South Africa approved Wal-Mart’s R16.5 billion (US$2.4 billion) bid for control of retailer Massmart with minimal conditions on Tuesday, giving the world’s top retailer a big boost in its plan to expand in fast-growing Africa.
South Africa’s Competition Tribunal told Wal-Mart not to cut jobs for two years, honor existing labor agreements, and work to develop local suppliers, concessions the US firm had earlier proposed itself.
The deal gives Wal-Mart a 51 percent stake of Massmart, a discount retailer that sells everything from liquor to televisions and has a presence in at least a dozen African countries.
The decision will be seen as a major advance for Wal-Mart, which had said it could drop its offer if the government imposed targets on using local suppliers.
“This is good news. It included concessions put forward by both parties so it’s a victory all round,” said Paul Theron, CEO of Johannesburg-based asset manager Vestact.
“It shows that South Africa is open for business, that large corporates are potential players for outside investment.”
Massmart must also “give preference” to reemploying 503 workers fired in 2010, set up a R100 million (US$15 million) fund to help develop local suppliers, and not challenge SACCAWU’s right to represent bargaining units for three years, the tribunal said.
The two companies said in a joint statement they were “pleased” with the decision and expected Massmart’s food business to grow by 50 percent over the next five years.
The decision was a victory for Wal-Mart, as it did not impose restrictions on where it sources it goods, said Brian Sozzi, a New York-based analyst at Wall Street Strategies.
“In two years it looks like they can go to town on labor costs,” he said.
“The whole thing with them is to get goods into the South African market as cheap as possible and sell them as cheap as possible.”
However, the ruling is a blow to South Africa’s influential labor unions, one of which is already considering an appeal.
“We are meeting with our legal representatives to explore legal options,” said Mike Abrahams, a spokesman for the South Africa Commercial, Catering and Allied Workers Union (SACCAWU), adding that the union could consider appealing to the Competition Appeals Court.
That could further delay the deal, which was first announced in September 2010.
The deal was a test case for major foreign investment in South Africa, which has the continent’s deepest capital markets but where unions are in a coalition with the ruling African National Congress.
Three government departments – economic development, trade and industry, and forestry and fisheries – and the unions had lined up against the deal, asking the tribunal to impose targets on local procurement and a freeze on job cuts.
The government and unions have said Wal-Mart’s global supply network could lead to a flood of cheap imports, sparking job losses and squeezing local companies.
“We would have hoped that the deal would be rejected or at least much more stringent conditions be imposed,” said Patrick Craven, a spokesman for the COSATU union federation.
“Our biggest concern remains completely unanswered, and that is the knock-on effect on jobs in other retailers and the manufacturing industry.”
The three departments said in a joint statement late on Tuesday they would need further study to determine whether the conditions were sufficient enough to prevent widespread job losses.
“Based on the outcome of the study of the conditions and the responses of Wal-Mart/Massmart, we will decide on the next steps to take. Government reserves its legal options at this stage,” the three departments said.
http://www.tralac.org/cgi-bin/giga.cgi?cmd=cause_dir_news_item&cause_id=1694&news_id=104482&cat_id=1026
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
Showing posts with label a Tralac Associate. Show all posts
Showing posts with label a Tralac Associate. Show all posts
Thursday, June 2, 2011
Wednesday, May 25, 2011
South Africa, Walmart / Massmart Merger
Gerhard Erasmus, a tralac Associate and Paul Kruger, a tralac Researcher, discusses the Walmart/Massmart Merger - The Role of International Law in Regulating Competition, Investment and Trade.
BACKGROUND
The recent hearings before the South African Competition Tribunal on the proposed Walmart/Massmart merger were dominated by arguments about the impact of the proposed deal on jobs and local procurement. Some have argued that the Tribunal should decline permission for the merger, and that if it could not do so, it should impose restrictive conditions on Walmart, which wants to buy 51% of Massmart for about R16.5bn. The South African trade unions, the government and some retailers want specific conditions about future labour practices and imports to be imposed as part of the conditional approval for the transaction to go ahead.
A number of important international legal issues have also been raised. Arguments on behalf of Walmart suggest that several international agreements impact on the domestic regulation of trade, competition, investment and related aspects. These matters are often connected. This paper discusses these issues and the reasons why international trade law applies to investment, competition and this particular merger. The relationship between national and international law also needs clarification, as does the role of the government in this matter. One of the additional questions to consider is whether private parties can invoke these agreements; or do they only apply on the inter-state level?
Walmart has subsequently offered certain concessions but during the hearings before the Competition Tribunal its legal representatives have argued that restrictive conditions (depending on how they are formulated) may violate South Africa’s obligations under the WTO agreements. It would be impermissible, they argued, to discriminate against Walmart by obliging it to comply with obligations which do not bind its competitors. What are these international obligations and why would the suggested conditions constitute violations of international rules? Do these international agreements apply domestically?
IS IT ABOUT PROTECTIONISM?
There have been suggestions that the intervention by the South African government before the Competition Tribunal is inspired by protectionist motives. The implication seems to be that it is improper for the authorities to be involved in these hearings. There is nothing improper about the government being concerned about an investment of this kind and to raise questions about its consequences. The other parties and commentators are free to entertain different views. They may challenge assumptions that employment can be protected in the manner proposed by the government and the unions and may offer alternative ideas on how best to secure welfare gains and consumer benefits. They may even pass judgment on the government’s motives and call them ‘protectionist’. The fact that the government raises its concerns now is, however, not wrong or inappropriate. These hearings take place before a public forum and the purpose is to obtain information from the parties concerned and to test the evidence; before making a final ruling on the conditions applicable to the merger. Ultimately the criteria laid down in South Africa’s competition legislation apply, while certain international obligations should also be considered. There is a qualification though; the government’s concerns can, insofar as they relate to binding international legal arrangements, only be accommodated within the ambit of permissible exceptions, in addition to complying with the Competition Act and general administrative law requirements. The accommodation of the international dimension is one of the challenges now facing the Competition Tribunal.
Governments are, as a matter of course, involved in matters of this magnitude; overseeing foreign investment is an accepted governmental function. Many states have legislation dealing with foreign investment and official permission is often required; as happened when foreign investors bought shares in Absa and Standard Bank in South Africa a few years ago.
In the globalised economy national market regulation measures frequently have international ramifications. Compliance with international obligations then enters the equation. There are many examples. Only last week the WTO Appellate Body gave a ruling in the EU/USA dispute about state subsidies paid to the Airbus and Boeing companies and the effect thereof on fair trade. It does not come as a surprise that the same consideration (the effect of the state’s international obligations)
applies to measures about competition and mergers involving foreign companies.
The procedure with respect to the present merger is not at fault. The transparent involvement by the government, together with other parties, acknowledges a basic rule of law requirement. The issues are openly debated. In South Africa (and in certain neighbouring countries) questions concerning the promotion of competition are regulated by law. The Competition Tribunal is an independent forum and will give a decision on the merits and in terms of its legal powers. If a particular party with the necessary standing feels aggrieved about the final ruling, it will be possible to take the matter to the Competition Appeal Court and even to the regular courts. South Africa has a dedicated legal arrangement consisting of detailed legislation and institutions (Competition Commission, Competition Tribunal and Competition Appeal Court) to investigate, decide and review competition related questions and rulings. This includes procedures for protecting the rights of parties and to ensure that the applicable legal norms are fully adhered to. Remedies will be granted where due.
This happened in Namibia with respect to Walmart’s recent merger notification in Windhoek. The facts of that case are mentioned below in order to highlight an important aspect of the present matter, the general rules-based nature of the procedure and the fact that decisions by competition authorities should be justiciable.
THE REGIONAL CONTEXT
The competition hearing in South Africa is the final hurdle for Walmart’s entrance into Africa, as the necessary approval has already been obtained in the other African states with competition regulators. Massmart operates in 14 African countries, but only six of these countries require competition approval for the acquisition. The competition authorities in Tanzania, Malawi, Swaziland and Zambia gave their unconditional approval for the deal. Namibia and South Africa are the two outstanding jurisdictions.
South Africa represents by far the most important market for Walmart in Africa; as 93 percent of Massmart’s revenues are generated in this country. If the merger is refused, or too strict conditions are imposed on its South African operations, it will seriously frustrate Walmart’s entry into Africa.
http://www.tralac.org/cgi-bin/giga.cgi?cmd=cause_dir_news_item&cause_id=1694&news_id=104218&cat_id=1027
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
BACKGROUND
The recent hearings before the South African Competition Tribunal on the proposed Walmart/Massmart merger were dominated by arguments about the impact of the proposed deal on jobs and local procurement. Some have argued that the Tribunal should decline permission for the merger, and that if it could not do so, it should impose restrictive conditions on Walmart, which wants to buy 51% of Massmart for about R16.5bn. The South African trade unions, the government and some retailers want specific conditions about future labour practices and imports to be imposed as part of the conditional approval for the transaction to go ahead.
A number of important international legal issues have also been raised. Arguments on behalf of Walmart suggest that several international agreements impact on the domestic regulation of trade, competition, investment and related aspects. These matters are often connected. This paper discusses these issues and the reasons why international trade law applies to investment, competition and this particular merger. The relationship between national and international law also needs clarification, as does the role of the government in this matter. One of the additional questions to consider is whether private parties can invoke these agreements; or do they only apply on the inter-state level?
Walmart has subsequently offered certain concessions but during the hearings before the Competition Tribunal its legal representatives have argued that restrictive conditions (depending on how they are formulated) may violate South Africa’s obligations under the WTO agreements. It would be impermissible, they argued, to discriminate against Walmart by obliging it to comply with obligations which do not bind its competitors. What are these international obligations and why would the suggested conditions constitute violations of international rules? Do these international agreements apply domestically?
IS IT ABOUT PROTECTIONISM?
There have been suggestions that the intervention by the South African government before the Competition Tribunal is inspired by protectionist motives. The implication seems to be that it is improper for the authorities to be involved in these hearings. There is nothing improper about the government being concerned about an investment of this kind and to raise questions about its consequences. The other parties and commentators are free to entertain different views. They may challenge assumptions that employment can be protected in the manner proposed by the government and the unions and may offer alternative ideas on how best to secure welfare gains and consumer benefits. They may even pass judgment on the government’s motives and call them ‘protectionist’. The fact that the government raises its concerns now is, however, not wrong or inappropriate. These hearings take place before a public forum and the purpose is to obtain information from the parties concerned and to test the evidence; before making a final ruling on the conditions applicable to the merger. Ultimately the criteria laid down in South Africa’s competition legislation apply, while certain international obligations should also be considered. There is a qualification though; the government’s concerns can, insofar as they relate to binding international legal arrangements, only be accommodated within the ambit of permissible exceptions, in addition to complying with the Competition Act and general administrative law requirements. The accommodation of the international dimension is one of the challenges now facing the Competition Tribunal.
Governments are, as a matter of course, involved in matters of this magnitude; overseeing foreign investment is an accepted governmental function. Many states have legislation dealing with foreign investment and official permission is often required; as happened when foreign investors bought shares in Absa and Standard Bank in South Africa a few years ago.
In the globalised economy national market regulation measures frequently have international ramifications. Compliance with international obligations then enters the equation. There are many examples. Only last week the WTO Appellate Body gave a ruling in the EU/USA dispute about state subsidies paid to the Airbus and Boeing companies and the effect thereof on fair trade. It does not come as a surprise that the same consideration (the effect of the state’s international obligations)
applies to measures about competition and mergers involving foreign companies.
The procedure with respect to the present merger is not at fault. The transparent involvement by the government, together with other parties, acknowledges a basic rule of law requirement. The issues are openly debated. In South Africa (and in certain neighbouring countries) questions concerning the promotion of competition are regulated by law. The Competition Tribunal is an independent forum and will give a decision on the merits and in terms of its legal powers. If a particular party with the necessary standing feels aggrieved about the final ruling, it will be possible to take the matter to the Competition Appeal Court and even to the regular courts. South Africa has a dedicated legal arrangement consisting of detailed legislation and institutions (Competition Commission, Competition Tribunal and Competition Appeal Court) to investigate, decide and review competition related questions and rulings. This includes procedures for protecting the rights of parties and to ensure that the applicable legal norms are fully adhered to. Remedies will be granted where due.
This happened in Namibia with respect to Walmart’s recent merger notification in Windhoek. The facts of that case are mentioned below in order to highlight an important aspect of the present matter, the general rules-based nature of the procedure and the fact that decisions by competition authorities should be justiciable.
THE REGIONAL CONTEXT
The competition hearing in South Africa is the final hurdle for Walmart’s entrance into Africa, as the necessary approval has already been obtained in the other African states with competition regulators. Massmart operates in 14 African countries, but only six of these countries require competition approval for the acquisition. The competition authorities in Tanzania, Malawi, Swaziland and Zambia gave their unconditional approval for the deal. Namibia and South Africa are the two outstanding jurisdictions.
South Africa represents by far the most important market for Walmart in Africa; as 93 percent of Massmart’s revenues are generated in this country. If the merger is refused, or too strict conditions are imposed on its South African operations, it will seriously frustrate Walmart’s entry into Africa.
http://www.tralac.org/cgi-bin/giga.cgi?cmd=cause_dir_news_item&cause_id=1694&news_id=104218&cat_id=1027
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
Thursday, November 18, 2010
G20 - Balance of power is shifting from developed to emerging economies
The Leaders of the G20 recently had their fifth meeting since the start of the world recession in 2008. Many commentators view the outcome as neither surprising nor particularly disappointing. The Leaders build on their original commitments to support and stabilise the global economy and to lay the foundation for reform. They adopted an Action Plan which focuses on five policy areas namely: monetary and exchange rate polices, trade and development policies, fiscal policies, financial reforms, and structural reforms. However, given the complex world that we live in, these countries will have to rely on a number of international organisations such as the WTO, World Bank and IMF to pursue these reforms.
In the area of monetary and exchange rate policies, they agreed to follow “more market-determined exchange rate systems” to reflect underlying economic fundamentals. This came in response to China’s unwillingness to allow the Yuan to appreciate and America’s push for more liquidity into its banking system. However, in reference to concerns of emerging markets with overvalued flexible exchange rates such as South Africa, countries may respond with “carefully designed macro-prudential measures”. This could be interpreted as giving these countries the go-ahead to take the necessary steps to deal with the vast capital inflows into their economies, which have driven the currency gains.
On the issue of trade and development they reaffirmed their previous commitment to refrain from protectionist trade actions and to conclude the Doha Round of multilateral trade negotiations. They also agreed to formulate medium-term fiscal consolidation plans for advanced economies in line with the Toronto commitment. This commitment must ultimately bring about the stabilisation or reduction of government debt to GDP ratios by 2016 and to at least halve deficits by 2013.
The Leaders agreed to raise international financial regulation standards and to ensure that national authorities fully implement current global standards. They endorsed the policy framework by the Financial Stability Board to address problems related to systemically important financial institutions and banks that are purported to be too-big-to-fail. This latest undertaking comes in response to the financial crisis that was caused by reckless and irresponsible risk taking by banks and other financial institutions, combined with major regulatory and supervisory failures.
These decisions came amid a related debate on the reform of international financial institutions. These organisations, originally responsible for the regulation of the international economy after the Second World War, were created for a different time and purpose. Urgent reforms were necessitated by the realities of a multi-polar global economy where developing countries are now key global players. In response to better reflect these realities, the voting powers of developing and transition countries at the World Bank were increased earlier this year. The 3.13 percentage point increase in the voting power of these countries brought their share to 47.19 percent.
Similarly, the IMF’s Executive Board also announced governance reforms earlier this month. This will bring about a 6 percent shift in the voting power of developing countries. Accordingly, the top ten shareholders of the Fund; the United States, Japan, the four largest European economies (France, Germany, Italy and the United Kingdom), and the BRICs (Brazil, China, India and the Russian Federation) will better reflect their ranking in the global economy.
One thing is clear; the balance of power is shifting from developed to emerging economies.
By: JB Cronje - Tralac South Africa
http://www.tralac.org/cgi-bin/giga.cgi?cmd=cause_dir_news_item&cause_id=1694&news_id=95688&cat_id=1059
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
In the area of monetary and exchange rate policies, they agreed to follow “more market-determined exchange rate systems” to reflect underlying economic fundamentals. This came in response to China’s unwillingness to allow the Yuan to appreciate and America’s push for more liquidity into its banking system. However, in reference to concerns of emerging markets with overvalued flexible exchange rates such as South Africa, countries may respond with “carefully designed macro-prudential measures”. This could be interpreted as giving these countries the go-ahead to take the necessary steps to deal with the vast capital inflows into their economies, which have driven the currency gains.
On the issue of trade and development they reaffirmed their previous commitment to refrain from protectionist trade actions and to conclude the Doha Round of multilateral trade negotiations. They also agreed to formulate medium-term fiscal consolidation plans for advanced economies in line with the Toronto commitment. This commitment must ultimately bring about the stabilisation or reduction of government debt to GDP ratios by 2016 and to at least halve deficits by 2013.
The Leaders agreed to raise international financial regulation standards and to ensure that national authorities fully implement current global standards. They endorsed the policy framework by the Financial Stability Board to address problems related to systemically important financial institutions and banks that are purported to be too-big-to-fail. This latest undertaking comes in response to the financial crisis that was caused by reckless and irresponsible risk taking by banks and other financial institutions, combined with major regulatory and supervisory failures.
These decisions came amid a related debate on the reform of international financial institutions. These organisations, originally responsible for the regulation of the international economy after the Second World War, were created for a different time and purpose. Urgent reforms were necessitated by the realities of a multi-polar global economy where developing countries are now key global players. In response to better reflect these realities, the voting powers of developing and transition countries at the World Bank were increased earlier this year. The 3.13 percentage point increase in the voting power of these countries brought their share to 47.19 percent.
Similarly, the IMF’s Executive Board also announced governance reforms earlier this month. This will bring about a 6 percent shift in the voting power of developing countries. Accordingly, the top ten shareholders of the Fund; the United States, Japan, the four largest European economies (France, Germany, Italy and the United Kingdom), and the BRICs (Brazil, China, India and the Russian Federation) will better reflect their ranking in the global economy.
One thing is clear; the balance of power is shifting from developed to emerging economies.
By: JB Cronje - Tralac South Africa
http://www.tralac.org/cgi-bin/giga.cgi?cmd=cause_dir_news_item&cause_id=1694&news_id=95688&cat_id=1059
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
Wednesday, September 29, 2010
South Africa-China Comprehensive Strategic Partnership: dining in the dragon’s lair?
Taku Fundira, a Tralac Researcher, asks and discusses the question: South Africa-China Comprehensive Strategic Partnership: dining in the dragon’s lair?
The Sino-South Africa (RSA) relationship has reached new heights since the establishment in 1998 of diplomatic relations between the two countries. To date, we have witnessed considerable achievements in Sino-RSA economic, trade cooperation and increases in bilateral trade. In 2009, China became South Africa’s largest export destination overtaking the US and trade statistics from the World Trade Atlas reveal that total trade between the two countries reached US$ 15 billion in 2009, accounting for 17% of China-Africa trade. This share places South Africa as China’s second top African trading partner after Angola. The most recent engagement between the two countries is the Comprehensive Strategic Partnership (CSP), signed by President Jacob Zuma and his counterpart Premier Hu Jintao on 24 August 2010. This marked the last of a series of state visits by President Zuma to the BRIC nations that began in October of 2009 in Brazil.
38 bilateral cooperation agreements are contained in the declaration, ranging from political dialogues, trade, investment, mineral exploration and agriculture to joint efforts in the global arena, such as in the United Nations and the Forum on China-Africa Cooperation (FOCAC). The signing of the CSP can be viewed as a commitment to further strengthen the bilateral relations between the countries and establish a viable long term relationship which takes into account not only the political, but also the commercial interests of both parties.
For the South African government, this relationship is viewed as a vital strategic foreign policy goal to align itself with the new economic giant. According to Alves and Sidiropoulos (2010), the link between the government’s domestic socio-economic priorities and South Africa’s international relations, is at the forefront. This implies that domestic priorities of enhancing access to quality education, health, job creation and poverty eradication have to be factored in. The complementarities in this case offer South Africa an opportunity to learn from China. For China, South Africa offers among other opportunities a gateway to consolidate and expand its African footprint.
Despite the importance of this south-south configuration from a political and economic view, this relationship is not without its challenges, especially with labour movements which accuse Chinese competition as a key reason for job losses. Furthermore, trade between the two countries mirrors that of South Africa and its traditional north partners, where RSA exports are mainly primary resource based-products and imports are mainly manufactured value added products. The prevalence of non-tariff barriers that exist especially for agriculture further exacerbates the concerns as these are hampering RSA’s penetration of the China market. Despite these concerns and given the current forecasts of China’s future economic size and political weight, the logic of improving relations seems irrefutable.
In tralac’s recent publication on South Africa’s Way Ahead – Looking East, we note that expected losses (employment, wages, and production) in certain sectors will be offset by the opportunities created in other sectors with a competitive potential thus in the long run allowing South Africa to develop and expand trade in its competitive sectors. Affected sectors such as clothing and textiles need to be realigned and adopt new technologies while opportunities exist in the chemicals, plastics and non-ferrous metals sectors.
While South Africa dines in the dragon’s lair, there should be a common understanding amongst South African stakeholders, of China role’s in the global economy. The South African government needs to inform its stakeholders that China’s rise is inevitable, and we should not avoid engaging China effectively on the trade front. Concentrating only on defensive positions, on how to limit China’s impact is counter-productive and will ensure that the Sino-RSA relationship remains skewed in ways that suit the Chinese economy far more than those of South Africa.
http://www.tralac.org/cgi-bin/giga.cgi?cmd=cause_dir_news_item&cause_id=1694&news_id=93462&cat_id=1030
References
Alves and Sidiropoulos (2010), South Africa-China Relations: Getting Beyond the Cross-roads? The Sunday Independent, 29 August 2010, [online] full article
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
The Sino-South Africa (RSA) relationship has reached new heights since the establishment in 1998 of diplomatic relations between the two countries. To date, we have witnessed considerable achievements in Sino-RSA economic, trade cooperation and increases in bilateral trade. In 2009, China became South Africa’s largest export destination overtaking the US and trade statistics from the World Trade Atlas reveal that total trade between the two countries reached US$ 15 billion in 2009, accounting for 17% of China-Africa trade. This share places South Africa as China’s second top African trading partner after Angola. The most recent engagement between the two countries is the Comprehensive Strategic Partnership (CSP), signed by President Jacob Zuma and his counterpart Premier Hu Jintao on 24 August 2010. This marked the last of a series of state visits by President Zuma to the BRIC nations that began in October of 2009 in Brazil.
38 bilateral cooperation agreements are contained in the declaration, ranging from political dialogues, trade, investment, mineral exploration and agriculture to joint efforts in the global arena, such as in the United Nations and the Forum on China-Africa Cooperation (FOCAC). The signing of the CSP can be viewed as a commitment to further strengthen the bilateral relations between the countries and establish a viable long term relationship which takes into account not only the political, but also the commercial interests of both parties.
For the South African government, this relationship is viewed as a vital strategic foreign policy goal to align itself with the new economic giant. According to Alves and Sidiropoulos (2010), the link between the government’s domestic socio-economic priorities and South Africa’s international relations, is at the forefront. This implies that domestic priorities of enhancing access to quality education, health, job creation and poverty eradication have to be factored in. The complementarities in this case offer South Africa an opportunity to learn from China. For China, South Africa offers among other opportunities a gateway to consolidate and expand its African footprint.
Despite the importance of this south-south configuration from a political and economic view, this relationship is not without its challenges, especially with labour movements which accuse Chinese competition as a key reason for job losses. Furthermore, trade between the two countries mirrors that of South Africa and its traditional north partners, where RSA exports are mainly primary resource based-products and imports are mainly manufactured value added products. The prevalence of non-tariff barriers that exist especially for agriculture further exacerbates the concerns as these are hampering RSA’s penetration of the China market. Despite these concerns and given the current forecasts of China’s future economic size and political weight, the logic of improving relations seems irrefutable.
In tralac’s recent publication on South Africa’s Way Ahead – Looking East, we note that expected losses (employment, wages, and production) in certain sectors will be offset by the opportunities created in other sectors with a competitive potential thus in the long run allowing South Africa to develop and expand trade in its competitive sectors. Affected sectors such as clothing and textiles need to be realigned and adopt new technologies while opportunities exist in the chemicals, plastics and non-ferrous metals sectors.
While South Africa dines in the dragon’s lair, there should be a common understanding amongst South African stakeholders, of China role’s in the global economy. The South African government needs to inform its stakeholders that China’s rise is inevitable, and we should not avoid engaging China effectively on the trade front. Concentrating only on defensive positions, on how to limit China’s impact is counter-productive and will ensure that the Sino-RSA relationship remains skewed in ways that suit the Chinese economy far more than those of South Africa.
http://www.tralac.org/cgi-bin/giga.cgi?cmd=cause_dir_news_item&cause_id=1694&news_id=93462&cat_id=1030
References
Alves and Sidiropoulos (2010), South Africa-China Relations: Getting Beyond the Cross-roads? The Sunday Independent, 29 August 2010, [online] full article
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
Wednesday, October 21, 2009
Monetary integration in Africa (I).
European monetary integration and the successful establishment of the Euro as a prominent world currency have revived the discourse on the contribution that the integration of monetary systems can make to economic development and macro-economic stability. In Africa, in particular, this debate found fertile ground. Three reasons can be identified that will explain this.
The first is the preference in Africa for the linear model of regional integration and consequently the adoption of regional integration agreements that as final step envisages monetary integration and the adoption of a single currency. At the pinnacle of African integration arrangements, the African Union from the start adopted the goal of a single African currency along the lines of the Euro.
The Southern African Development Community (SADC) serves as an example in southern Africa of many integration arrangements in Africa that envisages the adoption of a single currency. For SADC the latter development is expected to occur in 2018.
In addition, Africa is home to two successful monetary integration arrangements, namely the CFA franc Zone in francophone Africa, and in southern Africa, the Common Monetary Area (CMA). Both these arrangements are legacies of Africa’s colonial past but they remain examples of how monetary integration have contributed and still can contribute to stability and growth.
The third reason is associated with the fact that Africa has an unfortunate history of economic regression and macro-economic and political instability in many countries. Combine this with the fragmented nature of the continent into a multitude of very small and poor economies and the idea of a single regional currency and its benefits as an anchor of stability (an agent of restraint) and facilitator of intra-regional trade becomes attractive.
To contribute to this discussion and specifically to clarify many of the issues and questions that characterise monetary integration as a regional integration arrangement tralac has decided to contribute to the debate. This explanatory note is the first in a series that will be published as hot seat comments. The intention is to clarify concepts and highlight the costs and benefits of monetary integration in the African context. The finer and more detailed technicalities of the topic will be avoided in order to enhance accessibility for non-specialists.
By Colin McCarthy, a Tralac Associate www.tralac.org
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
The first is the preference in Africa for the linear model of regional integration and consequently the adoption of regional integration agreements that as final step envisages monetary integration and the adoption of a single currency. At the pinnacle of African integration arrangements, the African Union from the start adopted the goal of a single African currency along the lines of the Euro.
The Southern African Development Community (SADC) serves as an example in southern Africa of many integration arrangements in Africa that envisages the adoption of a single currency. For SADC the latter development is expected to occur in 2018.
In addition, Africa is home to two successful monetary integration arrangements, namely the CFA franc Zone in francophone Africa, and in southern Africa, the Common Monetary Area (CMA). Both these arrangements are legacies of Africa’s colonial past but they remain examples of how monetary integration have contributed and still can contribute to stability and growth.
The third reason is associated with the fact that Africa has an unfortunate history of economic regression and macro-economic and political instability in many countries. Combine this with the fragmented nature of the continent into a multitude of very small and poor economies and the idea of a single regional currency and its benefits as an anchor of stability (an agent of restraint) and facilitator of intra-regional trade becomes attractive.
To contribute to this discussion and specifically to clarify many of the issues and questions that characterise monetary integration as a regional integration arrangement tralac has decided to contribute to the debate. This explanatory note is the first in a series that will be published as hot seat comments. The intention is to clarify concepts and highlight the costs and benefits of monetary integration in the African context. The finer and more detailed technicalities of the topic will be avoided in order to enhance accessibility for non-specialists.
By Colin McCarthy, a Tralac Associate www.tralac.org
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
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