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
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).
9
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
4
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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