Political deals on nuclear energy and United Nations reform dominated the headlines during the visit of Indian Prime Minister Manmohan Singh to South Africa this week, while bilateral trade and investment won’t get much government help.
South Africa will back India as it pushes the 44-member nuclear suppliers group (NSG) to accept an agreement struck between Singh and United States President George W Bush to bring India’s civilian nuclear programme in from the diplomatic and economic cold.
At the core of the agreement, which has been stalled in the US Senate, is an expanded regime of inspections at civilian installations by the International Atomic Energy Agency in return for permission to buy nuclear fuel and technology from NSG members. This despite the fact that India has developed weapons outside the framework of the nuclear non-proliferation treaty.
President Thabo Mbeki told journalists that South Africa would have ”no problem” supporting that, signalling once again the increasingly assertive and independent line the government is taking as it seeks to expand South Africa’s civilian nuclear programme.
Satyabrata Pal, the local Indian High Commissioner, says South Africa’s support is ”extremely important” because of the leading role it plays in nuclear affairs. Backing for the Indo-US deal may help placate an American administration that has been frustrated by South Africa’s apparent support for Iran’s fuel enrichment ambitions. It may also have played a role in securing Indian support for Mbeki’s approach to UN Security Council reform.
An agreement about trade is further off, but Pal stresses that Indian and South African companies are pressing ahead without it.
A study by Ron Sandrey of the Trade Law Centre for Southern Africa puts local exports to India at $2,65billion last year, 50% up from 2004’s total and the equivalent of 2% of India’s total basket of imports. South Africa also got 2% of its imports from India last year, at a total value of $1,1billion.
That may not be quite such a good performance as it seems. India is growing at a steady 8% and is consuming vastly more imports than it has in the past. South Africa’s share of that market, however, has halved from 4% in 1999, even as the dollar value of trade has grown. Local exports to India are also highly concentrated. Gold accounted for $1,85billion, or 70%, of total exports last year. Coal accounted for another $171million, with the balance made up by chemicals, iron and steel, and gemstones.
In contrast Indian exports to South Africa are far more diverse, ranging from vehicles to rice and pharmaceuticals. Imports of Indian vehicles were up 32% last year to $189million. Drugs are also doing particularly well.
With a free trade deal no longer on the cards the Southern African Customs Union (Sacu) and India are inching toward a much more restricted preferential trade agreement. An initial document outlining the framework for talks has been broadly agreed on, say people familiar with the process, but it was not signed during Singh’s visit because Lesotho is currently chairing Sacu and a visit to Maseru was not on his agenda.
In any event, trade experts don’t expect much from any deal with Sacu, and from South Africa adopting an increasingly protectionist tone. ”It will probably be a limited set of lists [of tradeable goods] that they exchange, and it is unlikely to be hugely significant,” says Peter Draper of the South African Institute of International Affairs.
Other practical barriers persist. Indian business people, like their counterparts in Europe and the US, have persistently complained about what they see as an obstructionist approach to granting South African visas.
That, combined with poor air links, has also put a damper on tourism growth. Last year five million Indians travelled abroad, but visits to South Africa have stagnated at 36 000 a year.
Speaking to the India-South Africa CEOs’ Forum in Jo’burg, Singh called for sustained growth to treble bilateral trade by 2010. Relative cultural proximity should help, he suggested: ”Businessmen from both India and South Africa should feel much more at home in each other’s countries. English is widely spoken in both countries and we share values of democracy and pluralism. The presence of a large number of people of Indian origin in South Africa should also help cement our business relationship.”