Trade relations between the GCC and South Africa
Mina Baliamoune-LutzUniversity of North Florida
African Economic Conference 2009 African Development Bank and
Economic Commission for AfricaAddis Ababa, November 11-13
Introduction
“Today the Arab countries of the Middle East face a
challenge familiar to all south Africans: to create jobs for the large cohort of young people reaching working age. Over the next decade or so, the Middle East may experience population growth of 150m people – the equivalent of adding two Egypts. In demographic terms, the task is similar to that facing SA–only larger. Rising labour force participation by women only increases the pressure. The task is immense and the stakes are high.”
(Marcus Noland and Howard Pack, Global Dialogue, 2008)
Similarities between South Africa and Arab countries
High unemployment rates. High age dependency rates. Low (although getting stronger in some
countries such as Tunisia, Morocco, and SA) share of manufacturing in exports, with heavy reliance on minerals and commodity export in GCC countries.
High population growth in most countries.
GCC In the period 1996-2005, unemployment in South
Africa averaged 26.6% (see HDR 2007/08) while the highest average unemployment rate in the GCC was 5.2% (in Saudi Arabia).
However, when we distinguish between male and female unemployment we find important differences. In South Africa the same unemployment rate applies to both, while in the GCC countries the rates are significantly higher for women. – For example, female unemployment as a % of male
unemployment rate is 548% in Qatar, 274% in Saudi Arabia, 173% in Kuwait, and 118% in the UAE.
GCC and SA as engines of growthIlahi and Shendy (2008) study Growth rates of real GDP, private investment and private
consumption in Egypt, Jordan, Morocco, Pakistan, Sudan, Syria, Tunisia, and Yemen (regional countries) are strongly correlated with remittance flows from and the accumulation of financial surpluses in GCC countries.
Interestingly, growth in the regional economies does not seem to be influenced by growth in the North.
Ilahi and Shendy argue that “[l]inkages with the GCC could help sustain output growth in the regional countries in the face of the global economic slowdown and oil price shocks and could provide diversification gains to international capital seeking markets uncorrelated with Northern and emerging market countries”(p. 3).
Arora and Vamvakidis (2005) study South Africa serves as an “engine” of
growth for the rest of Africa. The authors argue that this could be caused by higher efficiency, economies of scale and technological gains associated with trade, and other factors, such as financial linkages.
Table 1. South
Africa Bahrain Kuwait Oman Qatar Saudi
Arabia UAE
GDP (PPP US$, billions)
520.9 15.6 66.7 38.4 22.13a 363.2 115.7
Income per capita
11,110 21,482 26,321 15,602 27,664 15,711 25,514
Adult literacy 90.9 86.5 93.3 81.4 89 82.9 88.7
Life expectancy
50.8 75.2 77.3 75 75 72.2 78.3
HDI (rank)* 0.777 (81)
0.866 (41)
0.891 (33)
0.814 (58)
0.875 (35)
0.812 (61)
0.868 (39)
Data are for 2005, unless noted otherwise. a Estimated. * HDI: Human development index for 2005; (rank) refers to the country’s rank based on 177 countries ranked by HDI in 2005. Source: Human Development report, 2007/2008 (UNDP).
Table 2: Institutional capacity in South Africa and selected GCC countries Technology,
innovation, and diffusion*
Local availability of specialized research and
training
Local suppliers quality
Intellectual property
protection
Brain drain
South Africa
75 81 79 81 43
Bahrain 74 15 51 68 72
Kuwait 74 51 58 55 97
Qatar 64 15 41 73 99
UAE 88 27 73 74 98
Higher values indicate higher capacity. The index for each category is in %. Source: Global Competitiveness Reports 2004-05 and 2005-06 * Firm level technology absorption
Recent patterns of trade
Top traded commodities Top trade partners Trade between SA and GCC
SA: Top exported commodities(2007)
12%
11%
40%
20%
8% 9%71 Natural or cultured pearls, precious or semi-precious stones, precious metals, metals cladwithprecious metal, and articles thereof; imitation72 Iron and steel
27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineralwaxes84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
87 Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof
Other commodities
Source of data: United Nations Statistics Division - Commodity Trade Statistics Database (COMTRADE)
SA: Top imported Commodities(2007)
16%
10%7%
38%
19%
10%27 Mineral fuels, mineral oils and products of their distillation; bituminoussubstances; mineral w axes
84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
87 Vehicles other than railw ay or tramw ay rolling-stock, and parts and accessories thereof
85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image andsound recorders and reproducers,99 Commodities not specif ied according to kind
Other commodities
Source of data: United Nations Statistics Division - Commodity Trade Statistics Database (COMTRADE)
UAE: Top imported commodities(2006)
19%
8%8%
39%
11%
15%
99 Commodities not elsewhere specified 71 Pearls, precious stones, metals, coins, etc84 Nuclear reactors, boilers, machinery, etc 87 Vehicles other than railway, tramway85 Electrical, electronic equipment Other commodities
UAE: Top exported commodities(2006)
50%
26%
6%
3%3%
12%
27 Mineral fuels, oils, distillation products, etc99 Commodities not elsewhere specified 71 Pearls, precious stones, metals, coins, etc 85 Electrical, electronic equipment 87 Vehicles other than railway, tramway Other commodities
Saudi Arabia: Top imported commodities (2007)
19%
14%
10%
6%5%
46%
84 Nuclear reactors, boilers, machinery, etc87 Vehicles other than railway, tramway85 Electrical, electronic equipment 73 Articles of iron or steel 72 Iron and steelOther commodities
Saudi Arabia: Top exported commodities (2007)
87%
6%1%
3%2%
1%
27 Mineral fuels, oils, distillation products, etc39 Plastics and articles thereof 29 Organic chemicals 87 Vehicles other than railway, tramway 85 Electrical, electronic equipment Other commodities
Qatar: Top imported commodities (2007)
26%
15%
13%
12%
3%
31%
84 Nuclear reactors, boilers, machinery, etc 73 Articles of iron or steel 85 Electrical, electronic equipment 87 Vehicles other than railway, tramway 72 Iron and steel Other commodities
Qatar: Top exported commodities (2007)
90%
2% 0%
2%
3%
3%
27 Mineral fuels, oils, distillation products, etc39 Plastics and articles thereof 31 Fertilizers 29 Organic chemicals 87 Vehicles other than railway, tramway Other commodities
Top traded commodities
SAIncreased diversification of exports
GCCHigh concentration of exports (mineral fuels)Improving diversification of exports in UAE
SA: Top export partners(2007)
12%
8%
7%
13%
8%
52%
USA Japan
Germany United Kingdom
China Other partners
SA: Top import partners(2007)
12%
11%
7%
5%
57%
8%
Germany China
USA Japan
United Kingdom Other partners
Source of data: United Nations Statistics Division - Commodity Trade Statistics Database (COMTRADE)
UAE: Top import partners(2006)
9%
9%
7%
6%
50%
19%
Areas, nes China India USAGermany Other partners
UAE: Top export partners(2006)
26%
11%
4%
3%39%
17%
Areas, nes JapanOther Asia IranIndia Other partners
Saudi Arabia: Top import partners (2007) 13%
54%
5%
10%
9%
9%
USA China
Germany Japan
Italy Other partners
Saudi Arabia: Top export partners (2007)
26%
5%
17%
24%
4%
24%
Japan Other Asia, nesUSA Other Europe, nes United Arab Emirates Other partners
Qatar: Top import partners(2007)
10%
10%
8%
7%
11%
54%
USA Italy
Japan Germany
United Arab Emirates Other partners
Qatar: Top export partners(2007)
41%
17%
11%
6%
5%
20%
Japan Rep. of Korea
Singapore India
Thailand Other partners
Major trade partnersGCC High concentration on a small group of
countries, especially for exports. Japan: major export market
SA Slightly lower concentration
Exports (2006)
0
5
10
15
20
25
% t
ota
l exp
ort
s
Imports (2006)
02468
1012141618
% t
ota
l im
po
rts
Exports (2000)
0
2
4
6
8
10
12
14
16
18
20
% t
ota
l exp
ort
s
Imports (2000)
0
2
4
6
8
10
12
14
16
18
% t
ota
l im
po
rts
SA: Nuclear reactors, boilers, machinery, etc [HS1996 code 84]
Exports (2000)
0
5
10
15
20
25
% t
ota
l exp
ort
s
Imports (2000)
0
10
20
30
40
50
60
GCC Iran Nigeria China India
% to
tal im
po
rts
Exports (2006)
0
5
10
15
20
25
% to
tal e
xp
ort
s
Imports (2006)
0
5
10
15
20
25
30
35
% to
tal im
po
rts
SA: Mineral fuels, oils, distillation products, etc [HS1996 code 27]
Exports (2000)
0246
8101214
% to
tal e
xpor
ts
Imports (2000)
0
5
10
15
20
% t
ota
l im
po
rts
Exports (2006)
0246
81012
% t
ota
l exp
ort
s
Imports (2006)Growing share of China
0
2
4
6
8
10
12
14
16
18
20
% to
tal im
po
rts
SA: Electrical, electronic equipment [HS1996 code 85]
Exports (2000)
0
2
4
6
8
10
12
14
16
18
% t
ota
l exp
ort
s
Imports (2000)
0
5
10
15
20
25
30
35
40
45
% t
ota
l im
po
rts
SA: Fertilizers [HS1996 code 31]
Exports (2006)
05
1015
20253035404550
% to
tal e
xpor
ts
Imports (2006)
05
1015202530354045
% t
ota
l im
po
rts
Exports (2000)
0
5
10
15
20
25
30
% t
ota
l exp
ort
s
Imports (2000)
0
20
40
60
% t
otal
impo
rts
Exports (2006)
0
5
10
15
20
25
% t
otal
exp
orts
Imports (2006)
0
10
20
30
40
50
60
% to
tal i
mpo
rts
SA: Beverages, spirits and vinegar [HS1996 code 22]
Commodity Partner Trade Value in US$
Exports Imports Pitch and pitch coke, from coal, mineral tars [HS1996 code 2708] World 18,655,079 13,370,064 Qatar 422795 (2.27%) Saudi Arabia 143145 (0.77%) UAE 418354 (2.24%)
World 1,840,120,349 10,917,941,061 Petroleum oils, oils from bituminous minerals, crude [HS1996 code 2709] Oman 356,963,569 (3.27%) Saudi Arabia 2,877,728,820 (26.36%)
World 1,077,233,408 3,241,346,291 Oils petroleum, bituminous, distillates, except crude [HS1996 code 2710] Bahrain 26,688,375 (0.82%) Oman 48,917,166 (1.51%) Saudi Arabia 303,285 (0.03%) 359,032,795 (11.08%) UAE 3,728,577 (0.35%) 362,690,390 (11.19%)
World 74,458,408 242,203,121 Mineral or chemical fertilizers, nitrogenous [HS1996 code 3102] Bahrain 4,592,106 (1.90%) Qatar 608,70714 (25.23%) Saudi Arabia 109,538,935 (45.23%)
World 96,709,200 64,884,266 Fertilizer mixtures in packs of < 10kg [HS1996 code 3105] Saudi Arabia 3,241,819 (5%) UAE 237,594 (0.37%)
Table 3. South Africa’s trade with GCC (2007), selected commodities, HS 4 level
World 38,589,590 358,485,457 Air, vacuum pumps, compressors, ventilating fans, etc [HS1996 code 8414]
UAE
791,690 (2.05%) 132,458 (0.04%)
World 32,634,433 151,699,016 Air conditioning equipment, machinery [HS1996 code 8415] UAE 561,583 (1.72%)
World 15,253,623 47,717,854 Industrial, laboratory furnaces, ovens, incinerators [HS1996 code 8417] UAE 260,919 (1.71%)
World 58,908,667 313,777,303 Refrigerators, freezers and heat pumps nes [HS1996 code 8418] Qatar 231,743 (0.39%) Saudi Arabia 311,664 (0.53%) UAE 553,173 (0.94%)
World 31,457,834 181,209,135 Machinery, non-domestic, involving heating or cooling [HS1996 code 8419] Qatar 464,494 (1.48%) UAE 406,695 (1.29%)
World 30,329,902 277,581,046 Machinery for dish washing, bottle washing, filling [HS1996 code 8422] Saudi Arabia 348,946 (1.15%) UAE 1124,003 (3.71%)
Future developments
1. Why should SA and GCC enhance trade with each other?
2. Which ‘sectors’ or groups of products would be good candidates for increased trade?
3. Is China a threat to trade relations between SA and GCC?
4. UAE is one of SA’s lucrative markets in the Gulf region, why do other GCC countries not have a similar (strong) trade (exc. oil) relation with SA?
Table 4. Demographics
South Africa
Bahrain Kuwait Oman Qatar Saudi Arabia
UAE
2005 47.9 0.7 2.7 2.5 0.8 23.6 4.1 Population In millions
2015 50.3 0.9 3.4 3.1 1.0 29.3 5.3
2005 59.3 96.5 98.3 71.5 95.4 81.0 76.7 Urban pop. (% of total)
2015 64.1 98.2 98.5 72.3 96.2 83.2 77.4
2005 32.1 26.3 23.8 33.8 21.7 34.5 19.8 Pop. under age of 15 (% of total)
2015 30.2 22.2 22.5 28.6 20.6 30.7 19.7
2005 4.2 3.1 1.8 2.6 1.3 2.8 1.1 Pop. age 65 and older (% of total)
2015 5.5 4.2 3.1 3.6 2.1 3.3 1.6
Source: Human Development report, 2007/2008 (UNDP).
2015
SASlower pop. growthApprox. 2/3 of the
population is urban30% of the pop. is
under age of 15
5.5% of the pop. is 65 and older
GCCRelatively high pop. growthOver 80% of the population
is urban30% of the population under
the age of 15 in Saudi Arabia and Oman; approx. 20% in other GCC countries.
3-4% of the pop. is 65 or older (lower in Qatar and UAE)
South-South trade
Trade between developing countries (South-South trade) offers wide scope for specialization and efficiency gains. At present, barriers to South-South trade are higher than those governing South trade with other partners, and distance–related costs are higher. Recent OECD research shows that the potential evidence from freer South-South trade may indeed be at least as large as the gains that developing countries can obtain from better access to rich countries’ markets (North-South trade).
(OECD Policy Brief, August 2006, p. 1)
Enhancing trade between South Africa and GCC countries can be viewed within the context of enhancing South-South trade.
South Africa and the United Arab Emirates, in particular are trying to diversify their production and exports. Thus, we should try to identify those areas where trade between GCC and SA would lead to important efficiency gains.
Non-tariff Barriers to trade• Language: English is becoming more and more the
common business language• Culture: Cultural differences will always be there
and globalization may or may not reduce them. However, in the case of South Africa, we could talk about proximity in culture, which would make the culture GCC or Arab culture definitely closer (due tohistorical links between SSA and the Arab Gulf) to South African culture than the Chinese culture, for example, is.
• Distance: GCC is closer to SA than China or other major trade partners are to SA.
Table 5. Distance and time difference between Johannesburg and selected cities Distance in kilometers (flight time) Time difference in hours
Dubai 6,399 (7 hours, 57 minutes) 2 (Dubai ahead)
Frankfurt 8,668 (10 hours, 46 minutes) 1 (Johannesburg ahead)
New York 12, 836 (15 hours, 57 minutes) 7 (Johannesburg ahead)
Beijing 11,693 (14 hours, 32 minutes) 6 (Beijing ahead)
Driving from Johannesburg to Dubai takes only 72 hours on average while driving to Frankfurt takes about 97 hours (assuming an average speed of 90 km per hour)!
Future developments
There could be substantial gains from increased trade and investment between SA and GCC in some important sectors.
1. Tourism2. Infrastructure investments (see Development Bank of South
Africa Infrastructure Barometer 2008) are an important component of the Accelerated and Shared Growth Initiative for South Africa (AsgiSA). SA’s National Treasury has allocated R568 billion for the infrastructure and maintenance (see Kirsten and Davies , 2008). Transport Energy ICT
3. Food and beverages
Trade chillingSA’s trade with the GCC countries tend to
be concentrated compared to its trade with the rest of the world. Are tariffs outside the lines of major traded products relatively high so that trade is chilled?
If yes, trade liberalization (free trade agreement) may expand the range of trade between GCC and SA.
Image of the V&A Waterfront - owned by Dubai World Africa - at night Dubai World, through its subsidiary Dubai World Africa, has bought the iconic V&A Waterfront in Cape Town, as well as a string of property and tourism investments such as Pearl Valley golf resort and spa, also in Cape Town and the Shamwari Game Reserve in the Eastern Cape.
