Madeleine Wackernagel
Contrary to popular opinion, global, not regional, trade is the key to economic growth in South Africa, says Professor Jeffrey Herbst of Princeton University.
“The Southern African market,” he says, “is just too small to provide the kind of trading opportunities this country needs to fuel substantial growth.
“Over the last 25 years, the region as a whole performed poorly, with its share of the global economy decreasing from 0,76% in 1970 to 0,58% in 1993.
“Southern African countries will be far better served by reforming their economies to take advantage of the roughly 99,4% of the world economy that is outside their region.”
Herbst, in Johannesburg to address the South African Institute for International Affairs conference on South Africa in the Global Economy, believes the reason for this concentration on local markets is historical and ideological. Its roots lie in colonisation and the subsequent “Balkanisation”, reified by the Organisation of African Unity.
“There is a sense that intra-African trade is more `pure’, serving the pan-African ideal, while entering the international arena has `grubby’ connotations.
“But the truth is that trade blocs within Africa have not worked; the continent is littered with examples of failed attempts at economic integration. The East Africa Federation collapsed because Kenya was seen as the dominant, and therefore, threatening partner. The omens are not good for the Southern African Development Community, either.”
Herbst points out that South Africa’s share of total imports by Malawi, Zambia and Zimbabwe amounts to between one-third and 40%. “It is hard to believe that South Africa will be able to increase these market shares significantly, especially given that in all of the countries in the region, imports of fuel, which South Africa cannot meet, probably account for a substantial portion of the import profile.”
The other side of the equation is that Malawi, Zambia and Zimbabwe export only 13%, 2% and 17%, respectively, of their products to South Africa. “There is a limit to how much of Zambia’s copper, Malawi’s tobacco or Zimbabwe’s tobacco, gold or ferro-alloys this country needs … The immediate scope for increased regional exports to South Africa will be mainly a function of economic growth rather than increasing market share.”
The only way out of the commodities trap is to concentrate on manufacturing exports, or, in the case of South Africa, services even. “The electronic banking system here is much more sophisticated than anything in the United States or Europe. There’s one opportunity already,” says Herbst. And there are precedents: India has become a significant exporter of computer programs.
The Uruguay round of the General Agreement on Tariffs and Trade has had a mixed reception in Africa, as has the concept of globalisation. “The failure to use the Uruguay round to make trade reform more credible is especially unfortunate because … to stabilise an economy and, eventually, to garner new investment, getting prices `right’ and even making fundamental reforms of institutions is not enough.”
Herbst ends on a warning note: “The new international trade regime will be possibly harmful, and, more probably, simply irrelevant, to those countries that do not reform.”