23 SCN 38-599

SCN 38-599

Suggested by Clive Tasker

BRIC DISPLAY DIVERGENT STRATEGIES IN AFRICA: AN ILLUSTRATION USING FIVE GATEWAY NATIONS by Simon Freemantle and Jeremy Stevens

From: “Economics - BRIC and Africa”, Standard Bank, December 9, 2009. http://ws9.standardbank.co.za/sbrp Reproduced by The European House-Ambrosetti for the Forum “Developing the Regions of Africa and Europe”, Taormina, October 6 and 7, 2011.

Economics

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BRIC and Africa

9 December 2009

BRIC display divergent strategies in Africa: an illustration using five gateway nations

Simon Freemantle Jeremy Stevens

Each BRIC nation has divergent advantages, competencies and interests, leading to divergent degrees of co-variance, co-operation and integration with Africa and within Africa.

Given a balance of regional dominance, natural resource strength and significant and deepening consumer markets, Kenya, Egypt, Angola, Nigeria and South Africa (KEANS) epitomise the economic and strategic potential inherent for the BRICs in engaging with the African continent. And, the KEANS offer BRICs an important gateway into Africa’s broader regional markets

Introduction An analysis of overall trade and investment patterns provides compelling proof of the overarching importance Africa holds in the current and future trajectories of some of the world’s core emerging markets1. Simultaneously, the unwavering acceleration of commercial and diplomatic ties between BRIC and Africa, particularly since the turn of the century, has proved critical in shaping Africa’s economic path.

While a discussion of overall ties between BRIC and Africa is essential

In Angola, China has clearly used its commercial and diplomatic muscle to access the country’s nascent energy sector. Meanwhile, Brazil has leveraged softer cultural ties to gain market access, while India remains notably absent.

Nigeria’s large consumer market and significant energy reserves provide the foundation for BRIC competition.

Surprisingly, China is a net exporter to Nigeria – having failed to secure substantial access to oil and gas reserves.

Meanwhile, Nigeria’s exports, largely of crude oil, to India and Brazil reached USD10 bn and USD6.7 bn in 2008.

Therefore, while India and Brazil are Nigeria’s second and third most prominent export destinations, China is Nigeria’s largest source of goods.

South Africa has the most balanced trade relations with the BRIC’s, with both exports and imports growing sharply, reflecting the dual importance of South Africa as a market and source of resources.

Egypt imports more from BRIC than it exports to BRIC. Overall, trade with BRIC accounts for 17% of Egypt’s total trade with the world. China is a dominant player, but India, Russia and Brazil each have strong bilateral relations with Egypt which are actively leveraged on the trade front.

In Kenya the competition between India and China is most pronounced. India is leveraging its comparative advantages in Kenya successfully, but China has gained ground since 2004.

The five countries outlined in this paper provide a more lucid view of the divergent and at times competing BRIC strategies in Africa – driven by both strategic and commercial objectives. Understanding what each of the BRIC’s is able to offer African countries, and where their priorities lie in commercial engagements, lies at the heart of engendering a deeper and more sustainable set of bilateral relationships.

in mapping the clear and abiding importance and scale of the relationship, this analysis must be balanced by more granular interrogation of where each of the BRIC countries differ in their strategies and trade and investment patterns with Africa; and how each African country differs in its response to these burgeoning ties.

To be sure, each BRIC has divergent advantages, competencies and interests, which have led to divergent agendas and strategic imperatives in Africa. Logically then, each BRIC has differing degrees of co-variance and co-operation with Africa and, even, within Africa.

The agility and diversity of trade engagements belie lazy, stylised and insular over-generalisations, which have all-too-often served as the launch-pad for much analysis and policy.

In addressing this caveat, this paper isolates individual BRIC trade engagements with selected African economic locomotives – Kenya, Egypt, Angola, Nigeria and South Africa (KEANS) – which define the nature and potential of commercial and strategic ties between BRIC and Africa. Moreover, as evidenced by the data elaborated on in previous editions of this report series, the KEANS are vital to BRICAfrica trade (often serving as gateways into broader regional markets), and in turn attract the highest levels of diplomatic attention from the BRIC countries. An analysis of engagements with these core markets therefore neatly outlines and defines the nuances particular to each of the BRIC economies co-operation patterns and strategies in Africa.

See BRIC in Africa: The fundamental drivers of BRIC in Africa (28 May 2009); and BRIC and Africa: Tectonic shifts tie BRIC and Africa’s economic destinies (14 October 2009).

1

Regional heavyweights epitomise BRIC-Africa allure

accounted for around two-thirds of BRIC-Africa trade flows in 2008 (see Figure 3).

Given a balance of regional dominance, natural resource strength and

Figure 3: African heavyweights dominate BRIC-Africa trade

significant and deepening consumer markets, KEANS roundly epitomise the economic and strategic potential inherent for the BRICs

180

in engaging with the African continent. Collectively, these five countries

150

have a population of 330 million (mn) people, around one third of USD bn

Africa’s total population. Their large respective Gross Domestic Product’s (GDP), led by South Africa and Nigeria, combine to produce

120 90

half of Africa’s USD1.5 trillion (tr) in output2 (see Figure 1). Moreover,

60

each of these countries operates in the heart of their respective

30

regions, playing an important role in linking neighbours to global

0

markets through ports, railways and auxiliary transport linkages.

1998

2000

2002

Kenya

Nigeria

2004

2006

2008

Figure 1: KEANS are Africa’s regional giants and gateways

USD bn

Angola

Egypt

South Africa

Rest of Africa

2500

Sources: African Development Bank, IMF

2000

Importantly, each country’s bilateral relationship with BRIC highlights

1500

the importance of historical, social, political and economic influences in

1000

the depth and nature of engagements. Furthermore, how each BRIC varies its respective strategy within these nations reflects a broader

500

agility and pragmatism of BRIC-Africa engagements. To be clear, not

0

only does each of the BRICs diplomatic and commercial engagements 2000 Other

2008 South Africa

2014F Nigeria

Kenya

Egypt

Angola

vary in comparison to one another, but each BRIC will also vary its own strategy within Africa: these five African nations serve as proxies for this undeniable reality.

Source: IMF, Standard Bank Group However, it is to be emphasised that a defining feature of the BRIC’s A clear indication of the strategic prioritisation of these five countries by

engagements with Africa have been the wider arc of trade and

the BRIC’s can be seen with the number of high-level diplomatic visits

diplomatic relations, encompassing a broad range of countries across

paid by BRIC leadership3 since 2000 (see Figure 2). In total, one in

the continent. Indeed, the BRIC countries search for commercial and

three visits to Africa by the collective BRIC political leadership between

strategic gains in Africa has led them to engage with countries

2000 and 2009 were to South Africa, Nigeria, Egypt, Angola or Kenya.

neglected by the continent’s traditional trading partners. Moreover, as

Figure 2: BRIC visits by leadership to KEANS since 2000

indicated by Figure 4, the growth of trade with the BRIC’s is in many

Number of visits

terms as important as the nominal value – particularly when projecting 25

for the long-term. In this sense, the mutually advantageous

20

underpinnings of BRIC-Africa ties are true for almost all African nations. The five countries chosen for analysis in this paper may

15

epitomise the nature of BRIC-Africa ties, but do not, in isolation,

10

represent the full portrait of bilateral relations.

5 0 South Africa

Nigeria

Egypt

Angola

Kenya

Source: Standard Bank Group Due to the clear convergence of commercial and diplomatic importance, Angola, Egypt, Kenya, Nigeria and South Africa,

2

Measured in purchasing power parity terms.

This figure accounts for visits by BRIC presidents, prime ministers/premiers, foreign ministers and ministers of trade/commerce.

3

2

Figure 4: BRIC bilateral trade growth (2000 – 2008 annual growth

Figure 4: BRIC-Angola trade, 1998 to 2008

rate) 30

USD bn

25 20 15 10 5 0 1998

2000

2002

2004

2006

China

India

Russia

Brazil

2008

Sources: IMF, Standard Bank Group China increased its share of Angola’s total trade from less than 1% in 1995 to above 30% in 2008. Moreover, China-Angola trade has exploded by nearly 90% each year over the past decade, making China one of Angola’s most important international partners. The only other BRIC nation with any significant stake in Angola’s energy sector

Source: Standard Bank Group

is Brazil, which is able to leverage strong cultural and historical ties to

Angola: Cash-flush China and culturally aligned

secure market access. Despite its growing need for oil given its status

Brazil dominate BRIC activity

as the world’s fifth largest energy consumer, India has been unable to gain a foothold in Angola. Indicatively, Brazil’s bilateral trade with

The energy needs of the BRIC’s domestic industrialisation and

Angola was nearly four-times larger than India’s in 2008. Only China

urbanisation have created a clear and unwavering convergence of

and Brazil have notably increased their portions of Angolan trade since

with Africa’s

resource abundant

nations,

1980 (see Figure 5).

particularly Angola. Recall, rapid industrialisation has made China the

Figure 5: BRIC trade as a proportion of Angola’s total trade

world’s second largest and India the world’s fifth largest consumers of

6%

the ending of the civil war in 2002 has coincided with a revival of BRIC

5%

interest in the continent. At the time, Angola’s oil sector was

4%

Per cent

energy. In many ways, the opening up of Angola’s economy following

underdeveloped and at the margins of global supply chains. Therefore, Angola’s situation is unlike the case of Nigeria where western oil

32% 24%

3%

16%

Per cent

commercial interests

2%

companies had established a relatively mature position by the early 2000s. Hence, for emerging countries with an energy play in Africa,

1%

Angola has provided the space for rapid gains. Here one sees the

0%

8% 0% 1980

tangible difference between Russia and the other BRIC nations: while robust domestic economic growth in China, India and Brazil has

1990 India Brazil

conflated their economic trajectory with Africa’s, Russia’s domestic

2000

2008

Russia China (RHS)

Sources: IMF, WTO, ISI Emerging Markets, Standard Bank Group

macroeconomic transformation can occur with limited input from African resources.

BRIC-Angola trade accounts for one-fifth of total BRIC-Africa trade, having increased at an annual average growth rate of 71% year-onyear (y/y) over the past decade, from USD400 mn in 1998 to USD29 bn in 2008. The significant majority of BRIC-Angola trade has been underpinned by an explosion in trade between China and Angola, which has increased, from around USD200 mn in 1998 to USD23 bn in 2008 (see Figure 4). Meanwhile, Brazil’s commercial relations with Angola have also swelled, from USD150 mn to USD4 bn in 2008.

3

Figure 6: BRIC trade as a proportion of Angola’s total trade

instance, 8% of Angola’s imports from India are pharmaceutical products. In the process, Indian companies have gained a 20% share of Angola’s pharmaceutical market. India has also targeted Angola’s boats and ships market, gaining a 31% share of Angola’s total imports of boats and ships in 2008.

In summary, Angola’s economic awakening coincided remarkably with the reinvigoration of the BRIC’s interest in the continent. With abundant and largely untapped energy reserves and a growing consumer base, Angola has much of what attracts the BRICs to the continent. China has stolen a march on its BRIC and traditional market competitors through its strategy of providing cheap loans to the Angolan

Sources: IMF, WTO, ISI Emerging Markets, Standard Bank Group

government in exchange for access to the country’s abundant oil

Angola’s exports to BRIC – narrow and undiversified

reserves. Chinese construction firms have also been on hand to engage actively in Angola’s ongoing infrastructural renewal process.

Angola’s economy is undiversified and reliant on mineral exports,

Given deep historical and cultural ties, Brazil has been able to gain a

which clearly manifests in BRIC-Angola trade. Recall, the energy

strategic foothold in Angola which has, thus far, eluded India.

sector accounts for around 60% of Angola’s GDP and 3% of the world’s total energy output. Angolan oil exports to China, amounting to

Nigeria:

around USD20 bn in 2008, have manifested into the largest trade

Brazil

offers

China

and

India

stiff

competition for market access

surplus of any African nation with BRIC – estimated to be around USD17 bn in 2008. By means of comparison, Angola’s mineral fuel and

Nigeria is on parity with Angola as the BRIC’s largest trade partner in

oil exports to Brazil and India amounted to USD2 bn and USD1 bn,

Africa, accounting for nearly one-fifth of BRIC-Africa total trade.

respectively.

Nigeria’s trade with BRIC has ballooned ten-fold, from USD2.96 bn in

China has spearheaded its progress in Angola through official bilateral

1998 to USD29 bn in 2008. However, unlike Angola, the nominal trade

assistance and loans to the Angolan government for much-needed

volumes are not distorted by trade with China. Rather, Brazil, India and

infrastructure programmes. Indicatively, with the global economy in

China each account for a large and equal share of BRIC-Nigeria trade.

freefall in late 2008 and oil prices plummeting, Angolan President Jose

Only Russia, thus far, has limited trade engagements with Nigeria.

Eduardo dos Santos turned immediately to China to secure the finance

Nigeria-India trade has increased from USD1.3 bn in 1998 to

necessary to continue the country’s developmental programme. It is

USD10.37 bn in 2008. Simultaneously, Nigeria-China trade increased

estimated that, since 2006, China has extended around USD10 bn in

from USD600 mn to USD8.3 bn over the same period. Nigeria-Brazil

loans to the Angolan government. As a result, Chinese state-owned oil

trade increased from USD1 bn in 1998 to USD10 bn in 2008.

majors and private and state-owned construction firms have gained Figure 7: BRIC-Nigeria trade, 1998 to 2008

significant, at times unassailable, traction in the Angolan market.

30

Angola’s imports from BRIC

25 The BRIC collective, once again led by China and Brazil, has wedded USD bn

itself neatly to Angola’s rejuvenation, particularly in providing the materials necessary to rebuild the country’s infrastructure stock.

20 15

Angola imported USD5 bn worth of goods from BRIC in 2008 – around

10

a quarter of Angola’s total imports. China and Brazil account for over

5

95% of Angola’s imports from BRIC, amounting to USD2.9 bn and

0

USD1.9 bn, respectively. In 2008 China was Angola’s second-largest

1998

2000

2002

2004

2006

China

India

Russia

Brazil

2008

source of goods (behind Portugal) and Brazil was Angola’s fourth most prominent source of goods (behind the US).

The inward traffic of

goods from Brazil and China docking at Luanda’s port is dominated by

Sources: IMF, Standard Bank Group

machinery, vehicles, articles of iron and steel and electrical equipment, intent

on

re-building,

industrialising

and

diversifying

In 1980, Brazil’s trade with Nigeria stood at USD600 mn, which was

Angola’s

significantly higher than Nigerian trade with Russia (USD120 mn), India

productive capacity.

(USD69 mn) and China (USD56 mn). Subsequently, Brazil has India is currently Angola’s 13th largest source of imports. Despite

managed to launch a highly competitive strategy from this strong

lagging both Brazil and China, India has made inroads in certain

starting position. Testament to this, Brazil increased its share of

products where it has an international competitive advantage. For

Nigeria’s total trade from 2% in 1980 to 8.2% in 2008. Unsurprisingly,

4

Brazil’s President Lula da Silva chose Nigeria as the venue for the

Russian President Dmitry Medvedev’s visit to the country in June this

inaugural Africa-South America Summit in 2006. For their part, India

year is a further indication of this shift.

and China have both managed to increase their relative share of

Nigeria’s exports to Brazil increased from USD1.3 bn in 2001 to

Nigeria’s total trade from close to nothing in 1980 to 4% and 5%,

USD6.7 bn in 2008, on the back of Brazil’s crude oil demand, which

respectively in 2008 (see Figure 8).

accounted for 99% of Brazil’s imports from Nigeria in 2008. The solid

Figure 8: BRIC trade as a share of Nigeria’s total trade

growth rate has meant that Brazil is currently Nigeria’s third most prominent export destination.

Brazil

10% 8% 6% 4% 2% 0%

India

Nigeria’s imports from BRIC Nigeria’s imports from the world surpassed USD27 bn in 2008. Over half of Nigeria’s total imports are made up of machinery, vehicles, electrical equipment, articles of iron and steel and plastic. Interestingly,

China

each BRIC has attached itself to Nigeria’s potential market in different ways.

Echoing the different role that Nigeria has for the BRIC nations, Nigeria’s imports from India increased from USD570 mn in 2001 to

Russia 1980

1990

2000

USD1.3 bn in 2008, leading to a large trade surplus of USD9 bn in

2005

2008. Machinery, pharmaceuticals, vehicles and electronic products accounted for 60% of Nigeria’s imports from India.

Sources: IMF, International Trade Centre, Standard Bank Group

Nigeria’s imports from Brazil have increased parallel to India’s from

Nigeria’s exports to BRIC

USD416 mn in 2001 to USD1.5 bn in 2008. Fuels, sugars and

Nigeria’s exports to India have increased from USD88 mn in 2001 to

beverages along with vehicles dominate total inflows. Like India,

USD10 bn in 2008. The vast majority of these flows, estimated to be

Nigeria has a large trade surplus with Brazil.

around 90%, are made up of crude oil, which has grown by 400% since 2001. In 2008 India was Nigeria’s second-largest export destination

In stark contrast, once again, Nigeria’s imports from China increased

after the US. Considering that India imports 70% of its energy

from USD910 mn in 2001 to a USD6.8 bn in 2008, resulting in a

requirements each year and has had limited success in tapping

substantial trade deficit for Nigeria. In fact, China is Nigeria’s largest

Angola’s energy reserves, it is no surprise that India has actively

source of goods but remains a marginal partner in terms of exports.

aligned itself to Nigeria.

China clearly envisions Nigeria, with the largest population in Africa, as an important market for its manufacturing exports. Already, China has

In contrast, China has, as yet, been unable to gain access to Nigeria’s

made great headway in electrical appliances. Interestingly, a large and

oil reserves. China’s imports from Nigeria have stagnated, increasing

growing number of Nigerians are basing themselves in China, as

from USD220 mn in 2001 to USD500 mn in 2008. In 2008 China

evidenced by a vibrant community in Guangzhou, acting as middle-

ranked as Nigeria’s 23rd most important export destination. In fact, of

men in China-Nigerian trade flows.

the BRIC nations, only Russia, with its own domestic energy source, imports less from Nigeria than China. This is set to change with the

An intensely competitive environment in Nigeria has manifested in a

mooted USD50 bn deal between the Nigerian government and China’s

divergence of BRIC strategies. Brazil and India have become top

state-owned oil major China National Offshore Oil Corporation

destinations for Nigeria’s oil output, while China has become a top

(CNOOC) which would give China access to around 6 bn barrels of

origin for Nigeria’s manufactured imports. The divergence in trade

Nigerian oil. This recent initiative shows that China’s energy pursuits in

realities debunks lazy stylised caricatures of BRIC-African relations.

Africa are relatively nascent – focused largely on Sudan and Angola.

Recall, Nigeria is one of Africa’s most prolific oil producers, yet exports

Unlike in the case of Angola, China has battled to compete with more

little to China, but is the third largest African market for its goods.

established international oil companies active in Nigeria. The timing of

However, Nigeria is clearly on China’s acquisition radar, and, should

China’s attempt to gain traction in Nigeria’s oil sector is opportune on

the proposed deal with CNOOC proceed in its proposed form, Nigeria

two levels. Firstly, China’s massive foreign reserves have allowed it to

will soon become one of China’s most important global energy

remain aggressive in pursuing global energy security at a time when

partners. BRIC-Nigeria relations should be appreciated in terms of

traditional players are being forced to consolidate and rein in costs;

each BRIC’s broader engagements in Africa as the relative penetration

and secondly, the Nigerian government has been vociferous in its

in Angola and Nigeria reflect in each of the BRICs prioritisation.

intention to diversify ownership of its oil sector – with emerging markets prioritised. The USD2.5 bn deal signed between Russian energy giant Gazprom and the Nigerian National Petroleum Corporation during

5

South Africa’s imports from China increased from USD1.2 bn in

South Africa: BRIC trade relations more balanced

1998 to USD11.4 bn in 2008. South Africa’s exports to China BRIC-South Africa trade has increased at an annual average of 24%

increased from USD500 mn in 1998 to USD5 bn in 2008.

each year since 1998, from USD3.1 bn to USD24.3 bn in 2008 (see Figure 9). Both South Africa’s exports to BRIC and imports from BRIC

South Africa is BRIC’s third-largest trade partner in Africa, accounting

increased eight-fold over the past decade. South African imports from

for 20% of Africa’s imports from BRIC and 15% of Africa’s exports to

BRIC have increased from USD2 bn in 1992 to USD16 bn in 2008.

BRIC. Meanwhile, BRICs have become increasingly prominent trade

Over the same period South Africa’s exports to BRIC increased from

partners for South Africa (see Figure 11). Consider that in 1980 trade

USD1 bn in 1998 to USD8 bn in 2008

with BRIC nations accounted for virtually zero of South Africa’s total trade. In contrast, by 2008, China (USD17.5 bn), India (USD4 bn),

USD bn

Figure 9: BRIC-South Africa trade, 1998 to 2008

Brazil (USD2.5 bn) and Russia (USD500 mn) combined to account for

25

nearly 15% of South Africa’s trade.

20

Figure 11: BRIC trade as a share of South Africa’s total trade

15 10 5 0 1998

2000

2002

2004

2006

China

India

Russia

Brazil

Brazil

2008

10% 8% 6% 4% 2% 0%

India

China

Sources: IMF, Standard Bank Group Russia Granted, the vast majority of BRIC-South Africa trade occurs between China and South Africa – some USD16.6 bn in 2008 (see Figure 10),

1980

1990

2000

2008

but Brazil and India also have important positions in South Africa’s international trade dynamic.

Source: IMF, International Trade Centre

Figure 10: Composition of BRIC-South Africa trade SA imports from BRIC Brazil 11%

South Africa’s imports from BRIC One-fifth of South Africa’s imports from China are comprised of

SA exports to BRIC Brazil 8%

Russia 2%

India 16%

electrical and electronic equipment, which increased from USD148 mn

Russia 3% India 28%

in 2001 to USD1.6 bn in 2008. Another 15% of South Africa’s imports from China are made up of nuclear reactors, boilers and machinery, which increased from USD100 mn in 2001 to USD1.2 bn in 2008.

China 71%

China 61%

Combining to account for around 15% of South Africa’s imports from China are articles of apparel (USD500 mn), vehicles (USD411 mn) and Source: IMF

footwear (USD456 mn).

It is unique that both South Africa’s exports and imports with BRIC

Given the relative decline in trade volumes with traditional markets in

nations have grown sharply, reflecting the dual importance of South

the Euro Zone, the US and Japan, China became South Africa’s

Africa as a market and a source of resources, as emphasised by the

largest trade partner in mid-2009. South Africa’s trade ties with Brazil

following figures:

and India are also rising, bolstered by ongoing diplomatic efforts within

South Africa’s imports from Brazil increased from USD250 mn in

the

India-Brazil-South

Africa

(IBSA)

platform,

which

offers

1998 to USD1.85 bn in 2008. South Africa’s exports to Brazil

institutionalised competition to Chinese interests. Nearly half of South Africa’s imports from India are made up of mineral fuels, oils and

increased from USD190 mn in 1998 to USD660 mn in 2008.

distillation products. More specifically, South Africa imported USD1.2 South Africa’s imports from Russia increased from USD50 mn in

bn of petroleum oil (not crude) in 2008. In addition, vehicles (USD207

1998 to USD350 mn in 2008. South Africa’s exports to Russia

mn), pharmaceutical products (USD192 mn) and machinery (USD100

increased from USD60 mn in 1998 to USD240 mn in 2008.

mn) account for the lion’s share of India’s exports to South Africa.

India’s competitive edge in South Africa resides in large part in its large

South Africa’s imports from India increased from USD500 mn in

diaspora community, which numbers in excess of 1.3 mn – the largest

1998 to USD2.5 bn in 2008. South Africa’s exports to India

in Africa.

increased from USD360 mn in 1998 to USD2.3 bn in 2008.

6

For the most part, the composition of Brazil’s exports to South Africa

USD163 mn in 2008. Ores, slag and ash (USD93 mn) and iron and

has remained intact, with the largest share of Brazilian goods made up

steel (USD70 mn) exports make up the majority of Russia’s residual

of vehicles, which increased from USD87 mn in 2001 to USD537 mn in

appetite for South Africa’s goods.

2008. Similarly, Brazil’s exports of nuclear reactors, boilers and

BRIC accounted for 15% of total South African trade in 2008. What is

machinery to South Africa increased from USD45 mn in 2001 to

somewhat unique about South Africa is that both exports and imports

USD201 mn in 2008. The aforementioned group of goods accounts for

between BRIC and South Africa have grown sharply, reflecting the dual

42% of South Africa’s imports from Brazil. That said, over the past

importance of South Africa as a market and a source of resources.

seven years, the composition of Brazil’s exports to South Africa has

While in broad terms South Africa’s exports to BRIC are raw materials,

seen both a relative and an absolute gain in certain soft commodities.

apart from vehicles and machinery, there is limited overlap in terms of

As a result, this group has seen its relative size increase from about

the type of product South Africa imports from BRIC. China has focused

10% of Brazil’s total exports to South Africa in 2001 to 25% in 2008.

on light manufacturing, electrical equipment and articles of apparel.

South Africa’s exports to BRIC

India is noted as a source of mineral fuels and oils, as well as automotives and pharmaceuticals, while Brazil is an important source

South Africa’s exports to China have ballooned from USD 1 bn in 2001

of soft commodities.

to USD9.2 bn in 2008. Considering China’s appetite for commodities, it is unsurprising that a significant majority of South Africa’s exports to

Egypt: BRIC accounts for 17% of Egyptian trade

China are metals (see Figure 12). For instance, iron ore (USD1.9 bn), manganese ore (USD1 bn), chromium ore (USD930 mn) and copper

BRIC-Egypt trade has accelerated by 29% y/y from USD1.6 bn in 1998

ore (USD120 mn) made up around 30% of South Africa’s exports to

to USD15 bn in 2008 (see Figure 13). Of the BRICs, China is Egypt’s

China in 2008.

dominant trade partner, accounting for half of BRIC-Egypt trade.

Nevertheless, the distribution is considerably more even than in the

Figure 12: China’s share of world consumption of resources in

case of Angola, for example.

2008 Figure 13: BRIC-Egypt trade, 1998 to 2008 50%

30% 20%

USD bn

Per cent

40%

10% Tin

Iron ore

Coal

Steel

Lead

Zinc

Aluminium

Copper

Nickel

Oil

0%

16 14 12 10 8 6 4 2 0 1998

Source: Beijing Axis, 2009

2000

2002

2004

2006

China

India

Russia

Brazil

2008

South Africa’s exports to India have grown from USD1.5 bn in 2001 to Sources: IMF, Standard Bank Group

USD5.5 bn in 2008. South Africa’s gold exports increased from USD1 Egypt’s imports from BRIC

bn in 2001 to USD2.5 bn in 2008, platinum exports increased from USD2 mn in 2001 to USD235 mn in 2008 and diamond exports

Egypt imports from BRIC increased from USD1.5 bn in 1998 to USD12

increased from USD1 mn in 2001 to USD64 mn in 2008. South Africa

bn in 2008. Egypt has a large trade deficit with BRIC of close to

also exports a large volume of coal to India, which increased from

USD9 bn, reflecting a relatively elevated purchasing power, large

USD 125 mn in 2001 to USD935 mn in 2008.

population and a dearth of natural resources.

South Africa’s exports to Brazil are made up of iron and steel (USD192 mn),

mineral

fuels,

oils

and

distillation

Egypt’s imports from Brazil increased at an annual growth rate of 20%

products

y/y since 1992, from USD300 mn in 1992 to USD1.45 bn in 2008.

(USD107 mn), pearls, precious stones and metals (USD86 mn);

Brazil has focused on goods, in which it has an international

nuclear reactors, boilers and machinery (USD84 mn) and organic

advantage, including:

chemicals (USD84 mn), which accounted for a collective 71% of South Africa’s exports to Brazil.

Sugar and sugar confectionary (USD313 mn), which is almost entirely cane and beet sugar. Brazil has an 82% share of Egypt’s

South Africa’s exports to Russia increased from USD75 mn in 2001 to

total sugar and confectionary imports;

USD442 mn in 2008. Nearly 40% of Russia’s imports from South Africa are edible fruit, nuts, citrus fruit and melons, which amounted to

7

Figure 15: Egyptian imports from Russia in 2008

Iron ore (USD289 mn), which translates into a 58% share of Egypt’s total ores, slag and ash imports;

Mineral fuels 6%

Meat and edible meat offal (USD256 mn), which is primarily frozen bovine and poultry meat. Brazil’s trade agility has enabled

Other 13%

Cereal 34%

it to gain nearly one-third of Egypt’s total meat and edible meat offal import; and Vehicles (USD70 mn) comprising mostly chassis fitted with

Wood 13% Copper 14%

engines for motor vehicles.

Figure 14: Egyptian imports from Brazil in 2008

Iron & steel 20% Source: International Trade Centre

Sugar 21%

Other 34%

Egyptian imports from India increased at an annual growth rate of 31% y/y since 1992, from USD300 mn in 1992 to USD1.6 bn in 2008.

Interestingly, unlike the cases of Brazil and Russia, Egypt’s imports from India are highly diversified (see Table 1). Apart from mineral fuels, oils and distillation products (USD380 mn), which account for one-fifth

Vehicles 5%

Iron ore 20%

Meat and edible offal 20%

of Egypt’s imports from India, Egypt imports a wide range of goods from India.

Table 1: Diversity of Egypt’s imports from India (per cent in 2008)

Source: International Trade Centre

Mineral fuels, oils and distillation products

21.4%

Meat and edible meat offal

15.3%

Cotton

8.6%

Egypt’s imports from Russia increased at an annual growth rate of 28%

Nuclear reactors, boilers, machinery

4.8%

y/y since 1992 from USD300 mn in 1992 to USD2.3 bn in 2008. Like

Organic chemicals

3.9%

Brazil, Russia has concentrated on the products in which it has a

Man-made filaments

3.8%

Sugars and sugar confectionery

3.8%

Dairy products

3.2%

Electrical & electronic equipment

3.0%

Plastics

3.0%

Coffee, tea, mate and spices

2.9%

Cereals (USD700 mn) made up of durum wheat, which

Iron and steel

2.6%

amounted to 25% of all Egypt’s imported cereal in 2008;

Articles of iron and steel

2.2%

Man-made staple fibres

2.2%

Vehicles

2.1%

global advantage, which has manifested into a narrow group of goods entering Cairo from Russia. However, owing to Russia’s large endowment of metals, the product make-up is different to Brazil’s.

Egypt’s imports from Russia include:

Around 10% of Egypt’s iron and steel (USD400 mn) imports;

Other

17.2%

Copper imports from Russia, which surpassed USD250 mn in 2008;

Source: International Trade Centre

Wood and pulp (USD270 mn), which make up 40% of Egypt’s

Egypt’s imports from China increased at an annual growth rate of 38%

wood and pulp imports; and

y/y since 1992, from USD470 mn in 1992 to USD6.6 bn in 2008.

Hence, China is both Egypt’s dominant source of goods and fastest-

Mineral fuels (USD114 mn).

growing source of goods out of the BRICs. Around 60% of China’s exports to Egypt are made up of machinery, electronic equipment, vehicles, apparel, iron and steel, and plastics.

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Figure 18: BRIC-Egypt trade as a share of Egypt’s total trade

Figure 16: Egyptian imports from China in 2008

Machinery, 18%

Other 32%

Organic chemicals 3% Plastics 4%

Articles of Vehicles iron or steel 5% 5%

Apparel 6%

Electrical and electronic equipment 13% Manmade filaments 8% Iron and steel 6%

Brazil

10% 8% 6% 4% 2% 0%

India

China

Russia

1980

Source: International Trade Centre

1990

2000

2008

Egypt’s exports to BRIC

Sources: IMF, WTO, International Trade Centre. Standard Bank Group

Egypt’s exports to BRIC increased from USD110 mn in 1998 to

Egypt has a large population of 95 mn, which is expected to increase

USD3 bn in 2008. India is notably Egypt’s largest export destination of

to 120 mn by 2025. Moreover, despite a large population, Egypt has a

the BRICs, accounting for two-thirds of BRIC-Egypt trade and 11% of

purposeful GDP per capita of USD2 162 p.a., which is greater than

Egypt’s total exports. Egypt’s exports to India increased from

India and close to China. (In purchasing power parity Egypt’s

USD40 mn in 1998 to USD2 bn in 2008. Egypt’s exports to India are

USD5 897 per capita GDP is larger than both China and India.)

undiversified with petroleum oils accounting for the significant majority.

Furthermore, Egypt offers BRIC a strategic gateway to both the Middle

Similarly, a quarter of Egypt’s exports to China, which increased from

East and North Africa. Clearly, each BRIC had a similarly starting point

USD40 mn in 1998 to USD 560 mn in 2008, are made up of mineral

in trade levels with Egypt. However, owing to a somewhat

fuels, oils and distillation products. Clearly, from the same starting point

differentiated trade offering, advantage and expertise, each BRIC has

in 1998, the role of Egypt as a supplier of energy to China and India is

experienced a varied degree of success. Leading the pack is China.

somewhat different, with India seemingly focusing more on Egypt’s

That said, each BRIC has grown its trade remarkably, reflecting a

supply than China.

shared appreciation of the importance of gaining a foothold in Egypt’s market – important in its own right, but also as a gateway into regional

In 1998, Egypt exported USD10 mn to both Brazil and Russia. From

markets.

this starting point both bilateral trade partnerships have grown at a

Kenya: India and China jostle for market share

similar speed, manifesting in Egypt’s exports to Brazil and Russia reaching USD230 mn and USD190 mn, respectively. Half of Egypt’s

In East Africa’s largest economy, Kenya, the nominal value of BRIC

exports to Brazil are fertilizer products. In contrast, half of Egypt’s

trade is notably lower than the cases of Angola, Nigeria, South Africa

exports to Russia are edible fruit, nuts, citrus fruit and melons.

and Egypt. Nevertheless, BRIC-Kenya trade has still increased tenThe convergence of political and economic interests between BRIC

fold, from USD310 mn in 1998 to USD3.8 bn in 2008.

and Egypt has meant that each BRIC has gained a particular relevance Unlike in the aforementioned cases, India is the dominant BRIC trade

to Egypt since 1980. For instance, in 1980 total BRIC trade accounted

counterparty in Kenya owing in large part to strong historical ties,

for a mere 2.5% of Egypt’s total trade, but by 2008 this figure swelled

cultural affinity, geographical proximity and a large Indian diaspora.

to 17.3%. China, which accounted for 1% of Egypt’s total trade in 1980,

India-Kenya trade increased from USD170 mn in 1998 to USD2 bn in

currently accounts for nearly 10% of Egypt’s total trade. India

2008. China-Kenya trade increased from USD90 mn in 1998 to

quadrupled its share of Egypt’s trade, from 0.5% in 1980 to 2% in

USD1.5 bn in 2008. Meanwhile, both Brazil (USD8 mn) and Russia

2008. Similarly, Russia and Brazil increased their share from a

(USD220 mn) linger at the margins of BRIC-Kenya trade flows.

combined 1% in 1980 to 3.5% and 2.3%, respectively (see Figure 18).

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mn in 2008. In addition, Kenya’s imports of nuclear reactors, boilers

Figure 19: BRIC-Kenya trade, 1998 to 2008

and machinery increased from USD4 mn in 2001 to USD103 mn in 2008, vehicles from USD4 mn in 2001 to USD103 mn in 2008 and

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cotton from USD18 mn in 2001 to USD63 mn in 2008.

USD bn

3

Meanwhile, China’s imports from Kenya have lagged, growing from USD5 mn in 2001 to USD34 mn in 2008. In terms of what Kenya

2

exports to China, metal ores (USD9 mn), raw hides and skins (USD4.6 mn) and vegetable textile fibres (USD4.5 mn) dominated in

1

2008.

0

Kenya offers India an important market for a number of its products.

1998

2000

2002

2004

China

India

Russia

2006

2008

Kenya’s imports from India increased from USD157 mn in 2001 to USD1.6 bn in 2008. Evidently, in terms of BRIC bilateral trade

Brazil

volumes, India has managed to maintain its dominant position in Sources: IMF, Standard Bank Group

Kenya. Petroleum oils (not crude) exports from India account for nearly half of India’s total exports to Kenya, increasing from USD22 mn in

China has made important headway in terms of trade, increasing its

2001 to USD750 mn in 2008. In addition, India’s pharmaceutical

relative share of Kenya’s total trade from 0.7% in 1980 to 7% in 2008.

products have been well received in Kenya, increasing from

India is leveraging its comparative advantages in East Africa

USD19 mn in 2001 to USD113 mn in 2008. India’s machinery exports

successfully. However, of all the African nations, Kenya is where Asia’s

to Kenya increased from USD16 mn in 2001 to USD120 mn in 2008.

emerging giants, India and China, are most obviously going head to head. Evidently, both have proved highly successful, with India (9.4%)

In contrast, while Kenya’s exports to India increased from USD31 mn

and China (7.6%) ranking as Kenya’s third and fourth most important

in 2001 to USD82 mn in 2008, they make up a small part of the

source of goods, respectively. Meanwhile, Russia has managed to

bilateral trade relationship. Disodium carbonate is Kenya’s largest

increase its share of Kenyan trade, from 0% in 1980 to 1.5% in 2008.

export to China, increasing from USD9 mn in 2001 to USD31 mn in

In contrast, Brazil grew its share modestly, from 0.2% in 1980 to 0.5%

2008. Coffee, tea and spice exports, which have increased from USD3

in 2008. Kenya is clearly not yet on Brazil’s African radar, but, with

mn to USD9 mn, are the second most prominent product group. Quite

biofuels gaining traction in East Africa, which has abundant and

clearly, much like the case for China, Kenya is a marginal player in

untapped agricultural potential, it is unlikely that this marginalisation will

India’s inward trade.

continue.

India is successfully leveraging its comparative advantages in East

Figure 20: BRIC-Kenya trade as a share of Kenya’s total trade

Africa’s largest market, Kenya. However, of all the African nations, Kenya is where Asia’s emerging giants, India and China, are most obviously going head to head, with China having gained ground since

India

Brazil

10% 8% 6% 4% 2% 0%

2004. Evidently, both have proved highly successful, with India and China ranking as Kenya’s third and fourth most important origin source of goods, respectively. Considering that Kenya is light on resources, Kenyan exports to BRIC are light.

China

Conclusion BRIC-Africa commercial and diplomatic integration is both compelling and significant. The default position for most BRIC-Africa perspectives is distorted by China’s appetite for commodities – especially energy.

Russia 1980

1990

Clearly, when analysing specific bilateral trade relationships, a more 2000

2008

nuanced and balanced BRIC-Africa trade portrait emerges.

Sources: IMF, WTO, International Trade Centre, Standard Bank

In Angola, China has clearly used its commercial and diplomatic

Group

muscle to access the country’s nascent energy sector. Meanwhile,

Kenya’s trade with China and India

Brazil has leveraged softer cultural ties to gain market access. India

Kenya’s imports from China increased from a mere USD138 mn in

remains notably absent from Angola, having leaned more heavily on

2001 to USD1.2 bn in 2008. Kenya’s imports of electrical equipment

the Nigerian market as a source of greater energy security. Clearly, the case of Nigeria cautions against over-simplifications presenting China

(primarily for line telephony, primary cells and batteries, insulated

as simply a commodity-hungry juggernaut. While Nigerian exports to

wires, and televisions) increased from USD22 mn in 2001 to USD191

India and Brazil reached USD10 bn and USD6.7 bn in 2008 – on the 10

back of crude oil demand – Nigeria currently exports a mere USD500 mn to China. With a major oil deal between China and Nigeria in the pipeline, this situation is likely to change, placing greater pressure on India’s desire to expand its energy assets in Africa.

The case of South Africa epitomises the potential for more balanced BRIC-Africa trade relations, while Kenya provides an indication of the interest the BRIC’s, particularly China and India, have in the continent beyond pure natural resources. For its part, Egypt has become an increasingly relevant market for BRIC goods and services. A large population and relatively elevated purchasing power are attractive to the BRICs. Furthermore, Egypt offers BRIC a strategic gateway to both the Middle East and North Africa.

The five countries outlined in this paper provide a more lucid view of the divergent and at times competing BRIC strategies in Africa – driven by both strategic and commercial objectives. It is abundantly clear that the BRIC’s see Africa as more than purely a source of cheap and abundant natural resources, and this extends well beyond the five gateway countries analysed in this paper. It is equally clear that the BRIC’s maintain distinctly different pockets of strength throughout Africa, reflecting both commercial and historical symmetries. Extending a broad brushstroke view of all BRIC engagements with Africa, and thereby missing these crucial divergences, will ultimately lead to policy dislocation on the continent. Understanding what each of the BRIC’s is able to offer African countries, and where their priorities lie in commercial engagements, lies at the heart of engendering a deeper and more sustainable set of bilateral relationships.

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