Are South African companies bold and strong enough to take advantage of the opportunities presented by the country’s participation in the $17 trillion (R208 trillion) Brics economy?
The answer to this question is an emphatic “Yes!”. Buoyed by their strong pedigree on the African continent, South African businesses are beginning to penetrate other Brics markets to slug it out, and in some instances collaborate with their Brics counterparts, to exploit opportunities in the Brics arena.
Brics countries (Brazil, Russia, India, China and South Africa) are home to roughly 46 percent of the world’s population, so entry into these markets exposes companies to huge consumer bases, and therefore a likelihood to rake in big profits.
South Africa’s most powerful business lobby groups, the Black Business Council (BBC) and Business Unity South Africa (Busa), have noted that local companies are profitably engaged.
Trade and Industry Minister Rob Davies was quoted in the Moscow media on Friday as saying that South African companies were making inroads in Russia, thanks to the Western sanctions against the country, which is accused by both the US and EU of funding and arming a rebellion in eastern Ukraine.
In August last year, Russia retaliated to the Western sanctions by imposing a ban on beef, pork, poultry, fish, fruit, vegetables, cheese, milk and other dairy products from the US, Canada, the EU, Norway and Australia.
They then added flowers and chocolate this January to its list of banned food products from the EU, costing EU farm exporters to Russia more than 11 billion euros (about R148bn) a year.
The ban on food imports from the EU has created food shortages in Russia, which needs to be filled by food suppliers from countries like South Africa that do not support the sanctions against Russia.
“We do know that there are sectors where the traditional suppliers of the Russian Federation have been disrupted. This has created opportunities for other suppliers to move in and occupy some of the space.
“A number of our business people have moved in to take advantage of that space,” Davis told Russia TV on Friday.
South Africa’s forays are not only limited to Russia. Brazil has been singled out as the Brics market where local companies have enjoyed better market penetration.
“Research indicates that there has been a lot of business activity between South Africa and other Brics nations since South Africa’s admission (into Brics) in 2011. South Africa’s foreign direct investment into Brics countries has been increasing steadily since 2008 with a noticeable peak since 2011 onwards.
“The total capital investment exceeds R20 billion and continues to grow. The favourite destination is Brazil, followed by China, Russia and India,” explains Pule Mokoena, BBC acting chief executive.
Busa is also bullish on local companies’ grabbing an even bigger share of the Brics economic pie despite South Africa consistently been falling in global competitiveness over the past six years, not withstanding frequent labour disruptions and electricity blackouts that hamper the economy.
“Our ranking is a concern and all stakeholders should work towards improving on the areas of concern so that South Africa ranking improves. Many economies have strengths and weaknesses and thus we must take advantage of the synergies in the Brics economies to build a stronger economy,” says Khanyisile Kweyama, chief executive of Busa.
She also points out that South Africa brings its own strengths into the Brics bloc, including mining industry experience, high-tech mining exploration, smelting and refining experience, vehicle manufacturing and a competitive financial services sector.
Russia is oil-rich and experienced in nuclear technology, but other Brics are strong manufacturers with strong export capabilities.
“South Africa continues to be a gateway to the rest of the continent and we are also rich in natural resources, making us an attractive partner in the Brics bloc,” adds Mokoena.
The BBC and Busa, which both have representatives in the Brics Business Council, are excited about the formation of the Shanghai-based New Development Bank (NDB) or the Brics Bank, which is expected to start funding infrastructure projects from April next year.
The NDB has been capitalised to the tune of $100 billion and will also manage a $100 billion emergency reserve currency, which will be used by Brics countries to protect their currencies from severe depreciations in the event of external shock.
The NDB will reduce dependence by Brics countries on Western-led global finance institutions, the World Bank and the International Monetary Fund (IMF), and offers an alternative funding source for developing economies.
Another attractiveness with Brics Bank is that it will not attach unfair conditions on its loans to the borrowers, unlike the World Bank and the IMF which forced developing countries to adopt the so-called structural adjustment policies as part of their loan packages.
These policies forced developing nations to follow a mixture of austerity measures, privatisation, and opening up their markets to foreign competition. More often than not, these policies had a devastating impact on the economies of poor countries.
Cash-strapped electricity parastatal Eskom, currently facing a more than R200 billion shortfall in its capital expenditure programme, is considering sourcing funding from the Brics Bank for the construction of its power stations and transmission infrastructure, according to Eskom chief executive Brian Molefe.
“The NDB will give access to equity funding to South Africa’s critical projects, particularly for infrastructure. The NDB would also complement funding from key development finance institutions such as the Development Bank of South Africa.
With a combined GDP of $17 trillion, the Brics nations have economic clout that rivals that of the US, the world’s economic and military superpower, and may even surpass the US in the near future owing to the higher growth rates in some of the Brics nations.
* Andile Ntingi is CEO and co-founder of GetBiz, an e-procurement and tender notification service.
** The views expressed here are not necessarily those of Independent Media.
The Sunday Independent