This week the BRICS summit in Durban is in the news and we thought that we would also throw out a few views. The theme of the summit is Partnership for Development, Integration and Industrialisation. Ellis Mnyandu puts together some of the highlights for the IOL Business Report:
- Transnet and China Development Bank agreed to co-operate, explore and identify opportunities for the Chinese bank for future collaboration in Transnet’s infrastructure upgrade programmes.
- Sinopec and PetroSA signed an agreement yesterday that boosted the possibility of building a crude oil refinery at Coega in the Eastern Cape.
- Representatives from the two nations’ central banks signed an agreement yesterday enabling the SA Reserve Bank to invest about 3 percent of its reserves of $50.4bn in Chinese assets.
- In addition, China and Brazil agreed to create a swop line allowing them to trade the equivalent of up to $30bn a year in their own currencies.
There should be more news about much-reported on development bank today. Yesterday the TV news made some vague statements about the bank allowing members to implement policies more effectively, but that does not make much sense. The Mail & Guardian explains that the role of the bank is still up for debate. Developing countries hope that it might be a way to access Chinese savings, specifically for infrastructure projects. China would like for the bank to invest in trade multiplying projects. In further coverage, Duncan Green argues in an interesting article that in the BRICS group South Africa has the most to learn from Brazil. And Cosatu’s Zwelinzima Vavi has called for industrialisation initiatives in South Africa and allowing trade unions to participate in the BRICS discussions.
In some interesting work from the School of Economics, Prof Riaan Rossouw, together with Prof Wim Naudé (MsM) has looked at the links between export diversification and economic performance with evidence from Brazil, India, China and South Africa. Access to markets are often argued to be the key benefit of BRICS membership for South Africa and they find that export diversification will have a positive impact on development here. The abstract of their paper follows:
In this paper we discuss relationship between export diversity and economic performance, focusing on Brazil, China, India and South Africa (BCIS). Using time data on exports over the period 1962–2000 and Applied General Equilibrium (AGE) models for each country, we note the similarities as well as differences in the patterns of diversification in these countries. We find evidence of a U-shaped relationship between per capita income and export specialization in at least China and South Africa, and given that the results from Granger causality testing are inconclusive and not robust with regards to export diversification measures, some preliminary evidence from the results suggest that export diversification Granger causes GDP per capita in Brazil, China and South Africa, but not in India, where it is rather GDP per capita changes that are driving export diversification. From AGE modeling we find that South Africa differs from the other economies in that it is the only case where export diversification has an unambiguously positive impact on economic development while in contrast in Brazil, China and India, it is rather export specialization that is preferred. We show that the manner in which export diversification is obtained may be important: if it is obtained with less of a reduction in traditional exports, the impacts are better (less negative).