Global competitiveness and African trade

Chi Chi Maponya, Brand South Africa’s chairperson, said an Africa with no borders will turn the continent into an integrated force.AFRICA is on a quest to improve its global competitiveness. With increased investment from China, Japan and the United States – the last has hinted at extending its Africa Growth and Opportunity Act – conditions are right for success. However, experts say that before we can think about trading with these economic giants and being more globally competitive, African nations have to improve relations with each other.

Government representatives and private business stakeholders gathered at the Hyatt Regency Hotel in Johannesburg on 25 July to discuss pan-Africanism and African integration over the next 50 years. The event, hosted by Brand South Africa, looked at ways of improving trade, movement of people and economic competitiveness on the continent.

Brand South Africa chief executive Miller Matola was optimistic Africa would reach its full potential by 2063. He said that to overcome development challenges on the continent, trade needed to be bolstered between African countries and freedom of movement between borders needed to be increased.

Stanley Subramoney, the chairman of the Nepad Business Foundation, said one of the reasons Africa was not competitive was because the infrastructure was designed mostly for trade outside the continent. It was not built for intra-African business. He pointed out that all major roads in Africa lead to ports, while networks between cities were poor. “We do not have the infrastructure, which is the reason we do not trade among ourselves. Sub-Saharan intra-African trade is about 7 percent.”

Nepad Business Foundation’s chairman, Stanley Subramoney, said for intra-African trade to improve, infrastructure on the continent would have to be improved.He added that the projected infrastructure deficit from now until 2040 was approximately $93-billion (R907-billion) a year. And though Africa was spending about $48-billion on infrastructure annually, Subramoney said inefficient authorities that managed the trade corridors cost the continent as much as $17-billion.

A 20-foot container coming from Shanghai to the Port of Durban cost $2 000, but to transport that same container from Durban to Shanghai cost $350. This was because goods were not being shipped out of the country. “We are pulling imports but we not exporting. And it is because our economy is not competitive.”

More alarming, transporting that same container from Durban to Johannesburg cost $2 200. Subramoney blamed this on the use of trucks, which were inefficient. “There is a whole load on trucks leaving Durban for Johannesburg, but the same trucks are returning empty.”

The regional director of the African Development Bank, Ebrima Faal, said transformation of the continent’s economic structure would require stakeholders to finance these trade corridors between countries. Faal referred to the Programme for Infrastructural Development in Africa as an appropriate tool that would open up continental trade corridors. But to do that would require $360-billion. “It targets road, rail, airports and maritime ports that need to be in place to allow the continent to trade with each other and therefore create jobs.”

Minister in the Presidency, Collins Chabane, the continent faces a lot of developmental challenges but it does not mean there are no solutions for them. Seated beside him is Brand South Africa’s chairperson, Chi Chi Maponya.

Integration

For integration to take place, countries in Africa had to create an open environment for business, which would allow goods and people to flow across borders more freely. Taking these aspects into consideration, Matola said South Africa was the frontrunner when it came to driving integration. Indeed, statistics from the 2012/2013 World Economic Forum (WEF) Global Competitiveness Report show that South Africa is first out of 144 countries when it comes to ease of business.

Chi Chi Maponya, Brand South Africa’s chairperson, said the Department of Trade and Industry was leading talks on integrating the three regional trade blocs of the Southern African Development Community, the Economic Community of West African States, and the East African Community. Combined, these three regions are home to over 700 million people.

“In terms of trade, there is a lot of discussion which seeks to achieve a borderless continent. That is not to say there will not be any borders; they are there for the sovereign identity of every country and that has to be respected. But there is so much we can do together in building a common goal of making Africa an integrated force.”

She said Africans had to find a way to make movement of goods, services and people easier for each other. “Before a dollar moves out of the continent it should have circulated a number of times within these trading blocs and changed the lives of the people.”

Ebrima Faal, regional director of African Development Bank, said that for trade corridors to be more open it would need funding from stakeholders Minister in the Presidency Collins Chabane said attempts to make Africa borderless did not mean boundaries would collapse. Instead, it would make trade and contact between people more efficient. He referred to the system established by Kenya, Uganda and Rwanda whereby foreign businesspeople pay customs at a one-stop border post. Such posts were being established throughout Africa to make the movement of goods and people quicker and easier.

“While the physical boundaries will not collapse, the potential exists for all these countries to work together so that the system is efficient and the markets that our goods need to access [do] not face the same strain as [they] did in the past,” said Chabane.

Asked whether South Africans would embrace nationals from other African countries, Chabane said they had already been accepted in society. Africans from other regions had been trading in the country since 1994 and even owned property.

Xenophobia existed at grassroots level, he said, and was a result of South Africa’s isolation from the rest of the world during apartheid. “South Africans were not allowed to travel outside its borders, let alone to have a passport. It is very rare to find a South African on the streets of Harare, Lagos or Egypt trying to sell something because we have always been confined.”

Brand South Africa’s chief executive, Miller Matola, believes South Africa is increasingly becoming more innovative, which will help boost its competitiveness

Innovation

According to the WEF, there are three stages of development that define the competitiveness of a country. Weak economies are categorised as factor driven, emerging economies as efficiency driven and developed economies as innovation driven.

South Africa is an efficiency driven economy. But Matola said that in coming years, it could transform into an innovative market. The WEF report ranked South Africa far higher than its emerging market counterparts. “We are better than the Next11 countries in terms of innovation. And the same goes for the Brics countries. So though we cannot say we are there, we can look at South Africa and say we are increasingly becoming more innovative.”

South Africa is also a global leader in legal rights, regulation of securities exchanges, and efficiency of corporate boards, and it has strong auditing and reporting standards. It is second when it comes to availability of financial services and third in financing through the local equity market. All of these aspects open up the platform for innovation.

Chabane said it was up to South Africans to create the platform. “Once you have more skilled people, especially from various areas [of expertise], they will be able to create space to be innovative.” He pointed out the Square Kilometre Array project in the Northern Cape, which had the largest telescope in the world, and the arms industry as examples of South African innovation.

The Department of Science and Technology, Chabane said, was trying to create an innovative environment by co-ordinating the country’s research capacity and ensuring the science field was managed properly. “We hope with these efforts, at some point we will be able to increase the capacity of innovation that is in the country to make us competitive.”

Maponya said South Africa’s current industrialisation drive would unleash a lot of talent. As a result, the country would no longer be a consumer market but one that was creative. This environment, she added, would allow the “spirit of innovation” to thrive. “Each one of us must take a role and ask, ‘What am I going to do to contribute to this bigger picture?’ So when we look back at our achievements 50 years from now, [they will be] something we can all be proud of.”

Minister in the Presidency, Collins Chabane, said an Africa without borders will make trade more efficient and quicker, therefore making the continent more globally competitive.

SACF launch

Brand South Africa used the occasion to launch the South African Competitiveness Forum (SACF), an event that will try to identify the strengths and weaknesses in the country’s economy. It will be held on 5 November 2013.

According to Petrus de Kock, Brand South Africa’s research manager, the SACF would focus on five topics, namely: education and skills, products and services, governance and leadership, infrastructure, and foreign direct investment (FDI) competitiveness. “We have a very open economy to FDI and a very strong legal framework. We have to be open to those strengths.”

De Kock said South Africans would be encouraged to become active participants in the economy to achieve the goals of the National Development Plan (NDP), which included poverty alleviation, job creation, and quality health care. Brand South Africa had already reached out to business and the government for help in defining the kinds of competitiveness issues that affected the country’s reputation.

Reputation was a key indicator determining a country’s competitiveness, De Kock explained. In the Anholt-GfK Roper Nation Brand Index, which measures a nation’s reputation, South Africa retained its 36th spot – out of 50 – for a second consecutive year.

There will be two preliminary events leading up to the SACF. De Kock will host stakeholder input workshops on 30 August. Knowledge gathered at this event will be presented at the SACF. In September, Brand South Africa will be in Cape Town to co-host a youth dialogue on the NDP with the Graduate School of Business. Young men and women will be invited to express their views on the forum.