts within SADC.
Our country’s growing role and importance not only on the African continent, but as a regional power will continue to develop and grow in significance in the coming years.