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Kiwi economist points to free trade option for South Africa

BuaNews (Tshwane)

October 13, 2006

Kiwi Economist Points to Free Trade Option as Mlambo-Ngcuka Heads to New Zealand and Australia

Cape Town

As Deputy President Phumzile Mlambo-Ngcuka prepares to travel to New Zealand and Australia for a visit that will focus on economic opportunities, a former chief economist in New Zealand’s Ministry of Foreign Affairs and Trade says South Africa should consider joining a Free Trade Agreement that exists between Singapore, New Zealand, Chile and Brunei, writes Shaun Benton.

Dr Ron Sandrey, now a professor at Stellenbosch University while working with the Stellenbosch-based Trade Law Centre for Southern Africa, told BuaNews today that South Africa "should start looking at joining the free trade agreement between New Zealand, Singapore, Chile and Brunei".

The reasons for this are two-fold, he said: "There are big complementarities there, such as with food exports such as fish and fruit. The link to Singapore I think is also important because South Africa would benefit from a linkage with an efficient Asian economy and one which poses less of a direct threat — in terms of competition in manufacturing such as clothing or footwear — than that posed by China or India."

"Singapore is not a low-wage structure country, and so the clothing sector [in South Africa], for example, would not be under threat."

"A modern FTA," he says, "is about much more than merchandise trade as it should concentrate on numerous issues such as services and investment cooperation, for example."

It is his belief that New Zealand sets the high-water mark for FTAs globally.

Ms Mlambo-Ngcuka leaves on Sunday for an official, five-day visit to Australia and New Zealand, where she will meet her counterparts there and explore opportunities for a range of partnerships designed to boost South Africa’s Accelerated and Shared Growth Initiative (ASGISA).

Apart from meeting Australia’s Deputy Prime Minister Mark Vaile, who is also Minister for Trade, and his New Zealand counterpart Michael Cullen, she is also expected to pay courtesy calls on Australia’s longstanding Prime Minister, John Howard, and Helen Clark, the Prime Minister of New Zealand.

The South African delegation will be in Australia from October 16 to 18 and New Zealand from the 19th to the 21st of October.

The official visit to the two south Pacific countries, sometimes referred to as Australasia, comes within the context of South Africa’s "commitment to extend our relations with many countries and many regions to get support for Nepad [the New Partnership for Africa’s Development]", Deputy Foreign Minister Aziz Pahad said on Thursday.

As the two south Pacific nations are fellow members of the Commonwealth, South Africa will explore ways to mobilise these countries to ensure that the Commonwealth also becomes "actively involved in the process of Nepad and help us to consolidate the African agenda" he said.

Mr Pahad will be accompanying the Deputy President on the five-day visit, as will Trade and Industry Minister Mandisi Mpahlwa and Science and Technology Minister Mosibudi Mangena.

Australia is South Africa’s third-largest trading partner in Asia, after Japan and the People’s Republic of China. Globally, it is South Africa’s seventh-largest trading partner, according to the Department of Foreign Affairs (DFA).

Fifty per cent of Australian exports to Africa are earmarked for South Africa, which is by far the largest and most dynamic market in Africa for Australian products.

South African exports to Australia have been increasing over the past few years, pushing the country into a positive trade balance with the south Pacific nation.

Last year, South African exports to Australia totaled almost R10 billion, according to the DFA, while imports from Australia amounted to R7,3 billion.

Trade with New Zealand has increased dramatically since 1990, with the trade balance between South Africa and the dairy-producing and sheep-farming nation remaining more or less equal.

Dr Sandrey has just completed a paper for the National Agricultural Marketing Council of South Africa, where he points out potential lessons to be learned from New Zealand’s agricultural reforms.

His analysis explores why these reforms have benefited New Zealand substantially while reforms in South Africa’s agricultural sector have changed very little, especially where subsistence agriculture is concerned. He says he recognises and supports the importance of agri-BEE in South Africa but feels that there are profitability problems with small-scale farming.

In New Zealand, Deputy President Mlambo-Ngcuka is expected to hold discussions with the Governor of the Reserve Bank, Dr Bollard, Minister of Economic Development Trevor Mallard, Deputy Prime Minister and Minister of Finance Dr Michael Cullen, and the Governor-General.

There are also strong linkages between South Africa and New Zealand and South Africa and Australia in terms of the large number of South Africans there, not to mention the strong sporting ties, said Dr Sandrey.

It is estimated that there are at least 100 000 South Africans in Australia alone, many of whom are in high-ranking managerial positions and play a significant part in the Australian economy.

Partially because of this, he said, the relationships between the tourism and also the services sector were strong. However, South African investment in Australia still exceeds Australian investment in South Africa by about two to one.

The deputy foreign minister said promoting South Africa’s AsgiSA and the Joint Initiative for Priority Skills Acquisition will feature top of the agenda of the South African delegation, and partnerships will be explored in infrastructure development, sector investment strategies, skills and education initiatives, "second economy" interventions, macro-economic issues and public administration issues.

South Africa would also be exploring opportunities for investors in both countries and identifying new markets for South African exports. Australian investment in South Africa has increased significantly over the past few years, mainly in mining, mining equipment, agriculture, agribusiness and infrastructure and services and trade.

Australia is also a big investor in South Africa, and the merger in the 1990s of Australian BHP Billiton and South African Gencor, has created the largest mining company in the world.

So influential is BHP Billiton now that the chairman of the South African unit, Dr Vincent Maphai, suggested in parliament this week that South Africa’s Department of Foreign Affairs and BHP Billiton SA Ltd set up a small forum through which its representatives could interact with foreign affairs officials to see where their interests intersected on foreign policy.

Last month, the longstanding Australian Treasurer, Peter Costello, visited South Africa and held extensive talks with Finance Minister Trevor Manuel, who will be taking over from Mr Costello the chairmanship of the Group of 20 (G20) countries next year.

While in Australia, Deputy President Mlambo-Ngcuka is also expected to hold discussions with the Governor of New South Wales, Professor Marie Roslyn Bashir and with representatives from the Queensland State Government on Queensland’s Skills Development Programme.

She will also meet the Governor of the Australian Reserve Bank, Glenn Stevens, and will participate in a business forum co-hosted by the Premier of the New South Wales Parliament and the President of the New South Wales Legislative Council.

With South Africa embarking on a massive overhaul of its infrastructure, the Deputy President will also participate in an infrastructure roundtable in Australia.

"We expect that since this has been one of the first high level visits of [involving] the presidency going to the region after many years, we will use this visit also to strengthen the political, cultural and trade links between our countries; and in the context of that, how do we cooperate further in all the multilateral institutions and how do we improve south-south cooperation," Mr Pahad said.