Wednesday, October 21, 2009

Willemien Denner, a tralac Researcher, comments on South Africa and Brazil furthering South-South trade.

Since the 1990’s Brazil and South Africa have gained prominence in international relations. This is attributed to the regional importance of the Brazilian and South African economies and increased financial and commercial liberalisation programs. Trade between South Africa and Latin America has also grown significantly over the last few years, with Brazil currently being South Africa’s largest trading partner in Latin America.

Recently President Jacob Zuma and the Department of Trade and Industry have reiterated the importance of furthering South-South trade for South Africa, especially trade with the Latin American countries.

President Zuma spoke at the South Africa-Brazil Roundtable Business Forum which was held in Brazil on 8 October 2009. The delegation included representatives of 45 companies which are interested in expanding trade and investment with Brazil in the areas of energy, mining, finance, infrastructure and pharmaceuticals. The President emphasised that South Africa has mainly focused their exports on raw materials to Europe and North America and that South Africa currently aims to find partners among the powerhouse economies of the South. African countries, including South Africa, have already established trade and investment cooperation framework arrangements with South American countries. These arrangements will enable South African businesses to explore the potential for trade and investment in Brazil, while providing opportunities for South African investors.

A Memorandum of Understanding (MoU) has also been signed by the Brazilian Ministry of Development, Industry and Foreign Trade and the South African Department of Trade and Industry. The MoU aims to promote trade and investment through the development of an implementation plan that will focus on the structuring of trade and investment initiatives to benefit both South Africa and Brazil.

The Department of Trade and Industry also identified the Latin American region as a destination for South Africa’s exports and have commissioned a study on the opportunities for increasing trade with Latin America. Although the results will only be discussed on Thursday this week, an important preliminary finding of the study is that the export potential to Argentina, Brazil, Chile, Mexico and Venezuela is estimated to be US $ 200 billion.

South Africa is also focused on the promotion of intra-African trade and investment. South Africa has become one of the biggest investors in sub-Saharan Africa in the sectors of mining, electrical power, financial services and telecommunications. Brazil is the driving force for the South American continent on the other hand. This makes the relationship between South Africa and Brazil important for the advancement of the broader development of the African and South American regions. According to President Zuma the global economic crisis has shown the need for the reconfiguration of the global economy. The development of South-South relations must be at the centre of this change. Countries like Brazil and China has been leading the shift in the global economic relations, contributing to the rapid growth of the share of developing countries in world trade.

The current trading relationship between South Africa and Brazil is exemplified by the following:

* The value of South Africa’s total imports from Brazil has increased by 2% from 2007-2008. In December 2008 the total value of Brazilian imports was approximately US $ 1.6 billion.
* South Africa’s exports to Brazil for the year 2008 represented only 1% of South Africa’s total exports to the world. However, South African exports to Brazil grew by 26% in the period 2007-2008.
* The top ten products, in terms of Brazilian imports represented 59% of the total South African imports from Brazil. The top product sector was exports of repaired imports; imports of returned exports (24%) followed by live animals, animal products (9%); animal or vegetable fats and oils (8%); machinery (3%) and food, beverages and tobacco (3%).
* The top ten South African products exported to Brazil represented 64% of South Africa’s exports to Brazil. The top five product sectors were base metals (19%); mineral products (16%); machinery (9%); chemical products (5%) and plastic products (4%).
* Although South Africa currently only exports a limited amount of their total exports to the Latin America region, exports to most of these countries, including Brazil, Argentina and Chile, have grown over the last few years. As South-South trade becomes increasingly important, Brazil has the potential to provide South African businesses with investment and export opportunities.

Source: World Trade Atlas; BuaNews