Tuesday, August 3, 2010

President Zuma to lure BRIC for economic growth in upcoming trip

President Jacob Zuma goes to Russia and China this month, part of a push to open new trade and investment routes to the fast-growing emerging economies.

The trips come on the heels of a state visit to South Africa by Brazilian President Luis Inazio Lula da Silva during last month's soccer World Cup that underscored the importance emerging countries are placing on boosting mutual trade.

They also mean Mr Zuma will have visited all four of the BRICs countries - Brazil, Russia, India and China - in a little over a year after taking office.

"It's very telling," said Martyn Davies of Frontier Advisory, a Johannesburg-based consultancy. "This year Zuma will have been to all four BRIC economies. That is quite something."

First stop for Mr Zuma will be Moscow on August 5-6, where he will hold talks with President Dmitry Medvedev, who made his maiden trip to Africa a year ago although he did not visit South Africa, the continent's biggest economy.

President Zuma will then go to China on an official visit towards the end of the month although final dates are still being drawn up, a foreign ministry spokesman said.

The Russia trip has a formal focus on building ties in sectors such as agriculture, defence and mining, although it will also enable Mr Zuma to get a glimpse of how Moscow oversees an economy set to grow twice as fast as his own this year.

With forecast expansion of just 2.3 percent this year, South Africa stacks up less favourably against China and India, the reason that BRICs is just BRICs, and not BRICSA, as many policymakers in Pretoria would wish.

To this end, the ruling African National Congress (ANC) is in the middle of major soul-searching, in particular over how to tackle the chronic and persistent unemployment that has tended to cap annual growth at 5 percent, even in the best of times.

Many ANC officials are starting to regard the success of the BRICs economies as proof that the state should be doing more, not less, to nurture growth - a departure from the free-market orthodoxy that has prevailed since the end of apartheid in 1994.

"Pretoria's interpretation of what's driving BRICs is that it's very much a state-capitalist approach," Davies said.

More trade, more competition?
At a more practical level, Mr Zuma's trips are also part of the push to open up new markets for South African exports - another part of the government's plans to boost growth and create jobs.

Yet it could also have the effect of exposing the relative lack of competitiveness in an economy built on mining and struggling to adapt to the realities of the post-apartheid era.

In particular, the labour market remains hamstrung by unions who occupy a privileged position in society and goverment because of their prominence in the fight against white-minority rule and have held frequent strikes to demand above-inflation wage rises.

A World Bank study published last week showed South African unit labour costs in 2008 were higher than any other mainstream emerging market apart from Morocco.

And South Africa is perceived as an easy place to do business, ports came out as exceptionally sluggish, taking an average 43 days to clear a standard unit of cargo, compared to 37 in Nigeria, 30 in China and just 16 in Argentina.

"South Africa is exporting far less industrial output and attracting less foreign direct investment (FDI) than many in the same peer group," the World Bank report said.

"More significantly, it is not exporting or attracting FDI as much as it needs to tackle its twin challenges of high unemployment and widespread poverty."

Sourced by SA - The Good News via Reuters