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What does BRICS mean for the road freight industry?
As The Economist points out, Africa is one of the world’s fastest growing regions: four of the world’s top 10 fastest growing economies are on the continent – and that growth is taking place in the midst of the rise of emerging markets that are redefining the global economic landscape. To many, the notion that China soon may be the world’s biggest economy is more a matter of fact than a prediction to be fulfilled.
In this context, how does South Africa fare as a gateway to Africa at the level of road infrastructure; and what economic and investment significance does it take on in “the new economic reality”, as some have described it?
South Africa’s inclusion in the former BRIC, the powerful emerging market group comprising Brazil, Russia, India and China (now BRICS), has given the African continent new geopolitical significance, as frequently pointed out by Minister of International Relations and Co-operation Maite Nkoana-Mashabane.
In practical terms, Minister of Trade and Industry Rob Davies says South Africa is helping neighbouring African countries to develop transport corridors in order to boost regional integration and create a larger marketplace for Africans. That spells a greater opportunity for importers within the region, and exporters outside it who are set to benefit from regional integration efforts in the BRICS bloc and the accompanying corresponding infrastructure agenda.
With more than 75% of the top 300 global companies in consumer goods and distribution projecting an increase in consumer spending in the BRICS countries, according to a recent KPMG study, a true African gateway holds massive potential for South Africa as the continental connector.
South Africa currently exports three to four times the value of goods that it imports from neighbouring Southern African Development Community (SADC) countries, and the government says it wants to work together to “set common standards and develop common strategies” for road infrastructure. Those standards are emerging in the context of greater enthusiasm on the part of fellow BRICS countries to invest. India, for one, says it expects to reach a preferential trading deal with the Southern African Customs Union by the end of the year, as it seeks to expand its economic footprint on the African continent. Brazil and Russia have programmes in place that put current trade and trade targets into arguably the most aggressive economic partnerships yet.
Added to it all are the numbers released by the Department of Trade and Industry, showing that two-way trade between China and South Africa reached R119.7 billion ($17.9bn) already in 2009, enabling China to surpass the United States as South Africa’s largest trading partner.
Now, a $1-trillion African free trade area (FTA) will serve as a major boost for the BRICS grouping, says International Marketing Council of South Africa chief executive officer, Miller Matola. The intention points to a trade context in which logistics will play a central role.
Leaders of 26 African countries have agreed to launch negotiations formally to establish a “grand free trade area”, pulling together three regional economic communities, namely: the Common Market for Eastern and Southern Africa, the East African Community and the SADC.
Davies states that the move will open up a market of 26 countries consisting of 500 to 700 million people – and it is set on the back of the North-South Corridor.
With the latest report on the long-term growth outlook for the EMEA countries (Europe, Middle East and Africa), which demonstrates South Africa, Turkey and Saudi Arabia are the markets with the most promising 10-year growth outlook, South Africa is most likely to serve its role as a gateway to Africa through driving integrated regional growth using the transport corridor.
South African Institute of International Affairs national director Elizabeth Sidiropoulos says, “The invitation to South Africa to join the BRICS carries symbolic significance as an acknowledgement of the country’s role in Africa and on the global stage.”
She adds, however, that it does not mean there is room for anything but a pragmatic approach, according to her findings.
While BRICS membership presents economic opportunities for the country, it is not automatic in Sidiropoulos’s view.
Our own environment needs to attract foreign direct investment from the other BRIC nations.
The new North-South Corridor may go further than any effort to date toward achieving this. So far, the plan has been to link eight countries across southern and East Africa; now there are calls to ultimately cover the 26 countries involved in discussions for a grand FTA.
Running along the two main trading routes in Africa, the corridor – in its inclusion of eight countries – would link South Africa’s Durban port and the Copperbelt area of the Democratic Republic of Congo (DRC) and Zambia, as well as the Copperbelt and the Tanzanian port of Dar es Salaam.
With the commodities boom and demand from China and emerging markets, the need for the corridor is well understood of the grand FTA touted by Davies as containing enormous economic opportunity.
Beyond minerals and the value for energy in the region, the project is designed to limit bottlenecks and the costs of trade between the southern African states involved.
For importers using South Africa as a gateway, as well as export-oriented companies seeking to take advantage of BRICS status via export-driven access to emerging economies, the existing North-South Corridor appears to be good news all around. Efforts to expand it across more countries certainly positions the continent for good long-term prospects for regional integration.
Efforts to expand it across more countries certainly position the continent for good long-term prospects for regional integration are successful for a start and then matched by a solid infrastructure agenda willing to embark with the private sector and aid donors.
The ability to access African markets for investment based on South Africa’s influence and membership of the BRICS bloc means less fragmentation for companies seeking to do business, given the increased connectedness between markets that have until now been viewed in silos due to the relative difficulty of conducting business across borders.
‘‘If we are to realise our vision of creating a vibrant and integrated free trade area, it is vital that we develop the region’s physical infrastructure and capacity to trade. That is why the North-South Corridor pilot aid-for-trade programme is so important to our progress,’’ says Kenyan President Mwai Kibaki.
According to the Inter Press Service (IPS), faster border crossings and improved port facilities, railways and highways will enable producers and traders (particularly in landlocked countries) to transport their goods quickly and access regional and international markets more easily, stimulating economic growth and inward investment.
Kelvin Kachingwe from the IPS adds that in addition to upgrading infrastructure, the initiative will “simplify regulatory processes to speed up cross-border clearing procedures, harmonise transit and transport regulations, as well as simplify administrative requirements.”
Garreth Bloor
