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SOUTH AFRICA: Mutually Beneficial Trade With India a Key Objective

Louise Redvers

JOHANNESBURG, Jul 20 2011 (IPS) - South African companies are being urged to use the leverage of its government’s strong political relationship with India to develop new business and investment opportunities.

Now a member of the BRICS emerging economies grouping alongside Brazil, Russia, India and China, South Africa, is in a strong position, experts believe, to enhance its South-South co-operation.

Trade volumes between South Africa and India doubled from 2007 to 2010, with India becoming South Africa’s sixth-largest destination for exports and its ninth-largest source for imports.

South Africa’s minister of trade and industry, Rob Davies, said he believes there is huge potential for furthering mutually beneficial trade exchange and increasing investment channels between South Africa and India.

Speaking at the launch of the India Africa Business Network (IABN) at the University of Pretoria Gordon Institute of Business Science (GIBS), Davies, said world trade patterns were changing and that South Africa was in a good position to seize new opportunities.

“The African continent is now in a fortunate position where there is now a diversity of trade and investment partners,” he told an audience of Indian and South African business leaders and bankers at the GIBS Sandton campus in Johannesburg.

“No longer are we confined in terms of trade and investment to the old powers that we used to know in the past,” he said.

“We now have broader opportunities, particularly from BRIC (Brazil, Russia, India and China) countries being here on the African continent, and India is of course among them.”

He added: “There’s a very solid commitment from the South African government and our institutions to support South African businesses in becoming more involved in India.”

The minister welcomed the IABN as a way to help grow business relations and address what he called a “mindset issue” relating to how South African companies could position themselves better among dynamic markets.

The IABN will be run out of GIBS’ newly-formed Centre for Dynamic Markets (CDM) and will complement existing networks such as IBSA (India, Brazil and South Africa) and the India and South Africa CEOs forum co-chaired by leading Indian industrialist Ratan Tata and Patrice Motsepe, executive-chairman of Africa Rainbow Minerals.

The new network’s founder and director, Abdullah Verachia, described IABN as a “knowledge hub for India-Africa commerce” promoting exchange between business leaders and educational institutions in both countries.

He said: “We want to provide a forum where senior South African and Indian government and business leaders can meet and interact so as to increase trade and investment between the two economies.

“There are incredible opportunities for South African businesses in India, which has a population in excess of one billion. The two countries are also on the first tier of emerging market economies and both face similar challenges of poverty and inequality.”

He agreed with Davies that the political foundations that united the two countries through their anti- colonial struggles provided a strong platform for economic engagement.

“It is now how we leverage that that counts,” noted Verachia, who is also a director at the Johannesburg-based Frontier Advisory strategy and research company.

Indian investment in South Africa is estimated to be more than six billion dollars with several major Indian multinationals such as Tata, Reliance, and Mahindra and Mahindra having established a firm foothold in the local market place.

This week Tata is due to begin construction on a vehicle assembly plant in Rosslyn, outside Pretoria.

Although details are being kept firmly under wraps until the launch on Jul 22, the factory is believed to be the first of its kind in South Africa and will assemble pre-manufactured parts to produce light commercial vehicles, which are currently imported into the country.

India’s High Commissioner in South Africa, Virender Gupta, told IPS: “Tata has been importing vehicles to South Africa for a long time and it was the logical step to start manufacturing here.

“It’s a very significant development and I would really like more Indian companies to go that route, of creating manufacturing facilities and jobs here in Africa.”

South African investment in India is so far only at around the 250 million dollar mark, spearheaded by SABmiller, First Rand (the first African bank to get an operating license in Africa) and Airports Company South Africa, which won a lucrative contract to rehabilitate Mumbai Airport.

Verachia said the aim of the IABN was to help address that imbalance and help more small and medium South African businesses find their way into the Indian market.

“If you look at Indian investment coming to South Africa, it is in a second wave through smaller businesses, and we as South Africans need to look at that see how we can take advantage of similar opportunities in India,” he explained.

Davies said that mutually beneficial trade was South Africa’s key objective going forward and that greater engagement with emerging economies gave them an “historic opportunity to create new patterns of trading”.

“The dialogue we are having at the moment is looking at the areas where we are directly competitive and those where we are complementary,” he explained.

“The questions are, can we not identify the complementary areas and prioritise those and so contribute to both growth and employment in both of our countries?”

Davies said South Africa currently exported primary or scrap products like coal and wood pulp, while India exported value-added items like petroleum oils, cars, pharmaceuticals and mobile phones.

“We need to find a balance between competiveness and co-operation,” he said, something he believed the Cape to Cairo Free Trade Area would help achieve, as it would create a larger single market of Africa nearer in size to other BRIC economies.