Direct benefits of Cape Town’s MyCiTi early phase Bus Rapid Transit system are skewed in favour of middle rather than lower income residents. Credit: Gail Jennings/IPS

CAPE TOWN, South Africa, Oct 2 2012 (IPS) - In South Africa, Bus Rapid Transit systems, which were pioneered to great effect in Latin American countries such as Colombia and Brazil, are being promoted as potentially effective ways of delivering improved public transport services to the urban poor. But experts question whether systems such as these can alleviate poverty to any meaningful extent.

Bus Rapid Transit, sometimes referred to as “rail on road” systems, are high-quality, high-capacity bus systems with their own right-of-way, dedicated bus lanes.

Today the TransMilenio in Bogota, Colombia carries around 1.6 million passengers every day, over 84 kilometres of segregated busway. In Curitiba, Brazil, about 70 percent of commuters use the BRT, and around 30 percent of passengers are “converted” private car users.

It is upon purportedly transformative systems such as these that the cities of Johannesburg, Tshwane and Cape Town in South Africa, Lagos in Nigeria and Nairobi in Kenya have pinned their transport hopes and dreams.

Early phases of multi-million dollar capital projects are operating in Johannesburg and Cape Town, and are set to soon launch in at least four other cities in South Africa.

But while it is too early to draw long-term conclusions about the impact of these transport systems, a number of researchers are asking questions and coming up with some answers about their ability to contribute to national goals of alleviating poverty.

James Chakwizira, a senior researcher in the built infrastructure department at the Council for Scientific and Industrial Research (CSIR), told IPS that although these high-quality services do have great potential for addressing public transport challenges within communities, the current initiatives such as Johannesburg’s three-year-old system, Rea Vaya, fall short of expectations.

He said because terminal infrastructure developments are located away from the marginal communities’ location, people from these areas need to use a minimum of two transport modes in order to access and use the routes.

Councilor Rehana Moosajee, who is on the Mayoral Committee Member for Transport for the City of Johannesburg, and is a Rea Vaya champion, told IPS that initially one of the key imperatives of the Rea Vaya system was to overcome apartheid’s spatial legacy and promote access and social cohesion.

“I think that now a lot more work will have to be done over a period of time in assessing impacts on poverty, as based on the city’s own multiple deprivation indices, the areas of highest multiple deprivation are further south of Soweto – a township to the south of Johannesburg – and therefore not yet reached by the service.

“Our own experience suggests that Rea Vaya commuters are certainly saving time, though, and we have also had some interesting accounts of property availability and take-up on certain parts of routes and the creation of economic activity,” she said.

At a December 2011 conference on Land Passenger Transport, Karen Lucas, an international researcher on transportation equity, supported the implementation of BRT to the extent that “these major infrastructure projects are needed to bring high quality, modern and efficient mainstream public transport services to inner cities.”

However, she noted “these services will serve only a minority of the travel needs of urban populations.”

Research released in July by the University of Pretoria’s Christo Venter and Eunice Vaz reached a similar conclusion. Using data from a small-sample household survey conducted in Soweto, they found that the time and cost benefits of the system “accrue largely to medium-income households rather than to the poorest commuters in the area.”

“To the extent that passengers can spend time and fare savings on other goods, Rea Vaya contributes to poverty reduction,” they found. The researchers also noted that Rea Vaya is priced higher than the cheapest available public transport alternative, commuter rail, which remains the mode of choice for the poorest commuters.

The average travel cost for Rea Vaya users comes to R10.20 (about 1.24 dollars) per one-way trip to work, as compared to R11.70 (about 1.42 dollars) for other modes of transport like mini-bus taxis, which most people used to take before Rea Vaya.

Overall, the direct benefits of Rea Vaya are skewed in favour of middle- rather than lower-income residents, the researchers concluded. They suggested that more specific targeting was needed for the BRT to deliver significant poverty reduction benefits.

The situation is similar with the City of Cape Town’s MyCiTi early phase BRT service.
African Centre of Excellence for Studies in Public and Non-motorised Transport (ACET) researchers Lorita Maunganidze and Romano Del Mistro used ACET Household Survey data to conclude that MyCiTi might not be of value to poor commuters.

“While poor commuters may benefit from more accessible, frequent and fast BRT services, ironically, these will be more expensive and in some cases unaffordable to them and therefore of no benefit,” the researchers said.

They recommend that the routing structure be revised and rationalised to make in-vehicle and trip distances shorter, particularly for the poor commuters who face the longest commuting distances and times; and that local BRT be tailored more specifically to work within the South African environment or under South African conditions.

Councilor Brett Herron, City of Cape Town’s Mayoral Committee Member for Transport, Roads and Stormwater, told IPS that it is not possible to look at the impact of a new BRT service on poverty, or on poor communities, in isolation from the entire public transport network.

“BRT is just one mode of transport and this mode alone cannot have expansive direct economic benefits to poor communities … BRT trunks alone are not going to bring about the level of change we require in order to universally benefit the urban poor.

“We will seriously address poverty only when we piece together all the complicated components of this puzzle; public transport is one piece – with changed land use, densification, transit-orientated development, all responding to new or improved public transport corridors, we will start to bring people to opportunities and take opportunities to people.”

Pauline Froschauer, project manager for Rustenburg Rapid Transport, which is currently in the construction phase, told IPS that instead of poverty alleviation, a transport project such as a BRT should be measured against what is usually its primary objective: the effect it has on levels of mobility and accessibility.

“At best one could say that by improving mobility and accessibility, there are positive ‘externalities’, such as city development, local economic development and poverty alleviation. But to try to measure this in one BRT corridor (such as the Soweto-CBD Rea Vaya) is, I think, misrepresentative. Until one has a reasonable network effect, improved mobility and accessibility will not be achieved.”

Chinese construction workers in front of new 90-million dollar five start hotel. / Claire Ngozo/IPS

China and India have caused an explosion of trade and investment in Africa in the past decade. Yet they are perceived quite differently: China has a reputation for economic ruthlessness, while India’s business interests are generally seen as beneficial to Africa.

But their investment in Africa needs to be viewed in the context of broader investment trends on the continent, trade experts said at the "Money, Power and Sex: the Paradox of Unequal Growth" conference organised by the Open Society Institute of Southern Africa, which is taking place from May 22 to 24 in Cape Town, South Africa.

Ultimately, it is the responsibility of African governments to set firm ground rules for foreign investment flow and ensure a direct relationship between trade and development, the experts said.

"We are not leveraging our regional economic communities or the African Union (AU) to get better deals and the kind of investment that we need," lamented Buddy Kuruku, policy advisor at the African Centre for Economic Transformation in Liberia.

If Africa would make development its priority, with the support of the AU, its 54 nations would quickly gain more control over emerging economies’ investments in their territory.

"World powers compete for a presence on the continent, and Africa can benefit from that. If the AU countries would work in solidarity, they wouldn’t need to fear India’s or China’s presence," said Zhongying Pang, professor of international relations at the Renmin University of China in Beijing.

Although it is still too early to tell what China’s and India’s impact on Africa will be, "it’s potentially more positive than negative," says Howard French, former New York Times bureau chief in China and a fellow with the Open Society Foundation researching Chinese migration to Africa.

"Africa has for a long time been stuck in a position with few options of whom it wants to trade with," French said.

With China and India competing for investment opportunities alongside Europe and North America, African nations now have a multitude of potential trading partners to choose from. And more leverage to set the rules.

According to the World Bank, Indian and Chinese foreign direct investment in Africa has grown dramatically. To date, China has been the largest single investor, aid-giver and trade partner on the continent, with 127 billion dollars in resource extraction and infrastructure deals in 2010.

India has much less financial muscle than China, but its influence in Africa is on a rapid rise. It currently accounts for 46 billion dollars in trade deals on the continent and has announced it will invest 70 billion dollars by 2015.

"The Chinese state is surely a major motor of economic activity in Africa. But India is equally striving to boost its investment in resource extraction on the continent," said French.

At the same time, exports from Africa to Asia tripled in the last five years, to 27 percent of total Asian imports, according to 2010 World Bank data, showing a clear trend towards rapidly growing South- South commerce.

This tendency has been heightened since South Africa joined the Brazil, Russia, India and China (BRIC) group of emerging economies in December 2010, now called BRICS.

China’s push into Africa is viewed more critically because it is largely based on massive state companies pursuing major public works and infrastructure projects, such as stadiums, highways and railroads, very often with state and multilateral funding.

"China has a very formalised policy to encourage Chinese interests and investment in Africa. India has no such policy," explained Kuruku. India instead follows a short-term investment outlook, with a two- to five-year strategy.

India’s engagement with the continent is primarily driven by private businesses and focused on acquisitions.

"That means Indian companies tend to generate more jobs and facilitate skills transfer, while only a very small component of Chinese investment in Africa creates jobs," Kuruku noted.

China says it is committed to reversing its negative image. The Asian giant plans to revise its Africa foreign policy, hoping this will provide further political advantages in Africa.

"We have learnt from criticism levelled at our investment policy. If China wants to continue to play a role in Africa, it needs to maintain its principle of non-interference, but also add others, such as multilateral interventions and careful policies on land ownership," said Pang.

Chinese enterprises in Africa also need to comply more strictly with local labour and environment regulations, facilitate the transfer of skills to African countries and upgrade their industries.

Others argue that India is getting off too lightly.

"India has invested in buying off agricultural land to fight food price inflation in its own country. India doesn’t have better labour standards than China. Exploitation, corruption and bribery are rife in India," argued Aniket Alam, a senior editor of the Mumbai-based journal Economic and Political Weekly.

Like China, India has been particularly interested in Africa to help meet its rising energy requirements, investing in nations with crude oil resources like Nigeria, Sudan, and Angola, he said.

China and India both have rapidly modernising industries and burgeoning middle classes with rising incomes and purchasing power. They have therefore demand not only for natural resource-extractive commodities and agricultural goods but also for diversified exports, such as processed commodities, light manufactured products, household consumer goods and food. All of which Africa can offer.

(END/2012)

NAIROBI, May 15 (IPS) – Economic and social growth have become the heart of the development agenda of the bloc of leading emerging economies known as IBSA (India, Brazil and South Africa) since it began focusing less on politics.

This is according to Michael Sudarkasa, chief executive officer of the African Business Group, a South African-based economic development and business consulting advisory services group.

It has been nine years since the IBSA forum was established, and it has impacted on aid effectiveness in Africa, says Sudarkasa, who has 20 years of experience in regional and international trade and business analysis, with a focus on private sector development.

"The IBSA dialogue forum has also been a catalyst for greater efforts within the South to explore ways that development aid can be mobilised from domestic resources to support developing countries."

IBSA has stimulated increased bilateral initiatives among Southern partners such as the Africa South America Strategic Partnership and the New Asian African Strategic Partnership, he says.

Excerpts of the interview follow.

Q: Are there specific examples of the impact of IBSAs success?

A: The success that the IBSA countries have had in working together has indirectly stimulated increased activity by all three nations, both independently as investors and as partners in other parts of the continent of Africa. And South Africa has emboldened efforts to engage with other Southern partners in South America and Asia.

Also, South Africa's participation in IBSA has to be considered as a key reason that the country was invited to become a member of BRICS (the grouping of Brazil, Russia, India, China and South Africa) and BASIC (the block of developing countries of Brazil, South Africa, India and China).

Q: Have there been any fundamental shifts of bi- and tri–lateral engagements within IBSA in an attempt to boost its impact?

A: There are none that are glaringly apparent. At the onset of BRICS, when South Africa joined the BRIC forum, there was some speculation that the new initiative, with China as the key driver, might overshadow IBSA.

However, the institutions of IBSA are quite strong, well defined, and all the IBSA members have reiterated their support of the initiative and heralded its value as a stand-alone structure.

Nonetheless, the potential rivalry exists between the two structures and as such there will likely be continued effort to distinguish IBSA from BRICS, and this may ultimately lead to more pronounced and visible shifts, and/or dynamics within IBSA.

Q: What have been IBSA’s best practices so far?

A: They include the development of joint technical committees involving the ministries of all three governments to explore technology sharing and joint projects, and the establishment of a fund to support lesser-developed countries within the three regions.

Q: What impact has the IBSA forum had on the livelihoods of people in its member countries?

A: Economically, IBSA provided a diversification opportunity for all three nations and bilateral trade grew. This cushioned them from a sure economic contraction had they remained solely focused on engaging with their historic trade partners in the North. Q: Has the global crisis compromised IBSA's ability to achieve developmental objectives in target countries?

A: If anything, the global crisis has strengthened the resolve of the three nations to engage economically and created an opportunity to look into other South-South economic partnerships.

Q: Is the IBSA initiative an important example of South-South cooperation that could provide a blueprint for future South-South partnerships in support of development?

A: IBSA has definitely become a poster child for the benefits of South-South cooperation, and a leading forerunner for the voice of the South in global multilateral structures. However, the fact that IBSA is a tripartite initiative, aimed in part at also serving as a bridge between the regions that the three countries represent, means that it would be difficult to easily replicate IBSA with three other countries from each region.

Q: What is the key thing to take away from the IBSA initiative?

A: IBSA has encouraged and will continue to encourage Southern nations to see each other as stronger potential partners, and has definitely set the trend for future South-South partnerships in support of development.

(END/2012)

Rail networks in Africa remain under-developed, proving a major obstacle to intra-continental trade. / Servaas van den Bosch/IPS

GENEVA, Apr 23 (IPS) – Though the World Trade Organisation (WTO) has long held that trade between African countries is too low, experts at the South Centre, an inter-governmental think tank of developing countries, say intra-continental trade is already significant in manufactured goods and promises a new path to industrialisation.

“Trade among African countries is very low. Last year, it stood at 10 percent of the continent’s overall trade,” Valentine Rugwabiza, deputy director general of the WTO, which seeks to reduce barriers and promote aid for trade, told IPS.

“Though Africa’s share in world trade is also very small – less than three percent in 2011 – it is growing very rapidly, particularly with emerging economies; while trade amongst African countries is stagnant.”

With a rigid division of labour inherited from the colonial era, Africa relies on a narrow range of exports and is over-dependent on primary products: in 2010, fuel extraction and mining represented 66 percent of its total merchandise exports.

According to Rugwabiza, lack of investment in infrastructure and non-tariff barriers of all kinds make trade between the 54 countries cumbersome.

“Whereas it takes 18 days to export products from Latin America and the Caribbean, it takes almost 33 days to do so from Africa,” she added, noting that it is also more expensive to ship a container from Africa than from any other part of the developing world.

For instance, shipping a container from South-east Asia costs 900 dollars, compared to 2,000 dollars from Africa; likewise, it costs 935 dollars to import a container from South-East Asia, and almost 2,500 dollars to do so from Africa. The Geneva-based South Centre, however, has a more optimistic view.

“In absolute terms, intra-African trade is low,” Aileen Kwa, trade policy officer with the South Centre, told IPS. “In terms of non-oil exports Africa’s internal trade is almost on par with its exports to the EU. Furthermore, the trade growth rate within Africa is the second highest after China and before the United States and the EU. Therefore, it is very promising, also in terms of the quality of exports.”

She explains that, with the exclusion of South Africa, only 10 percent of sub-Saharan Africa’s exports to the EU are in manufactured goods, a figure that rises to 27 percent for intra-regional trade.

“Most of Africa’s manufactured goods go to Africa. So if the continent wants to industrialise, the market that provides the best opportunities is Africa, not China, the U.S., or the EU.”

For Rugwabiza, however, the industrialisation of Africa will require not only strengthening of the domestic market, but also integration into the world market.

“Today, components of the same piece are produced in different countries all over the world. This is a huge chance for Africa to specialise in single tasks and insert itself into global value chains,” she told IPS.

“Some countries already do so, but they are still an exception. Mauritius, for example, produces pieces for H&M, (a major global clothing store). Since it has a reliable logistics and service sector, the multinational knows that it will receive the orders on time and, thanks to a stable and predictable legal environment, that there will be no unexpected regulations coming up,” she said.

Kwa notes that the picture is uneven: in some parts of Africa, intra-regional trade is larger than in others. The total exports of the East African Community (EAC) to sub-Saharan Africa already surpassed their total exports to the EU in 2000. Other countries like Zambia and Senegal also export more to Africa than to Europe.

Still, other regions display a bleaker outlook.

Rugwabiza belives that Africa, with its high dependence on trade with the outside world, is highly vulnerable to external shocks. This is particularly true of the agricultural sector, as the food crisis has shown.

“In 2008, Africa imported cereals for 15 billion dollars, with only five percent coming from the continent. Agricultural subsidies in developed countries, insufficient investment and low productivity in (domestic) agriculture and non-trade barriers (between African countries) are still a huge obstacle,” she added.

Shoprite (Pty) Ltd, for example, a South African multinational, spends 20,000 a week on securing import permits to distribute meat, milk and plant-based goods to its stores in Zambia alone. For all the countries it operates in, about 100 ‘single entry’ import permits are required each week, but this can increase to 300 per week during busy periods.

As a result of this legal red tape, there could be up to 1,600 documents accompanying each loaded Shoprite truck that crosses a Southern African Development Community (SADC) border.

But things can change. For example, the EAC has managed to substantially reduce the number of control points, while Uganda and Rwanda have set up a common border post that is now open 24 hours a day.

Kwa says that African countries’ over-dependence on imports from world markets, particularly in food, is mainly due to their loss of productive capacities.

She believes there needs to be some balancing between short-term and long-term goals. While in the short run countries must be able to import food quickly and as cheaply as possible to meet their immediate needs, they must, in the long term, produce their own food without relying on imports from developed countries that have an extremely unfair competitive advantage due to the latter’s massive government subsidies.

Relying on imports undercuts domestic producers and undermines their future capacity to produce. Therefore, countries may need to use tariffs and other trade policy tools to stop some of the imports, even from their neighbours, at least for some time.

“First countries have to increase their productive capacities and then trade will follow. The WTO always thinks about increasing trade, but the main question for Africa is how to increase its productive capacities. Then trade will naturally follow,” Kwa told IPS.

(END/2012)

MOSCOW, Apr 19 (IPS) – Indonesia’s keen interest in becoming the newest member of BRICS – a bloc of emerging-market nations comprised of Brazil, Russia, India, China and South Africa – has sparked off a round of debate on the future and efficacy of South-South groupings.

István Tarrósy, assistant professor of political science at the Department of Political Studies at the University of Pécs and managing director of the Africa Research Centre in Pécs, Hungary, said that Indonesia’s development statistics make the country a shoe-in for membership: it is the largest economy in southeast Asia and is a demographic giant with a population of 248 million people, making it the fourth most populous country in the world, ahead of even Brazil and Russia.

It also has an active labour force of 117 million people, as of 2011.

Indonesia has long been recognised as a leading actor in the developing world, most notably for its active role within the Non-Aligned Movement (NAM) ever since it hosted the Bandung Conference in 1955.

“Its voice has always been decisive in any issue connected with the then Third World, today, the Global South. In terms of South-South cooperation, and in light of a redefined system of North-South dialogue within a gradually more multi-polar world, Indonesia has its place among the top categories of states influencing how our transnational global world develops,” Tarrósy told IPS.

Furthermore, given the country’s “pragmatic foreign policy practices and long-term cooperation with countries of the region and beyond, Indonesia could strengthen the common voice of emerging economies via BRICS. With the potential entrance of Indonesia, BRICS would then need to redefine, or rather refine its status as (possibly) one of the most important inter-regional groupings of countries of the global South,” he added.

Another significant issue is the investment sector, on which developing or emerging economies rely heavily. Foreign direct investment (FDI) into Indonesia, and Indonesian FDI flown into other, less strong economies across southeast Asia and beyond, could be further encouraged by BRICS membership, which would facilitate better trans-regional cooperation.

For instance, it could pave the way for increased “South-South cooperation in Africa, with a more substantial Indonesian role in project generation and financing. In addition to China’s and India’s growing presence and involvement in the African continent, Indonesia could play (a bigger role), particularly if we (acknowledge) the growing amount of official development assistance (ODA) emerging economies have granted Africa,” according to Tarrósy.

Indonesia is one of Asia’s leading economic powerhouses; with last year’s economic growth recorded at 6.5 percent, the country is poised to overtake Russia in the regional economic race, said John Mashaka, financial analyst at Wells Fargo Capital Markets.

He told IPS that Indonesia recorded exports worth 204 billion dollars in 2011. Compared to its European counterparts like Greece, Italy and Spain, which are still floundering in the economic slush of the 2008 crash, Indonesia’s credit ratings shot up and the country’s economic outlook remains favorable.

Its domestic market is huge and the current economic boom can be attributed to its political stability and sound economic and monetary policies, which have attracted consistent FDI.

“In short, Indonesia is an economic power to be (reckoned) with and its decision to join the BRICS could have a huge impact in terms of the body’s credibility. Indonesian membership will definitely solidify BRICS’ capital composition, and also bring on board extraordinary fiscal capability,” Mashaka told IPS.

BRICS versus IBSA?

Thomas Lawo, executive director of the European Association of Development Research and Training Institutes (EADI) in Bonn, Germany, doubts that BRICS will be a major game-changer in global geopolitics in an increasingly multi-polar world, mostly because of its members’ divergent economic trends and political interests.

On the one hand, Russia is set to re-emerge as a strong global power with a dominant role in central and western Asia, along with India and China.

“But India needs to sort out its internal rifts and neighbourhood problems first, while China is becoming a strong force to reckon with in Asia, Africa and Europe. China is definitely the (primary) growth-engine of Asia and is stepping up its influence in the global economy (armed) with military strength to match its ambitions,” Lawo said.

Indonesia, on the other hand, is more comfortably clustered with South Africa and Brazil as a regional power and an economic anchor-country for the southeast Asian region, but lesser on a wider global scale.

Another possibility is the re-emergence of a politically stronger ASEAN, now that Burma (Myanmar) is opening up to its neighbours. In this context, the MIST countries – Malaysia, Indonesia, Singapore and Thailand – will become more relevant, if they can overcome their internal problems and play the regional integration card.

Alexandra A. Arkhangelskaya, head of the Centre for Information and International Relations at the Institute for African Studies at the Russian Academy of Sciences, explained to IPS that after the admission of South Africa, BRICS will likely be expanded to include Indonesia, Turkey, Australia, Nigeria and Mexico.

If this happens, she stressed, BRICS will be pushed to clearly articulate its specific identity in the international arena.

The rise of BRICS as regional bloc also raises the question of whether its role is very different from that of IBSA, the same group minus China and Russia.

BRICS has certainly attracted a lot of attention and it is widely accepted that the bloc will try to achieve certain broad economic reforms as well as attempt to restructure the Western-dominated global financial architecture.

Still, Arkhangelskaya believes that the extent to which IBSA will be forced to live in the former’s shadow will very much depend on South Africa, which is currently “sitting on two chairs”, as well as China’s role in BRICS and the world economy.

Experts fear that IBSA will be forced to dissolve in the light of BRICS’ expansion.

Some analysts still argue that IBSA and BRICS represent the old clash of India versus China; others believe it is more likely that the groups will find themselves on very different tiers of the South-South multilateral cake.

Although there is some overlap in core issues, the fact remains that the BRICS countries are more focused on economy, while IBSA is concerned with promoting democratic values and other causes common to the three countries, and has a distinct personality of its own.

Thus, IBSA can remain an instrumental and practical mechanism of the three countries representing three different continents, sharing their interests and strengthening their economic cooperation to further the interests of the South.

(END/2012)

JOHANNESBURG, Apr 3 (IPS) – South Africa needs to stop agonising over whether it deserves to be in BRICS and start focusing on making the most of its membership to leverage better trade deals.

That is the message from business leaders and academics following last week’s BRICS summit in New Delhi, which brought together the heads of state and government of Brazil, Russia, India, China and South Africa.

From the moment South Africa was asked to join the group there has been much discussion on whether the country really qualifies, and even the inventor of the BRIC acronym, Jim O’Neill, has made no secret of his doubts around the African country’s membership.

In a recent interview with South Africa’s Mail & Guardian newspaper, the global chairman of Goldman Sachs Asset Management said: "It's just wrong. South Africa doesn't belong in BRICS. South Africa has too small an economy… and in fact, South Africa's inclusion has somewhat weakened the group's power."

But Gus Mandigora, executive director for Trade Policy at Business Unity South Africa (BUSA), said the question over whether South Africa merited membership of BRICS was getting old, and what was important now was making the most of that membership.

"Our view is that we are members, so let’s get over that question of whether we deserve to be there or not," he said.

"Yes, BRICS is still in its infancy and yes, it is still a work in progress, but I think the question we should be focusing on is, not should we be there, but how can we use this platform and its opportunities to our advantage."

Mandigora, whose organisation led a delegation of more than 50 South African businesses to New Delhi – among them Africa Rainbow Minerals, the Development Bank South Africa and Standard Chartered – said he agreed that more needed to be done to "institutionalise" the role of business within BRICS.

"One criticism that is often made is that between summits nothing happens, so we need to ensure more work is done in between the summits to follow up on discussions," he said.

"These are still early days and we are still refining how we do things, but we are confident that we can get advantage for South African businesses out of the country being in BRICS."

Abdullah Verachia, a partner at South African emerging markets consultancy Frontier Advisory and the head of the India-Africa Business Network at the Gordon Institute of Business Science (GIBS) in Johannesburg, agrees the question of South Africa’s eligibility is no longer relevant.

He told IPS: "We cannot keep lamenting whether we should be there or not, we know our economic profile pales in comparison with the other members and even with countries outside like Turkey and Mexico.

"I think we should focus more on how we can benefit by being at the table and engaging within this dynamic economic grouping, which by 2015 will make up 50 percent of global market capitalisation."

Verachia said more engagement between business and government was crucial, in order to capitalise on South Africa’s membership of BRICS. He welcomed the announcement of a plan to create a BRICS development bank, which could open the door for more engagement among the five countries and reduce dependency on the dollar.

The idea for the bank, which would offer an alternative to the World Bank and the Asian Development Bank, has been largely supported by global analysts, although some say there is not enough political cohesion and there are too many conflicting interests among the member countries to make it work.

On a South African level Verachia said: "There may only be 56 kilometres between Johannesburg and Pretoria, but you’d think it was several thousand, seeing how little business and government seem to talk."

South Africa’s parliament is located in Pretoria and its unofficial financial capital is Johannesburg.

"In India, there is a much closer engagement between government and private sector and I think that is something we can learn from. But I do feel this needs to come from business, it can’t be government that drives that side of the process," he said.

Some sort of BRICS-CEO grouping, like the one India and South African already share, could, Verachia said, be a way of creating more tangible and measurable benefits for business within BRICS countries, which he felt were lacking now.

Lyal White, director of the Centre for Dynamic Markets at GIBS, agreed BRICS still lacked firm direction and targets and said more needed to be done to take the discussions out of the summit and turn them into relevant policy.

"I think the development bank is a good idea and there is a lot of potential for this," he said. "But the idea needs to be backed up with functioning institutions like a secretariat at least to support it going forward."

White believes that with South Africa due to host next year’s summit, the ball is in their court, to take the initiative and establish the working groups immediately in preparation for 2013.

He said: "If we get the ball rolling now it will make for a stronger summit next year, and it should prevent the agenda being hijacked by either the larger members or geopolitical developments, which to some extent it was this year."

And he added: "BRICS was created on economic lines, not political, but since South Africa has joined, and perhaps it is just coincidence due to the changes in the global context, it seems the last few summits have been dominated by politics.

"I think we need to get the focus back to the economics and to go beyond the talk about united economic fronts and really start making it easier for businesses and companies in the member countries to engage."

The BRIC bloc was formed in 2009 and last week’s summit was its fourth. The group became BRICS when South Africa joined in 2010.

The five members account for roughly 18 percent of the world's GDP, 43 percent of its population and 15 percent of global trade, and hold 40 percent of global currency reserves.

(END/2012)

The G20 is not representative of the WTO because the poorest countries have no say in setting the trade agenda. / Kim Cloete/IPS

"We will all attend the Cancun meeting to ensure that any agreement to hasten progress in further trade liberalisation is informed by the Doha Agenda," South Africa’s Minister of Trade Rob Davies told IPS.

The Doha Development Agenda (DDA) was launched by the WTO almost 11 years ago to correct the historical imbalances and asymmetries in the global trading system. It was designed to enable poorer countries to integrate into the system.

"This is a most dangerous move by the industrialised countries which are determined to undermine the independence and multilateral character of the WTO, where a large majority of countries are asking for developmental flexibilities for implementing liberal trade commitments," said a trade envoy, referring to the agenda for the meeting.

"The G20 is not representative of the WTO because the poorest countries and countries in Africa, except for South Africa, have no say in setting the trade agenda," the envoy said.

The G20 bloc of major and emerging economies is made up of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States, and the European Union.

Clearly, the rich countries have overwhelming influence in setting the agenda at the G20 meetings, the envoy said.

"The draft agenda for the meeting is basically asking trade ministers to agree on creating a super-body headed by the chiefs of the WTO and OECD (Organization for Economic Cooperation and Development) to oversee all the review and monitoring functions," the envoy argued.

Therefore, the presence of the BRICS ministers is so essential and important, lest the trade agenda be radically altered for the next 10 years, said sources familiar with the BRICS ministers meeting.

During their meeting in New Delhi last week, the BRICS ministers discussed the draft G20 agenda issued by Mexico, and not yet made publicly available, the South African trade minister said.

Significantly, the draft agenda is silent on the Doha trade talks.

It aims to take decisions on core trade issues without first discussing them at the WTO, which is now grappling with new approaches to accelerate the DDA talks.

"We strongly believe that the process has to be multilateral and the central focus has to be on the Doha single undertaking," said Davies, emphasising the importance of transparency and inclusiveness.

"Attempts to reshape the architecture without concluding the Doha talks are not correct," Davies said, suggesting that the BRICS countries are ready to take small steps to reinvigorate the Doha trade negotiations. The minister insisted that agriculture is at the heart of the DDA and that precious little is done to address the continued trade-distorting subsidies of the industrialised countries.

It is important to accord primacy to the Doha multilateral trade negotiations by discussing issues first at the WTO, Davies argued.

The draft agenda for what is going to be the first G20 trade ministerial meeting of its kind – beginning on Apr. 19 – sets the stage for preparing a "New Trade Narrative."

The five-page agenda obtained by IPS, which remains confidential, squarely addresses the trade interests of the rich countries, under subheadings such as "better understanding global value chains to better regulate trade" and "services, trade finance and trade facilitation are essential to oil global value chains."

Angel Gurria, secretary-general of the OECD, known as the rich-country think tank, and Pascal Lamy, the WTO director general, will provide the justification for pursuing this new agenda to the G20 trade ministers.

The heads of the OECD and the WTO have been working in tandem for some time now to change the manner in which global trade is measured and assessed in a neoliberal framework away from a development perspective, say analysts.

But developing countries and the least-developed countries have opposed the framework advanced by the OECD and WTO Secretariats on market-led trade reforms.

In addition, the G20 ministers will discuss "trade, growth, and jobs." The themes for discussion include "trade as a source of growth," "trade as a source of jobs," and "the imperative to keep markets open and to keep opening markets."

Up until now, trade negotiations, including the very setting of the trade agenda for any negotiations, have been based on a give-and-take framework. But for the first time, Mexico is asking ministers to move away "from this setting in which many trade discussions happen" to identify "the links between trade and job creation and (to improve) trade statistics that consider global chains and value addition."

Mexico also wants ministers to focus on "the major forces and challenges facing their economies, including protectionist pressures, and what alternative policies are there to deal with them, other than trade instruments."

"Reading the draft agenda, one gets the feeling that there is a hidden language, which shows basically the interest of developed countries and not of developing countries," said Isabel Mazzei, a former Oxfam International trade policy advisor.

Speaking in her private capacity to IPS, she asked: "What does it really mean ‘to change the trade narrative’- does it mean to ‘move the goal posts’?"

"The Doha Round is about development, agriculture, elimination of subsidies, policy space….and now it looks like this narrative is obsolete as there is no mention of agriculture or subsidy elimination," she said. "Many developing countries still have a big portion of their labour force coming from the agricultural and manufacturing sectors.

"Clearly the G20 draft agenda is a concerted attempt to bring the issues and concerns of rich countries from the back door," she concluded.

(END/2012)

Fishing boats in Cape Town harbour, South Africa, with Table Mountain as backdrop. Credit: Servaas van den Bosch/IPS

By Ravi Kanth Devarakonda

GENEVA, Mar 30 (IPS) – Brazil and South Africa have experienced a widespread contraction of their manufacturing industries, with the latter suffering massive unemployment as well, thanks to the rampant volatility and misalignment of dominant global currencies like the dollar, trade experts from the two countries say.

“Brazilian industry is at the receiving end of exchange rate appreciation and 2011 saw a negative growth in the manufacturing sector with textiles, leather, chemicals, rubber, and electrical industries, among others, having been adversely affected,” said Josue Gomes da Silva, the chief executive of the Brazilian company, Coteminas. He was speaking at a closed-door seminar at the World Trade Organization (WTO) on Mar. 27.

“Four hundred thousand small businesses closed down in South Africa over the last three years, resulting in unemployment of about 23 to 34 percent due to the unstable exchange rate that made South African exports uncompetitive,” said Stewart Robert Jennings, chief executive of South Africa’s PG Group.

“The South African Rand has strengthened during the last three to four years and is now the most volatile currency,” he said, suggesting that the Brazilian Real and Rand are at their highest appreciation values against the greenback.

Da Silva and Jennings offered a detailed account of the creeping “deindustrialisation” in their respective countries at a closed-door seminar convened by the WTO’s Working Group on Trade, Debt, and Finance.

The two-day seminar, which concluded on Mar. 28, is an outcome of a sustained campaign by Brazil over the last year to persuade members of the WTO to discuss the role played by volatile exchange rates in international trade.

However, several industrialised countries, as well as China, were reluctant to address the issue of exchange rates at the WTO, saying it is part of the International Monetary Fund’s (IMF) agenda. “The seminar is an attempt to give shape to a reality, away from abstract concepts,” Brazil’s trade envoy Ambassador Roberto Azevedo told IPS.

While representatives from the private and public sectors and academia were invited to discuss the role exchange rates played in trade, journalists were barred from the seminar at the insistence of Canada and the United States.

Though there was no consensus on the factors influencing the misalignment of currencies, which imply that there is a gap between a country’s real exchange rate and its equilibrium level, there was general recognition that a problem exists and is playing an adverse role in different countries.

While currencies in big developing countries appreciated significantly over the last few years, in other countries, currencies depreciated or were maintained at a steady peg to the dollar despite favourable macro-economic fundamentals.

The Real is overvalued by 42 percent, while South Africa’s Rand has appreciated in double-digit percentage terms against the dollar. The Indian Rupee also initially appreciated by five percent against the dollar from 2008 to 2009. However, it has recently depreciated sharply due to the country’s burgeoning current account deficit.

Consequently, Brazil and South Africa witnessed a sharp drop in their exports of manufactured goods, while imports from other countries shot up alarmingly. “Brazil has dropped to 14th place in machinery and equipment exports, while imports doubled because of exchange rate overvaluation,” said da Silva.

Meanwhile, the policy flexibility of South Africa, Brazil and India, as reflected by the Wiggle Room Index constructed by The Economist, is not high. The three countries are ranked 65th, 79th and 82nd, respectively.

Against this backdrop, WTO director general Pascal Lamy issued a nuanced statement on Mar. 27 on the exchange rate volatility and its various effects on traders. He said international trade needs exchange rate stability.

“Trade measures cannot correct policy imbalances elsewhere, and be an answer to non-trade policy concerns…. Tit-for-tat measures would be a recipe for protectionist crossfire,” Lamy cautioned.

All these issues, Lamy said, “require a mix of cooperation in the macro-financial field and proper domestic policies which lie outside the remit of the WTO.”

The director general exhorted participants to make sure that the “WTO system does not crumble under the weight of excessive expectations.”

In contrast, a senior official of the U.S. administration, which is providing credit at close to zero percent to its banks and industry since the onset of the financial crisis in 2008, complained that China had kept the Yuan nearly unchanged despite a growing current account surplus and bulging foreign exchange reserves.

“A strong consensus now exists on the importance of promoting market-determined exchange rate systems, enhancing flexibility to reflect underlying economic fundamentals, avoiding persistent exchange rate misalignments and refraining from competitive currency devaluation,” said Mark Sobel, the U.S. Treasury Department’s deputy assistant secretary for international monetary and financial policy.

China responded saying that those countries adopting unconventional monetary policy have contributed to the currency volatility and misalignment by adding liquidity to financial markets.

“Exchange rate volatility was intensified by the monetary policy of major currency issuers – the U.S.,” Ruogu Li, president of China’s Exim Bank, told the participants.

“Both developed and developing members have fallen victim to major currency issuers,” the Chinese banker said, according to sources present at the meeting. “For every iPhone sold in the U.S., Chinese workers and companies get less than two percent, while the rest of the profits go to the American companies.”

The seminar has underscored the need to acknowledge the problem.

“If countries agree that misalignments are a given in the current international economic and trade processes, it is important to discuss the trade-related aspects of the problem at the WTO,” said Azevedo.

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China’s trade minister Chen Deming said his country could not follow sanctions against Iran when rising crude prices were hitting the BRICS countries / World Economic Forum/CC-BY-SA-2.0

Though the leaders chose to defer the long-awaited announcement of a ‘South-South Bank’ to next year’s meet, or beyond, the ‘Delhi Declaration' produced at the end of the summit said BRICS finance ministers have been directed to "examine the feasibility and viability of such an initiative, set up a joint working group for further study, and report back to us (heads of state) by the next Summit (in South Africa)."

"Creating such a ‘BRICS Bank’ involves complex issues, such as the medium of transfer of credit," said Vivan Sharan, associate fellow at the prestigious Observer Research Foundation (ORF), which hosted a BRICS academic forum of experts and scholars from member countries in New Delhi from Mar. 4 – 6.

"But there are no roadblocks ahead and it is an idea whose time has come," Sharan told IPS. "While the plan now is to supplement rather than supplant the existing global financial structure, there is clearly the ambition to go ahead."

For now though, according to Sharan, citizens of the bloc, who account for nearly half the world’s population, can be content with the knowledge that by June there will be a BRICS Exchange Alliance in place, allowing trading options using local currency.

"Investors will soon be able to invest in each other’s progress and there will be greater liquidity, better market-determined integration and the possibility of extending credit in local (currencies)," Sharan said. "Two BRICS countries are among the top five in purchasing power parity terms and four are in the top 10."

BRICS’ frustration with the policies of the wealthy G7 countries – France, Germany, Italy, Japan, Britain, the United States, and Canada – was palpable at the meeting of the new bloc’s trade ministers on Wednesday with Brazil's Fernando Pimentel leading complaints of the G7’s tardiness in meeting reforms promised by the International Monetary Fund (IMF).

Pimento’s concerns were reflected in the Declaration, which said: "The build-up of sovereign debt and concerns over medium to long-term fiscal adjustment in advanced countries are creating an uncertain environment for global growth."

Further, the Declaration charged that "excessive liquidity from the aggressive policy actions taken by central banks to stabilise their domestic economies have been spilling over into emerging market economies, fostering excessive volatility in capital flows and commodity prices."

But the toughest statements came over the sanctions imposed on Iran and the situation in the Middle East. "We respect the United Nations (Security Council) resolution but at the same time it does not forbid countries to engage in trade in essential commodities and what is required for human good," said India’s Anand Sharma at a joint press conference of trade ministers.

China’s trade minister Chen Deming declared that his country could not be expected to follow unilateral sanctions against Iran at a time of rising crude prices that were adversely affecting the BRICS countries and the global economy.

BRICS leaders said in the Declaration they were agreed that the "period of transformation taking place in the Middle East and North Africa should not be used as a pretext to delay resolution of lasting conflicts but rather it should serve as an incentive to settle them, in particular the Arab-Israeli conflict." "This is indeed a bold declaration coming from a group that is seen as disparate and one known to have divergent interests," said Pushpesh Pant, a professor at the Jawaharlal Nehru University’s School of International Studies. "Earlier there were flip-flops over issues in the Middle East."

Pant said it was still left to be seen how BRICS members will be able to carry out any of their articulations. "China has internal problems, Russia looks increasingly European, Brazil cannot shake off its Latin American moorings and India has serious problems in dealing with its neighbours." "Will membership in BRICS encourage China to support India’s candidature for a permanent seat in the U.N. Security Council is a question that looms up," said Pant. "Another is the sometimes conflicting interests of the Shanghai Cooperation Organisation (that includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan.)"

The Declaration said: "China and Russia reiterate the importance they attach to the status of Brazil, India and South Africa in international affairs and support their aspiration to play a greater role in the U.N."

According to Sharan the strength of the Delhi Summit lies in the Delhi Action Plan (DAP), released along with the Declaration on Thursday, calling for meetings of BRICS foreign ministers on the sidelines of the U.N. General Assembly, and of its finance ministers around the G20 meetings.

There will also be, according to the DAP, meetings of finance ministers and fiscal authorities around those organised by the World Bank and IMF, including stand-alone meetings.

"All this means is that, in spite of the ifs and buts, we can expect more of the kind of coordination seen at the Security Council during the year 2011 and that there is a better chance for multilateral approaches when it comes to global peace and security," said Pant.

(END/2012)

Rail networks in Africa remain underdeveloped only 10 percent of transport goes via rail. A train crossing the Namib Desert on its way from the Namibian port of Walvis Bay to the uranium rich Erongo Region. Credit: Servaas van den Bosch/IPS

By Servaas van den Bosch

JOHANNESBURG, Mar 29 (IPS) – South Africa’s membership of the bloc of leading emerging economies and its unique position in Africa heralded the country’s role as a gateway into the African continent. However, trade experts question whether it can live up to this position as investors begin to increasingly look towards other African markets.

In 2003 South Africa became part of the IBSA grouping (India, Brazil and South Africa), and seven years later it joined the bloc of countries now known as BRICS (Brazil, Russia, India, China and South Africa). Economists have predicted that the dynamic growth of the BRICS countries will bring about a shift in economic power toward the developing world.

And South Africa, as the most developed country in Africa, offers the infrastructure and services to unlock the region’s frontiers, they say.

With the International Monetary Fund forecasting 2012 growth figures averaging around six percent for sub-Saharan Africa – and with countries like Angola raking in GDP growth of almost double that – the continent is touted as the investment destination of the decade.

Africa’s population of just over one billion pales in comparison with Asia’s 3.8 billion, but the African market is largely untapped and most countries find themselves on a firm growth trajectory.

South Africa, therefore, should be the logical first port of call for investors. But regional trade experts gathered at a mid-March forum on South Africa’s Trade Policy, organised by the South African Institute for International Affairs (SAIIA), questioned the gateway concept.

“Yes, South Africa represents the continent in the G20 (bloc of developing nations), but that is not the point,” said Peter Draper, senior research fellow with SAIIA. “If a gateway is supposed to be a transmission belt between global and regional markets and production facilities, the question should be whether South Africa can use its physical and material infrastructure to fulfil a connecting function between Africa and the rest of the world.”

The answer to this question is not an unequivocal yes. “The need to get minerals down from the central African plateau to the ports, using South Africa’s good infrastructure, has boosted it as a transport hub,” said Draper. “But South Africa, geographically speaking, is not optimally located, and some of the traditional advantages are rapidly eroding.”

Places like South Africa’s economic province of Gauteng or its coastal city of Cape Town are no longer necessarily the preferred outposts from which multinationals conquer the continent.

The reason for this is not just because South Africa is relatively far from African markets.

Global player General Electric recently choose Nairobi as its sub-Saharan hub – following companies like Coca Cola, Nestle and Heineken – and it based its decision partly, say trade academics, on South Africa’s unpredictable policy environment.

“It raises the question: to what extent do foreign companies still use South Africa as a conduit into the continent?” said Draper, who said heavily populated centres of West Africa – and not South Africa – will drive future growth on the continent.

According to Dianna Games, chief executive officer of consulting firm Africa @ Work, South Africa used the gateway concept to position itself globally. “But this idea of South Africa as a single gateway into the continent is not necessarily shared by the rest of Africa.

“As foreign investors are disaggregating African regions and countries, South Africa is losing traction on a whole host of issues. This does not mean that other African countries are necessarily in a better position, but the reality is that these markets are moving up, while South Africa is sliding.”

She added that South Africa, situated at a remote tip of the continent, should deploy progressive strategies to keep attracting investment.

“Investors go directly to other African markets, because they can. The South African government is not as worried about the decline of this competitive edge as it should be,” she said.

Games said the South African port of Durban was one of the most expensive in the world. Though, with the rehabilitation of the East and West Coasts of Africa, some of it by resource companies needing to find more convenient export routes, trade patterns were starting to change in the region. In time, it is likely that Durban will be just one more port handling regional trade, rather than the main one.

“Investors are also worried about current government policies, including a decline in economic and press freedom. South Africa is losing its status as an exception in Africa, and is viewed by some to be on a downward trajectory, with some other economies rapidly improving. Meanwhile, the actions of petty bureaucrats have affected the relations between South Africa and other African countries, which generally are not managed well.”

In this vacuum, China and India have long since bolstered bilateral relations with most African countries. And Portuguese-speaking Africa, especially Angola, is Brazil’s well-established gateway into the continent.

“With 240 Australian listed mining companies, among others, and over 800 oil and gas outfits operating in Africa, the gateway concept is declining. Many of these companies operate from their host countries and go direct to the resources as required, rather than setting up headquarters in Africa…We focus heavily on BRICS and not on African countries. But BRICS might fizzle out,” Games said.

“We inherited the role of a gateway, it wasn’t necessarily a policy objective,” commented one South African trade official. “And we are certainly not a gatekeeper, which is the connotation that goes with the idea of a gateway.”

But according to the official, it is not really relevant whether South Africa is losing its gateway status. “We would welcome investments being routed directly to African countries. That way our collective growth trajectory is increasing. It means our policies are working. It means that the continent is growing and becoming more competitive. We need a growing Africa for South Africa’s own future.”

(END/2012)