South Africa has the potential to use its membership of both the African Continental Free Trade Area (AfCFTA) and the Brazil, Russia, India, China, South Africa (Brics) bloc to stimulate its economic development. So points out advisory and analytics firm Frost & Sullivan Africa consultant Yaa Ngonyama.
“Through the cooperation of these agreements and memberships, South Africa has the opportunity to transition away from its historic role as a commodity exporter towards higher productivity value addition,” she affirms. “Together, South Africa’s membership in Brics and AfCFTA presents several benefits that include improved investment, trade, tourism, skills acquisition, and technological capabilities, increased trade flow, influence in pan-African affairs, increased bargaining power, infrastructure development, and greater economic integration.”
She notes that South Africa lies on one of the world’s most important oceanic trade routes. Some 30 000 ships sail past the country’s coast every year, of which about 13 000 actually call into one of South Africa’s seven ports. Spread around the coast, these harbours give convenient access to both the east, west and north. And the country had a “robust” logistics and ports infrastructure, and was recognised as a gateway to Africa. Further, it was the biggest hub of foreign direct investment (FDI) in Africa.
Officially launched in January 2022, the AfCFTA promised to stimulate infrastructure and industrial development across the continent by removing tariffs, facilitating regional integration and developing new regional value chains. It is forecast that this could increase intra-African trade by 52.3%, and boost total African exports, by 2035, to $952-billion. A fully-realised AfCFTA could increase this number by 29%, representing an annual growth rate of 3%.
“For South Africa, the successful implementation of the AfCFTA is poised to yield a wide array of benefits,” she highlights. “These include diversification of exports, increased productive capacity, accelerated economic growth, heightened investment levels, expanded employment opportunities, and enhanced income prospects, all contributing to a more inclusive and robust economy.”
As for Brics, as the membership of the bloc increases, it is expected to become a key source of FDI, with companies investing in South Africa in order to access African markets. Major sectors that will benefit include automotive, clean energy, financial services, information technology, mining, and transport. Such FDI is also expected to result in greater port infrastructure investment in South Africa, to facilitate trade with the rest of the continent.