Opinionista Marius Oosthuizen 31 August 2018

SA and UK can find a new rhythm in economic relations

South Africa, with access to diverse raw materials, a young workforce and proximity to future African consumers estimated to number 2.5 billion by 2050, is well placed to be a co-creator of a UK-South Africa future manufacturing success, for mutual benefit.

When Prime Minister Theresa May took to dancing this week at the ID Mkhize Senior Secondary in Gugulethu, Cape Town, the South African and UK twitterati were out in full force describing the somewhat robotic machinations of the lead Brit, responsible for her country’s imminent exit from the European Union.

True, May’s dance moves were a bit mechanical, but in the world of bilateral trade relations, as was the serious purpose of her visit, an appropriate level of staging can be useful, if not preferred.

The UK leader visited South Africa as part of a three-day tour of sub-Saharan Africa, looking to cement trade ties to ensure “shared prosperity and security” with African nations, having set the ambitious goal of eclipsing the US by 2022 as the biggest investor in Africa out of the G7 group of industrialised nations.

While May remains under pressure to deliver a Brexit deal at home, the PM is trying to secure a post-Brexit future, in which the UK retains some of the geostrategic importance and international prestige that the small island nation has grown accustomed to.

The UK, and Britain in particular, has enjoyed a long and chequered connection with South Africa, beginning with a golden age of what one might call colonial overlordship, followed by a paradoxical but mutually beneficial trade enmeshment. Last year, during a joint statement by UK Secretary of State for International Trade Liam Fox, and South Africa Minister for Trade and Industry Rob Davies, bilateral trade in goods and services between the UK and South Africa was estimated to have been £7.6-billion in 2015, UK exports increasing by 25 percent for the last decade, and South Africa’s exports into the UK by 5 percent on an annual basis.

So, does South Africa stand to gain from the UK’s apparent Brexit-inspired courtship?

To answer that question meaningfully one has to consider the potential development path South Africa is likely to take in the next decade and beyond. It is unsurprising that President Cyril Ramaphosa had to provide assurances to May that land expropriation in South Africa, the new cornerstone of ANC policy, will take place in a manner that is “legal and transparent”.

No doubt the holders of purse strings in the UK, both public and private, will not be resting easy as they watch Ramaphosa ratchet up his pre-2019 electioneering with populist rhetoric, such as his recent call to US President Donald Trump to “leave [South Africa] alone… [and] stick around there in the White House… [and] not [to] get involved in [South Africa’s] issues”.

Irrespective of the apparent political crossroads facing South Africa in the next two years, the country still boasts at least three significant prospects that it, with the help of the UK, might leverage for success in coming years.

Natural resources and proximity to African markets

South Africa’s gold reserves, the bullion that built Johannesburg and initially attracted British interests to the tip of Africa, have been largely depleted in so far as cost-competitive mining is concerned. However, the country still represents a node of notable deposits of chromium, antimony, vast coalfields, iron ore, manganese, nickel, phosphates, tin, rare earth elements, uranium, gem diamonds, platinum, copper, vanadium, salt and some natural gas, though it is likely to remain a major importer of gas from Mozambique’s burgeoning industry.

Were South Africa able to resolve the political and labour fault-lines in its mining sector, and resolve Eskom’s self-inflicted issues pertaining to the security of supply of energy, as envisioned in the recently tabled Integrated Resources Plan 2018, mining could once again unlock marked interest from UK investors. While the UK’s own mining industry is said to be “past its prime”, due to declining cost competitiveness and rising environmental concerns, but for a few technology-driven operations that are thriving, it was estimated in 2016 that over $1-trillion worth of Africa’s resources are still controlled by a mere 101 companies — most British, listed on the London Stock Exchange. As with the emerging land reform issue in South Africa and its likely effects on the agricultural sector, the question will be whether UK investors will have the stomach for the socio-political complexity that increasingly comes with the territory in mining in South Africa.

Knowledge networks and exchange in expertise

Even though South Africa suffers from a much talked about education crisis, especially at the primary and secondary levels, five of the top 10 universities in Africa are scattered across South Africa. Between UCT, Wits, Stellenbosch University, UJ, UKZN, NWU and UWC, South Africa’s nodal knowledge network is the closest institutional asset to the UK’s own QS world university ranking as top dog, in that 10 of the 48 subject tables are led by UK institutions.

These include anatomy, physiology, archaeology, literature, geography, anthropology, art and design, education, development studies, sports-related subjects as well as library and information management.

While it is popular, and politically expedient, to talk of South Africa’s natural resource endowments, or “mineral wealth beneath the soil” as the Freedom Charter of 1955 calls them, it is more likely South Africa’s untapped human capital, if developed, that will ensure it’s prosperity and security in the future.

Naturally, the UK would be the ideal partner to South Africa, if education was to be prioritised. In fact, aside from the extra 100 Chevening scholarships for South African students to study in the UK, announced by May during her visit, a concerted effort ought to be made at bilateral strategic partnerships between UK and South African institutions, aimed at bringing world-class research and development to Africa, at scale, via South Africa. Who knows, perhaps through such an endeavour South Africa’s emerging dream of one day exporting beneficiated commodities could be realised.

Add an additive manufacturing partnership

Finally, as the world wrestles with the impact of industry 4.0, driven by innovations in and convergence of advanced robotics, automation, big data and 3D printing, both the UK and South Africa will grapple with maintaining a foothold in their industrial sectors of auto, pharmaceutical, chemicals and chemical-based products and in the case of the UK, electronics, audio and optical, railway locomotives and related components, aerospace and defence equipment.

The UK government is well aware of the likely trends shaping the sector, the Government Office for Science having conducted an extensive foresight analysis as long ago as 2013. However, the report only goes so far as to argue that “the UK needs to radically change its approach to providing a constant and consistent framework within which all firms aspire to prosper”, arguing that policies and measures need to ensure that manufacturing takes place “faster, [be] more responsive and closer to customers, [requiring] expos[ure] to new market opportunities”.

South Africa, with access to diverse raw materials, a young workforce and proximity to future African consumers estimated to number 2.5 billion by 2050, is well placed to be a co-creator of a UK-South Africa future manufacturing success, for mutual benefit.

The prime minister’s visit may have been brief and might have had an off-beat start, perhaps predictably for someone occupying 10 Downing Street at as precarious a time as the pre-Brexit season, but irrespective of who leads the Tories or the UK, partnership is likely to be in both nations’ long-term interests.

Such a partnership, to be effective, will, however, require patient capital, as someone called it, and enduring friendship, without which neither country will be able to make sense of the other’s imminent political evolution.

Perhaps equally important, is that neither country’s leadership allow a scenario where a two-left-feet race to the political bottom derails the potential for a renewed rhythm in economic relations. DM

Marius Oosthuizen is a member of faculty at the Gordon Institute of Business Science, University of Pretoria. He teaches leadership, strategy and ethics. He oversees the Future of Business in South Africa project which uses strategic foresight and scenario planning to explore the future of South Africa. He writes in his personal capacity.

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