Tuesday, January 18, 2022

South Africa- Deflated Egos and the Trade Deficit

Some numbers actually do make people and countries change their whole way of thinking about their relations with other people as well as themselves. Take the GDP of China as compared to that of the world’s number one economy, the USA. Economists have spent the last few years speculating on when the day will come when China, with its fabulous rates of GDP growth, would finally resume its rightful place as the world’s biggest economy which it was for many centuries until European, Japanese and American colonialism systematically plundered the country in the 19th century. When that day comes and it will certainly come at some time between 2020 and 2030 the US will become something that is not part of its national psyche, it will become number two! In Africa we have had the same situation with South Africa and Nigeria.

For years, South African officials and politicians as well as the public, whether under apartheid or under democracy, could take for granted that their country was number one in Africa and that anyone north of the Limpopo was small stuff and could be taken for granted. It has resulted in an insufferable level of hubris and arrogance in Pretoria towards its neighbours that was painful to not only those in Botswana but throughout southern Africa. But suddenly in early April Nigeria recalculated its GDP and overnight its GDP went from 42 billion naira to 80.2 billion Naira. The Nigerian economy had grown 90% overnight and South Africa was in a new position- number two in Africa! Big doesn’t mean Rich Unfortunately Nigeria has developed the reputation of being Africa’s home of ‘shonk’ and ‘dodgy deals’ and the sudden doubling of its GDP was initially seen by many who did not understand as something could be not possibly be accurate. However, this recalculation was not a product of Nigerian fudging of numbers but the exact opposite, their statistics office finally got the numbers right. The old GDP estimates were based on weightings from a 1990 base. These weights should be recalculated every 5 years to reflect the change in the economy but statistics being what they are, i.e. a very low priority for every government, this was not done for almost quarter of a century.

In 1990 Nigeria had no telecoms, no Nollywood to speak of and no booming and aggressive financial sector. This all changed in 20 years with a new 2010 base, lo and behold Nigeria was found to have a larger economy than South Africa. This meant that the usual measure of how rich a nation’s citizens are, its GDP/capita went from USD1,500 to USD2,688 in 2013. Of course it does not mean much because South Africa has some 53 million people and Nigeria 170 million and approximately 61% of those Nigerians are estimated to live on less than one dollar (9 pula) per day. This is up from 10 years ago when it was only 54%. The GDP per capita in South Africa was US$ 5,920 and so we will have wait for a very long time before the average South African worker would voluntarily swap places with his Nigerian counterpart no matter how big his economy may be. Despite the brave face put on his country’s relative decline in economic importance in Africa by then South African Finance Minister Pravin Gorham you could almost hear the South African egos deflating all the way from Pretoria. The sound will be much more audible from Washington when China overtakes them as the egos are much, much bigger. But like his South African counterpart the average American worker is still a very long way from wanting to voluntarily swap places with his Chinese counterpart. Hiding the Trade Numbers Some statistics are just so embarrassing that its better to just hide them from the public.

For years it has been impossible to get any reasonable estimate of South Africa’s exports and imports from its SACU neighbours, Botswana Lesotho Swaziland and Namibia i.e. the so-called BLNS. Like most commercial acts there was a good and a real reason for why these figures were not public. The good reason offered by South African officials is that all five SACU countries are part of a customs union i.e basically one economy and officials in SARS could say that there was no need for SARS to separate these numbers. In 2009, before I was blacklisted by the South African Treasury and never again allowed to work on SACU issues, I was conducting an agriculture study for SACU and despite desperate attempts could not get access to South Africa’s agricultural exports to the BLNS. I was told first these did not exist, then I was told these were confidential. Then I was told that the data is completely inconsistent between one country and another, which is entirely true. Given that some ZAR 20-30 billion in SACU customs revenue is distributed to each of the 5 SACU members every year on the basis of the share of intra-SACU imports, the fact that the trade figures should not be public in countries that claim to be accountable for their finances seemed scandalous. But I suspect the real reason for the secrecy is that the import statistics of the all SACU members were so inconsistent between one country and another with SA and Namibia, for example, never being able to agree that the actual distribution of the SACU customs pool was in effect not by any given formula but rather by agreement over which set of import statistics should use.

At the SACU centenary celebrations in Pretoria in 2010, the last SACU event to which I was ever invited, I publicly asked why such figures are not in the public domain in four countries that are democratic and respect the rule of law. My complaint and that of others was finally heeded by SACU which soon after started publishing some trade data and at the end of last year South Africa finally started to publish detailed trade data with and without the four BLNS. Pretoria needs its Piddling Neighbours! When you look at the South African trade figures you start to understand that there was yet another reason for keeping the figures out of public view. The trade figures show how important Africa in general is to South Africa and just how important the BLNS are to maintaining South Africa’s economic stability and a manageable trade deficit.

There are no full year figures yet available on BLNS trade as they only started late last year. What the available figures say is that for the year from January to August 2014 South Africa’s trade deficit was a mere ZAR70 billion. But if you exclude the SACU partners the trade deficit would have been ZAR 137 billion. In other words South Africa on net has exported this year ZAR 67 billion to the BLNS more than it imported and that is one of the main reasons why they agree to pay the substantial transfers to the BLNS. South Africa’s trade deficit with every other region of the world is subsidized by its surplus with Africa and the BLNS countries. And that is why the South Africans fight so hard to maintain their rail monopolies and their dominant position in Africa in general and Southern Africa in particular. It is Africa and the BLNS and that trade surplus that allows Pretoria to maintain its trade deficits with all the other regions with which its trades. It is time for South Africa to conclude that it needs its neighbours, not just as markets but as partners to its own economic development in which all must share- not just South Africans. This is a position that has long been recognized by countries like Kenya which have moved to a deep integration with its east African neighbours in the East African Community but not by South Africa in the context of SADC. And finally when Pretoria starts to think like Tswane it will also recognize the recalcitrant and ugly facts … it is now number two in Africa and it really needs its neighbours as partners to even stay second!

These are the views of the author and not necessarily those of any institution with which he may be affiliated.

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