THE South African economy is not benefiting from its partnership with Brics countries, according to Nelson Mandela Metropolitan University (NMMU) senior lecturer in business and economic sciences Professor Ronney Ncwadi and economics doctoral student Prince Ncube.
They spoke yesterday on “The impact of Brics alliance on South Africa’s economic growth” at a global affairs lunchtime dialogue at the south campus, as part of NMMU’s Diversity Week celebrations.
Ncwadi said it was important the economy should gain from belonging to the Brics group – consisting of Brazil, Russia, India, China and South Africa.
“The problem in SA is that we are fixing the symptoms instead of the problems. Fundamental structural problems like skills development and education needs to be addressed. We need to grow the economy to avoid poverty and unemployment. For empowerment to work we need growth – we can share growth, not poverty.”
Ncwadi said SA should avoid being the market of Brics partners, and that the biggest trade deficit was with China, which had huge import penetration in SA.
With more than 40% of footwear and knitted fabrics sold in SA made in China, imports were infiltrating the manufactured goods markets in SA fast.
The problem was that SA imported more than it exported to its Brics partners, Ncube, who is doing his PhD on the subject, said.
“SA’s economic growth is being adversely affected both in the short and long run by the trade openness in the alliance. The capital flight from SA, with imports flooding local markets, calls for some policy intervention. The openness should be controlled with a turnaround in some of the country’s domestic industrial policies,” he said.
Ncube said not only did the trade openness expose SA markets to global shocks, it could also drive out unskilled labour and force companies to invest in capital intensive machinery.
“Unemployment may increase if we do not protect our industry. Less exports and more imports could result in layoffs and plant closures. The country will lose its competitive edge if we do not create certain buffers.”
He said even though SA offered a hub to its Brics partners for reaching other African markets, this could be a two-edged sword because the country was also competing in the same markets and the new trade partners could congest it.
When asked after his talk about the political complexities of belonging to Brics, Ncube said politicians and academics did not often see eye-to-eye.
However, he said more public debate was needed to get the political will to limit the trade openness, possibly by identifying certain sectors that need protection. – Cindy Preller