23 SCN 38-599

SCN

38-599

Suggested by Clive Tasker

BRIC DISPLAY DIVERGENT STRATEGIES IN AFRICA: AN ILLUSTRATION USING FIVE GATEWAY NATIONS

by

Simon Freemantle and Jeremy Stevens From: “Economics - BRIC and Africa”, Standard Bank, December 9, 2009.

http://ws9.standardbank.co.za/sbrp

Reproduced by The European House-Ambrosetti for the Forum “Developing the Regions of Africa and Europe”, Taormina, October 6 and 7, 2011.

Economics BRIC and Africa

BRIC display divergent strategies in Africa: an illustration using five gateway nations

9 December 2009 Simon Freemantle Jeremy Stevens

Introduction

An analysis of overall trade and investment patterns provides

compelling proof of the overarching importance Africa holds in the

current and future trajectories of some of the world’s core emerging

markets1. Simultaneously, the unwavering acceleration of commercial

and diplomatic ties between BRIC and Africa, particularly since the turn

of the century, has proved critical in shaping Africa’s economic path.

While a discussion of overall ties between BRIC and Africa is essential

in mapping the clear and abiding importance and scale of the

relationship, this analysis must be balanced by more granular

interrogation of where each of the BRIC countries differ in their

strategies and trade and investment patterns with Africa; and how each

African country differs in its response to these burgeoning ties.

To be sure, each BRIC has divergent advantages, competencies and

interests, which have led to divergent agendas and strategic

imperatives in Africa. Logically then, each BRIC has differing degrees

of co-variance and co-operation with Africa and, even, within Africa.

The agility and diversity of trade engagements belie lazy, stylised and

insular over-generalisations, which have all-too-often served as the

launch-pad for much analysis and policy.

In addressing this caveat, this paper isolates individual BRIC trade

engagements with selected African economic locomotives – Kenya,

Egypt, Angola, Nigeria and South Africa (KEANS) – which define the

nature and potential of commercial and strategic ties between BRIC

and Africa. Moreover, as evidenced by the data elaborated on in

previous editions of this report series, the KEANS are vital to BRIC-

Africa trade (often serving as gateways into broader regional markets),

and in turn attract the highest levels of diplomatic attention from the

BRIC countries. An analysis of engagements with these core markets

therefore neatly outlines and defines the nuances particular to each of

the BRIC economies co-operation patterns and strategies in Africa.

1 See BRIC in Africa: The fundamental drivers of BRIC in Africa (28 May 2009); and BRIC and Africa: Tectonic shifts tie BRIC and Africa’s economic destinies (14 October 2009).

Each BRIC nation has divergent advantages, competencies and interests, leading to divergent degrees of co-variance, co-operation and integration with Africa and within Africa.

Given a balance of regional dominance, natural resource strength and significant and deepening consumer markets, Kenya, Egypt, Angola, Nigeria and South Africa (KEANS) epitomise the economic and strategic potential inherent for the BRICs in engaging with the African continent. And, the KEANS offer BRICs an important gateway into Africa’s broader regional markets

In Angola, China has clearly used its commercial and diplomatic muscle to access the country’s nascent energy sector. Meanwhile, Brazil has leveraged softer cultural ties to gain market access, while India remains notably absent.

Nigeria’s large consumer market and significant energy reserves provide the foundation for BRIC competition. Surprisingly, China is a net exporter to Nigeria – having failed to secure substantial access to oil and gas reserves. Meanwhile, Nigeria’s exports, largely of crude oil, to India and Brazil reached USD10 bn and USD6.7 bn in 2008. Therefore, while India and Brazil are Nigeria’s second and third most prominent export destinations, China is Nigeria’s largest source of goods.

South Africa has the most balanced trade relations with the BRIC’s, with both exports and imports growing sharply, reflecting the dual importance of South Africa as a market and source of resources.

Egypt imports more from BRIC than it exports to BRIC. Overall, trade with BRIC accounts for 17% of Egypt’s total trade with the world. China is a dominant player, but India, Russia and Brazil each have strong bilateral relations with Egypt which are actively leveraged on the trade front.

In Kenya the competition between India and China is most pronounced. India is leveraging its comparative advantages in Kenya successfully, but China has gained ground since 2004.

The five countries outlined in this paper provide a more lucid view of the divergent and at times competing BRIC strategies in Africa – driven by both strategic and commercial objectives. Understanding what each of the BRIC’s is able to offer African countries, and where their priorities lie in commercial engagements, lies at the heart of engendering a deeper and more sustainable set of bilateral relationships.

2

Regional heavyweights epitomise BRIC-Africa allure

Given a balance of regional dominance, natural resource strength and

significant and deepening consumer markets, KEANS roundly

epitomise the economic and strategic potential inherent for the BRICs

in engaging with the African continent. Collectively, these five countries

have a population of 330 million (mn) people, around one third of

Africa’s total population. Their large respective Gross Domestic

Product’s (GDP), led by South Africa and Nigeria, combine to produce

half of Africa’s USD1.5 trillion (tr) in output2 (see Figure 1). Moreover,

each of these countries operates in the heart of their respective

regions, playing an important role in linking neighbours to global

markets through ports, railways and auxiliary transport linkages.

Figure 1: KEANS are Africa’s regional giants and gateways

Source: IMF, Standard Bank Group

A clear indication of the strategic prioritisation of these five countries by

the BRIC’s can be seen with the number of high-level diplomatic visits

paid by BRIC leadership3 since 2000 (see Figure 2). In total, one in

three visits to Africa by the collective BRIC political leadership between

2000 and 2009 were to South Africa, Nigeria, Egypt, Angola or Kenya.

Figure 2: BRIC visits by leadership to KEANS since 2000

Source: Standard Bank Group

Due to the clear convergence of commercial and diplomatic

importance, Angola, Egypt, Kenya, Nigeria and South Africa,

2 Measured in purchasing power parity terms.

3 This figure accounts for visits by BRIC presidents, prime

ministers/premiers, foreign ministers and ministers of trade/commerce.

accounted for around two-thirds of BRIC-Africa trade flows in 2008

(see Figure 3).

Figure 3: African heavyweights dominate BRIC-Africa trade

Sources: African Development Bank, IMF

Importantly, each country’s bilateral relationship with BRIC highlights

the importance of historical, social, political and economic influences in

the depth and nature of engagements. Furthermore, how each BRIC

varies its respective strategy within these nations reflects a broader

agility and pragmatism of BRIC-Africa engagements. To be clear, not

only does each of the BRICs diplomatic and commercial engagements

vary in comparison to one another, but each BRIC will also vary its own

strategy within Africa: these five African nations serve as proxies for

this undeniable reality.

However, it is to be emphasised that a defining feature of the BRIC’s

engagements with Africa have been the wider arc of trade and

diplomatic relations, encompassing a broad range of countries across

the continent. Indeed, the BRIC countries search for commercial and

strategic gains in Africa has led them to engage with countries

neglected by the continent’s traditional trading partners. Moreover, as

indicated by Figure 4, the growth of trade with the BRIC’s is in many

terms as important as the nominal value – particularly when projecting

for the long-term. In this sense, the mutually advantageous

underpinnings of BRIC-Africa ties are true for almost all African

nations. The five countries chosen for analysis in this paper may

epitomise the nature of BRIC-Africa ties, but do not, in isolation,

represent the full portrait of bilateral relations.

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Figure 4: BRIC bilateral trade growth (2000 – 2008 annual growth

rate)

Source: Standard Bank Group

Angola: Cash-flush China and culturally aligned

Brazil dominate BRIC activity

The energy needs of the BRIC’s domestic industrialisation and

urbanisation have created a clear and unwavering convergence of

commercial interests with Africa’s resource abundant nations,

particularly Angola. Recall, rapid industrialisation has made China the

world’s second largest and India the world’s fifth largest consumers of

energy. In many ways, the opening up of Angola’s economy following

the ending of the civil war in 2002 has coincided with a revival of BRIC

interest in the continent. At the time, Angola’s oil sector was

underdeveloped and at the margins of global supply chains. Therefore,

Angola’s situation is unlike the case of Nigeria where western oil

companies had established a relatively mature position by the early

2000s. Hence, for emerging countries with an energy play in Africa,

Angola has provided the space for rapid gains. Here one sees the

tangible difference between Russia and the other BRIC nations: while

robust domestic economic growth in China, India and Brazil has

conflated their economic trajectory with Africa’s, Russia’s domestic

macroeconomic transformation can occur with limited input from

African resources.

BRIC-Angola trade accounts for one-fifth of total BRIC-Africa trade,

having increased at an annual average growth rate of 71% year-on-

year (y/y) over the past decade, from USD400 mn in 1998 to USD29

bn in 2008. The significant majority of BRIC-Angola trade has been

underpinned by an explosion in trade between China and Angola,

which has increased, from around USD200 mn in 1998 to USD23 bn in

2008 (see Figure 4). Meanwhile, Brazil’s commercial relations with

Angola have also swelled, from USD150 mn to USD4 bn in 2008.

Figure 4: BRIC-Angola trade, 1998 to 2008

Sources: IMF, Standard Bank Group

China increased its share of Angola’s total trade from less than 1% in

1995 to above 30% in 2008. Moreover, China-Angola trade has

exploded by nearly 90% each year over the past decade, making

China one of Angola’s most important international partners. The only

other BRIC nation with any significant stake in Angola’s energy sector

is Brazil, which is able to leverage strong cultural and historical ties to

secure market access. Despite its growing need for oil given its status

as the world’s fifth largest energy consumer, India has been unable to

gain a foothold in Angola. Indicatively, Brazil’s bilateral trade with

Angola was nearly four-times larger than India’s in 2008. Only China

and Brazil have notably increased their portions of Angolan trade since

1980 (see Figure 5).

Figure 5: BRIC trade as a proportion of Angola’s total trade

Sources: IMF, WTO, ISI Emerging Markets, Standard Bank Group

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Figure 6: BRIC trade as a proportion of Angola’s total trade

Sources: IMF, WTO, ISI Emerging Markets, Standard Bank Group

Angola’s exports to BRIC – narrow and undiversified

Angola’s economy is undiversified and reliant on mineral exports,

which clearly manifests in BRIC-Angola trade. Recall, the energy

sector accounts for around 60% of Angola’s GDP and 3% of the

world’s total energy output. Angolan oil exports to China, amounting to

around USD20 bn in 2008, have manifested into the largest trade

surplus of any African nation with BRIC – estimated to be around

USD17 bn in 2008. By means of comparison, Angola’s mineral fuel and

oil exports to Brazil and India amounted to USD2 bn and USD1 bn,

respectively.

China has spearheaded its progress in Angola through official bilateral

assistance and loans to the Angolan government for much-needed

infrastructure programmes. Indicatively, with the global economy in

freefall in late 2008 and oil prices plummeting, Angolan President Jose

Eduardo dos Santos turned immediately to China to secure the finance

necessary to continue the country’s developmental programme. It is

estimated that, since 2006, China has extended around USD10 bn in

loans to the Angolan government. As a result, Chinese state-owned oil

majors and private and state-owned construction firms have gained

significant, at times unassailable, traction in the Angolan market.

Angola’s imports from BRIC

The BRIC collective, once again led by China and Brazil, has wedded

itself neatly to Angola’s rejuvenation, particularly in providing the

materials necessary to rebuild the country’s infrastructure stock.

Angola imported USD5 bn worth of goods from BRIC in 2008 – around

a quarter of Angola’s total imports. China and Brazil account for over

95% of Angola’s imports from BRIC, amounting to USD2.9 bn and

USD1.9 bn, respectively. In 2008 China was Angola’s second-largest

source of goods (behind Portugal) and Brazil was Angola’s fourth most

prominent source of goods (behind the US). The inward traffic of

goods from Brazil and China docking at Luanda’s port is dominated by

machinery, vehicles, articles of iron and steel and electrical equipment,

intent on re-building, industrialising and diversifying Angola’s

productive capacity.

India is currently Angola’s 13th largest source of imports. Despite

lagging both Brazil and China, India has made inroads in certain

products where it has an international competitive advantage. For

instance, 8% of Angola’s imports from India are pharmaceutical

products. In the process, Indian companies have gained a 20% share

of Angola’s pharmaceutical market. India has also targeted Angola’s

boats and ships market, gaining a 31% share of Angola’s total imports

of boats and ships in 2008.

In summary, Angola’s economic awakening coincided remarkably with

the reinvigoration of the BRIC’s interest in the continent. With abundant

and largely untapped energy reserves and a growing consumer base,

Angola has much of what attracts the BRICs to the continent. China

has stolen a march on its BRIC and traditional market competitors

through its strategy of providing cheap loans to the Angolan

government in exchange for access to the country’s abundant oil

reserves. Chinese construction firms have also been on hand to

engage actively in Angola’s ongoing infrastructural renewal process.

Given deep historical and cultural ties, Brazil has been able to gain a

strategic foothold in Angola which has, thus far, eluded India.

Nigeria: Brazil offers China and India stiff

competition for market access

Nigeria is on parity with Angola as the BRIC’s largest trade partner in

Africa, accounting for nearly one-fifth of BRIC-Africa total trade.

Nigeria’s trade with BRIC has ballooned ten-fold, from USD2.96 bn in

1998 to USD29 bn in 2008. However, unlike Angola, the nominal trade

volumes are not distorted by trade with China. Rather, Brazil, India and

China each account for a large and equal share of BRIC-Nigeria trade.

Only Russia, thus far, has limited trade engagements with Nigeria.

Nigeria-India trade has increased from USD1.3 bn in 1998 to

USD10.37 bn in 2008. Simultaneously, Nigeria-China trade increased

from USD600 mn to USD8.3 bn over the same period. Nigeria-Brazil

trade increased from USD1 bn in 1998 to USD10 bn in 2008.

Figure 7: BRIC-Nigeria trade, 1998 to 2008


In 1980, Brazil’s trade with Nigeria stood at USD600 mn, which was

significantly higher than Nigerian trade with Russia (USD120 mn), India

(USD69 mn) and China (USD56 mn). Subsequently, Brazil has

managed to launch a highly competitive strategy from this strong

starting position. Testament to this, Brazil increased its share of

Nigeria’s total trade from 2% in 1980 to 8.2% in 2008. Unsurprisingly,

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Brazil’s President Lula da Silva chose Nigeria as the venue for the

inaugural Africa-South America Summit in 2006. For their part, India

and China have both managed to increase their relative share of

Nigeria’s total trade from close to nothing in 1980 to 4% and 5%,

respectively in 2008 (see Figure 8).

Figure 8: BRIC trade as a share of Nigeria’s total trade

Sources: IMF, International Trade Centre, Standard Bank Group

Nigeria’s exports to BRIC

Nigeria’s exports to India have increased from USD88 mn in 2001 to

USD10 bn in 2008. The vast majority of these flows, estimated to be

around 90%, are made up of crude oil, which has grown by 400% since

2001. In 2008 India was Nigeria’s second-largest export destination

after the US. Considering that India imports 70% of its energy

requirements each year and has had limited success in tapping

Angola’s energy reserves, it is no surprise that India has actively

aligned itself to Nigeria.

In contrast, China has, as yet, been unable to gain access to Nigeria’s

oil reserves. China’s imports from Nigeria have stagnated, increasing

from USD220 mn in 2001 to USD500 mn in 2008. In 2008 China

ranked as Nigeria’s 23rd most important export destination. In fact, of

the BRIC nations, only Russia, with its own domestic energy source,

imports less from Nigeria than China. This is set to change with the

mooted USD50 bn deal between the Nigerian government and China’s

state-owned oil major China National Offshore Oil Corporation

(CNOOC) which would give China access to around 6 bn barrels of

Nigerian oil. This recent initiative shows that China’s energy pursuits in

Africa are relatively nascent – focused largely on Sudan and Angola.

Unlike in the case of Angola, China has battled to compete with more

established international oil companies active in Nigeria. The timing of

China’s attempt to gain traction in Nigeria’s oil sector is opportune on

two levels. Firstly, China’s massive foreign reserves have allowed it to

remain aggressive in pursuing global energy security at a time when

traditional players are being forced to consolidate and rein in costs;

and secondly, the Nigerian government has been vociferous in its

intention to diversify ownership of its oil sector – with emerging markets

prioritised. The USD2.5 bn deal signed between Russian energy giant

Gazprom and the Nigerian National Petroleum Corporation during

Russian President Dmitry Medvedev’s visit to the country in June this

year is a further indication of this shift.

Nigeria’s exports to Brazil increased from USD1.3 bn in 2001 to

USD6.7 bn in 2008, on the back of Brazil’s crude oil demand, which

accounted for 99% of Brazil’s imports from Nigeria in 2008. The solid

growth rate has meant that Brazil is currently Nigeria’s third most

prominent export destination.

Nigeria’s imports from BRIC

Nigeria’s imports from the world surpassed USD27 bn in 2008. Over

half of Nigeria’s total imports are made up of machinery, vehicles,

electrical equipment, articles of iron and steel and plastic. Interestingly,

each BRIC has attached itself to Nigeria’s potential market in different

ways.

Echoing the different role that Nigeria has for the BRIC nations,

Nigeria’s imports from India increased from USD570 mn in 2001 to

USD1.3 bn in 2008, leading to a large trade surplus of USD9 bn in

2008. Machinery, pharmaceuticals, vehicles and electronic products

accounted for 60% of Nigeria’s imports from India.

Nigeria’s imports from Brazil have increased parallel to India’s from

USD416 mn in 2001 to USD1.5 bn in 2008. Fuels, sugars and

beverages along with vehicles dominate total inflows. Like India,

Nigeria has a large trade surplus with Brazil.

In stark contrast, once again, Nigeria’s imports from China increased

from USD910 mn in 2001 to a USD6.8 bn in 2008, resulting in a

substantial trade deficit for Nigeria. In fact, China is Nigeria’s largest

source of goods but remains a marginal partner in terms of exports.

China clearly envisions Nigeria, with the largest population in Africa, as

an important market for its manufacturing exports. Already, China has

made great headway in electrical appliances. Interestingly, a large and

growing number of Nigerians are basing themselves in China, as

evidenced by a vibrant community in Guangzhou, acting as middle-

men in China-Nigerian trade flows.

An intensely competitive environment in Nigeria has manifested in a

divergence of BRIC strategies. Brazil and India have become top

destinations for Nigeria’s oil output, while China has become a top

origin for Nigeria’s manufactured imports. The divergence in trade

realities debunks lazy stylised caricatures of BRIC-African relations.

Recall, Nigeria is one of Africa’s most prolific oil producers, yet exports

little to China, but is the third largest African market for its goods.

However, Nigeria is clearly on China’s acquisition radar, and, should

the proposed deal with CNOOC proceed in its proposed form, Nigeria

will soon become one of China’s most important global energy

partners. BRIC-Nigeria relations should be appreciated in terms of

each BRIC’s broader engagements in Africa as the relative penetration

in Angola and Nigeria reflect in each of the BRICs prioritisation.

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South Africa: BRIC trade relations more balanced

BRIC-South Africa trade has increased at an annual average of 24%

each year since 1998, from USD3.1 bn to USD24.3 bn in 2008 (see

Figure 9). Both South Africa’s exports to BRIC and imports from BRIC

increased eight-fold over the past decade. South African imports from

BRIC have increased from USD2 bn in 1992 to USD16 bn in 2008.

Over the same period South Africa’s exports to BRIC increased from

USD1 bn in 1998 to USD8 bn in 2008

Figure 9: BRIC-South Africa trade, 1998 to 2008


Granted, the vast majority of BRIC-South Africa trade occurs between

China and South Africa – some USD16.6 bn in 2008 (see Figure 10),

but Brazil and India also have important positions in South Africa’s

international trade dynamic.

Figure 10: Composition of BRIC-South Africa trade

Source: IMF

It is unique that both South Africa’s exports and imports with BRIC

nations have grown sharply, reflecting the dual importance of South

Africa as a market and a source of resources, as emphasised by the

following figures:

South Africa’s imports from Brazil increased from USD250 mn in

1998 to USD1.85 bn in 2008. South Africa’s exports to Brazil

increased from USD190 mn in 1998 to USD660 mn in 2008.

South Africa’s imports from Russia increased from USD50 mn in

1998 to USD350 mn in 2008. South Africa’s exports to Russia

increased from USD60 mn in 1998 to USD240 mn in 2008.

South Africa’s imports from India increased from USD500 mn in

1998 to USD2.5 bn in 2008. South Africa’s exports to India

increased from USD360 mn in 1998 to USD2.3 bn in 2008.

South Africa’s imports from China increased from USD1.2 bn in

1998 to USD11.4 bn in 2008. South Africa’s exports to China

increased from USD500 mn in 1998 to USD5 bn in 2008.

South Africa is BRIC’s third-largest trade partner in Africa, accounting

for 20% of Africa’s imports from BRIC and 15% of Africa’s exports to

BRIC. Meanwhile, BRICs have become increasingly prominent trade

partners for South Africa (see Figure 11). Consider that in 1980 trade

with BRIC nations accounted for virtually zero of South Africa’s total

trade. In contrast, by 2008, China (USD17.5 bn), India (USD4 bn),

Brazil (USD2.5 bn) and Russia (USD500 mn) combined to account for

nearly 15% of South Africa’s trade.

Figure 11: BRIC trade as a share of South Africa’s total trade

Source: IMF, International Trade Centre

South Africa’s imports from BRIC

One-fifth of South Africa’s imports from China are comprised of

electrical and electronic equipment, which increased from USD148 mn

in 2001 to USD1.6 bn in 2008. Another 15% of South Africa’s imports

from China are made up of nuclear reactors, boilers and machinery,

which increased from USD100 mn in 2001 to USD1.2 bn in 2008.

Combining to account for around 15% of South Africa’s imports from

China are articles of apparel (USD500 mn), vehicles (USD411 mn) and

footwear (USD456 mn).

Given the relative decline in trade volumes with traditional markets in

the Euro Zone, the US and Japan, China became South Africa’s

largest trade partner in mid-2009. South Africa’s trade ties with Brazil

and India are also rising, bolstered by ongoing diplomatic efforts within

the India-Brazil-South Africa (IBSA) platform, which offers

institutionalised competition to Chinese interests. Nearly half of South

Africa’s imports from India are made up of mineral fuels, oils and

distillation products. More specifically, South Africa imported USD1.2

bn of petroleum oil (not crude) in 2008. In addition, vehicles (USD207

mn), pharmaceutical products (USD192 mn) and machinery (USD100

mn) account for the lion’s share of India’s exports to South Africa.

India’s competitive edge in South Africa resides in large part in its large

diaspora community, which numbers in excess of 1.3 mn – the largest

in Africa.

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For the most part, the composition of Brazil’s exports to South Africa

has remained intact, with the largest share of Brazilian goods made up

of vehicles, which increased from USD87 mn in 2001 to USD537 mn in

2008. Similarly, Brazil’s exports of nuclear reactors, boilers and

machinery to South Africa increased from USD45 mn in 2001 to

USD201 mn in 2008. The aforementioned group of goods accounts for

42% of South Africa’s imports from Brazil. That said, over the past

seven years, the composition of Brazil’s exports to South Africa has

seen both a relative and an absolute gain in certain soft commodities.

As a result, this group has seen its relative size increase from about

10% of Brazil’s total exports to South Africa in 2001 to 25% in 2008.

South Africa’s exports to BRIC

South Africa’s exports to China have ballooned from USD 1 bn in 2001

to USD9.2 bn in 2008. Considering China’s appetite for commodities, it

is unsurprising that a significant majority of South Africa’s exports to

China are metals (see Figure 12). For instance, iron ore (USD1.9 bn),

manganese ore (USD1 bn), chromium ore (USD930 mn) and copper

ore (USD120 mn) made up around 30% of South Africa’s exports to

China in 2008.

Figure 12: China’s share of world consumption of resources in

2008

Source: Beijing Axis, 2009

South Africa’s exports to India have grown from USD1.5 bn in 2001 to

USD5.5 bn in 2008. South Africa’s gold exports increased from USD1

bn in 2001 to USD2.5 bn in 2008, platinum exports increased from

USD2 mn in 2001 to USD235 mn in 2008 and diamond exports

increased from USD1 mn in 2001 to USD64 mn in 2008. South Africa

also exports a large volume of coal to India, which increased from

USD 125 mn in 2001 to USD935 mn in 2008.

South Africa’s exports to Brazil are made up of iron and steel

(USD192 mn), mineral fuels, oils and distillation products

(USD107 mn), pearls, precious stones and metals (USD86 mn);

nuclear reactors, boilers and machinery (USD84 mn) and organic

chemicals (USD84 mn), which accounted for a collective 71% of South

Africa’s exports to Brazil.

South Africa’s exports to Russia increased from USD75 mn in 2001 to

USD442 mn in 2008. Nearly 40% of Russia’s imports from South Africa

are edible fruit, nuts, citrus fruit and melons, which amounted to

USD163 mn in 2008. Ores, slag and ash (USD93 mn) and iron and

steel (USD70 mn) exports make up the majority of Russia’s residual

appetite for South Africa’s goods.

BRIC accounted for 15% of total South African trade in 2008. What is

somewhat unique about South Africa is that both exports and imports

between BRIC and South Africa have grown sharply, reflecting the dual

importance of South Africa as a market and a source of resources.

While in broad terms South Africa’s exports to BRIC are raw materials,

apart from vehicles and machinery, there is limited overlap in terms of

the type of product South Africa imports from BRIC. China has focused

on light manufacturing, electrical equipment and articles of apparel.

India is noted as a source of mineral fuels and oils, as well as

automotives and pharmaceuticals, while Brazil is an important source

of soft commodities.

Egypt: BRIC accounts for 17% of Egyptian trade

BRIC-Egypt trade has accelerated by 29% y/y from USD1.6 bn in 1998

to USD15 bn in 2008 (see Figure 13). Of the BRICs, China is Egypt’s

dominant trade partner, accounting for half of BRIC-Egypt trade.

Nevertheless, the distribution is considerably more even than in the

case of Angola, for example.

Figure 13: BRIC-Egypt trade, 1998 to 2008


Egypt’s imports from BRIC

Egypt imports from BRIC increased from USD1.5 bn in 1998 to USD12

bn in 2008. Egypt has a large trade deficit with BRIC of close to

USD9 bn, reflecting a relatively elevated purchasing power, large

population and a dearth of natural resources.

Egypt’s imports from Brazil increased at an annual growth rate of 20%

y/y since 1992, from USD300 mn in 1992 to USD1.45 bn in 2008.

Brazil has focused on goods, in which it has an international

advantage, including:

Sugar and sugar confectionary (USD313 mn), which is almost

entirely cane and beet sugar. Brazil has an 82% share of Egypt’s

total sugar and confectionary imports;

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Iron ore (USD289 mn), which translates into a 58% share of

Egypt’s total ores, slag and ash imports;

Meat and edible meat offal (USD256 mn), which is primarily

frozen bovine and poultry meat. Brazil’s trade agility has enabled

it to gain nearly one-third of Egypt’s total meat and edible meat

offal import; and

Vehicles (USD70 mn) comprising mostly chassis fitted with

engines for motor vehicles.

Figure 14: Egyptian imports from Brazil in 2008

Source: International Trade Centre

Egypt’s imports from Russia increased at an annual growth rate of 28%

y/y since 1992 from USD300 mn in 1992 to USD2.3 bn in 2008. Like

Brazil, Russia has concentrated on the products in which it has a

global advantage, which has manifested into a narrow group of goods

entering Cairo from Russia. However, owing to Russia’s large

endowment of metals, the product make-up is different to Brazil’s.

Egypt’s imports from Russia include:

Cereals (USD700 mn) made up of durum wheat, which

amounted to 25% of all Egypt’s imported cereal in 2008;

Around 10% of Egypt’s iron and steel (USD400 mn) imports;

Copper imports from Russia, which surpassed USD250 mn in

2008;

Wood and pulp (USD270 mn), which make up 40% of Egypt’s

wood and pulp imports; and

Mineral fuels (USD114 mn).

Figure 15: Egyptian imports from Russia in 2008


Egyptian imports from India increased at an annual growth rate of 31%


Interestingly, unlike the cases of Brazil and Russia, Egypt’s imports

from India are highly diversified (see Table 1). Apart from mineral fuels,

oils and distillation products (USD380 mn), which account for one-fifth

of Egypt’s imports from India, Egypt imports a wide range of goods

from India.

Table 1: Diversity of Egypt’s imports from India (per cent in 2008)

Mineral fuels, oils and distillation products 21.4%

Meat and edible meat offal 15.3%

Cotton 8.6%

Nuclear reactors, boilers, machinery 4.8%

Organic chemicals 3.9%

Man-made filaments 3.8%

Sugars and sugar confectionery 3.8%

Dairy products 3.2%

Electrical & electronic equipment 3.0%

Plastics 3.0%

Coffee, tea, mate and spices 2.9%

Iron and steel 2.6%

Articles of iron and steel 2.2%

Man-made staple fibres 2.2%

Vehicles 2.1%

Other 17.2%


Egypt’s imports from China increased at an annual growth rate of 38%


Hence, China is both Egypt’s dominant source of goods and fastest-

growing source of goods out of the BRICs. Around 60% of China’s

exports to Egypt are made up of machinery, electronic equipment,

vehicles, apparel, iron and steel, and plastics.

Sugar 21%

Iron ore20%

Meat and edible offal

20%

Vehicles5%

Other34%

Cereal34%

Iron & steel20%

Copper14%

Wood13%

Mineral fuels6%

Other13%

9

Figure 16: Egyptian imports from China in 2008


Egypt’s exports to BRIC

Egypt’s exports to BRIC increased from USD110 mn in 1998 to

USD3 bn in 2008. India is notably Egypt’s largest export destination of

the BRICs, accounting for two-thirds of BRIC-Egypt trade and 11% of

Egypt’s total exports. Egypt’s exports to India increased from

USD40 mn in 1998 to USD2 bn in 2008. Egypt’s exports to India are

undiversified with petroleum oils accounting for the significant majority.

Similarly, a quarter of Egypt’s exports to China, which increased from

USD40 mn in 1998 to USD 560 mn in 2008, are made up of mineral

fuels, oils and distillation products. Clearly, from the same starting point

in 1998, the role of Egypt as a supplier of energy to China and India is

somewhat different, with India seemingly focusing more on Egypt’s

supply than China.

In 1998, Egypt exported USD10 mn to both Brazil and Russia. From

this starting point both bilateral trade partnerships have grown at a

similar speed, manifesting in Egypt’s exports to Brazil and Russia

reaching USD230 mn and USD190 mn, respectively. Half of Egypt’s

exports to Brazil are fertilizer products. In contrast, half of Egypt’s

exports to Russia are edible fruit, nuts, citrus fruit and melons.

The convergence of political and economic interests between BRIC

and Egypt has meant that each BRIC has gained a particular relevance

to Egypt since 1980. For instance, in 1980 total BRIC trade accounted

for a mere 2.5% of Egypt’s total trade, but by 2008 this figure swelled

to 17.3%. China, which accounted for 1% of Egypt’s total trade in 1980,

currently accounts for nearly 10% of Egypt’s total trade. India

quadrupled its share of Egypt’s trade, from 0.5% in 1980 to 2% in

2008. Similarly, Russia and Brazil increased their share from a

combined 1% in 1980 to 3.5% and 2.3%, respectively (see Figure 18).

Figure 18: BRIC-Egypt trade as a share of Egypt’s total trade

Sources: IMF, WTO, International Trade Centre. Standard Bank Group

Egypt has a large population of 95 mn, which is expected to increase

to 120 mn by 2025. Moreover, despite a large population, Egypt has a

purposeful GDP per capita of USD2 162 p.a., which is greater than

India and close to China. (In purchasing power parity Egypt’s

USD5 897 per capita GDP is larger than both China and India.)

Furthermore, Egypt offers BRIC a strategic gateway to both the Middle

East and North Africa. Clearly, each BRIC had a similarly starting point

in trade levels with Egypt. However, owing to a somewhat

differentiated trade offering, advantage and expertise, each BRIC has

experienced a varied degree of success. Leading the pack is China.

That said, each BRIC has grown its trade remarkably, reflecting a

shared appreciation of the importance of gaining a foothold in Egypt’s

market – important in its own right, but also as a gateway into regional

markets.

Kenya: India and China jostle for market share

In East Africa’s largest economy, Kenya, the nominal value of BRIC

trade is notably lower than the cases of Angola, Nigeria, South Africa

and Egypt. Nevertheless, BRIC-Kenya trade has still increased ten-

fold, from USD310 mn in 1998 to USD3.8 bn in 2008.

Unlike in the aforementioned cases, India is the dominant BRIC trade

counterparty in Kenya owing in large part to strong historical ties,

cultural affinity, geographical proximity and a large Indian diaspora.

India-Kenya trade increased from USD170 mn in 1998 to USD2 bn in

2008. China-Kenya trade increased from USD90 mn in 1998 to

USD1.5 bn in 2008. Meanwhile, both Brazil (USD8 mn) and Russia

(USD220 mn) linger at the margins of BRIC-Kenya trade flows.

Machinery,18%

Electrical and

electronic equipment

13%

Manmade filaments

8%Iron and

steel6%

Apparel6%

Vehicles5%

Articles of iron or steel

5%

Plastics4%

Organic chemicals

3%

Other32%

0%2%4%6%8%

10%India

China

Russia

Brazil

1980 1990 2000 2008

10

Figure 19: BRIC-Kenya trade, 1998 to 2008


China has made important headway in terms of trade, increasing its

relative share of Kenya’s total trade from 0.7% in 1980 to 7% in 2008.

India is leveraging its comparative advantages in East Africa

successfully. However, of all the African nations, Kenya is where Asia’s

emerging giants, India and China, are most obviously going head to

head. Evidently, both have proved highly successful, with India (9.4%)

and China (7.6%) ranking as Kenya’s third and fourth most important

source of goods, respectively. Meanwhile, Russia has managed to

increase its share of Kenyan trade, from 0% in 1980 to 1.5% in 2008.

In contrast, Brazil grew its share modestly, from 0.2% in 1980 to 0.5%

in 2008. Kenya is clearly not yet on Brazil’s African radar, but, with

biofuels gaining traction in East Africa, which has abundant and

untapped agricultural potential, it is unlikely that this marginalisation will

continue.

Figure 20: BRIC-Kenya trade as a share of Kenya’s total trade

Sources: IMF, WTO, International Trade Centre, Standard Bank

Group

Kenya’s trade with China and India

Kenya’s imports from China increased from a mere USD138 mn in

2001 to USD1.2 bn in 2008. Kenya’s imports of electrical equipment

(primarily for line telephony, primary cells and batteries, insulated

wires, and televisions) increased from USD22 mn in 2001 to USD191

mn in 2008. In addition, Kenya’s imports of nuclear reactors, boilers

and machinery increased from USD4 mn in 2001 to USD103 mn in

2008, vehicles from USD4 mn in 2001 to USD103 mn in 2008 and

cotton from USD18 mn in 2001 to USD63 mn in 2008.

Meanwhile, China’s imports from Kenya have lagged, growing from

USD5 mn in 2001 to USD34 mn in 2008. In terms of what Kenya

exports to China, metal ores (USD9 mn), raw hides and skins

(USD4.6 mn) and vegetable textile fibres (USD4.5 mn) dominated in

2008.

Kenya offers India an important market for a number of its products.

Kenya’s imports from India increased from USD157 mn in 2001 to

USD1.6 bn in 2008. Evidently, in terms of BRIC bilateral trade

volumes, India has managed to maintain its dominant position in

Kenya. Petroleum oils (not crude) exports from India account for nearly

half of India’s total exports to Kenya, increasing from USD22 mn in

2001 to USD750 mn in 2008. In addition, India’s pharmaceutical

products have been well received in Kenya, increasing from

USD19 mn in 2001 to USD113 mn in 2008. India’s machinery exports

to Kenya increased from USD16 mn in 2001 to USD120 mn in 2008.

In contrast, while Kenya’s exports to India increased from USD31 mn

in 2001 to USD82 mn in 2008, they make up a small part of the

bilateral trade relationship. Disodium carbonate is Kenya’s largest

export to China, increasing from USD9 mn in 2001 to USD31 mn in

2008. Coffee, tea and spice exports, which have increased from USD3

mn to USD9 mn, are the second most prominent product group. Quite

clearly, much like the case for China, Kenya is a marginal player in

India’s inward trade.

India is successfully leveraging its comparative advantages in East

Africa’s largest market, Kenya. However, of all the African nations,

Kenya is where Asia’s emerging giants, India and China, are most

obviously going head to head, with China having gained ground since

2004. Evidently, both have proved highly successful, with India and

China ranking as Kenya’s third and fourth most important origin source

of goods, respectively. Considering that Kenya is light on resources,

Kenyan exports to BRIC are light.

Conclusion

BRIC-Africa commercial and diplomatic integration is both compelling

and significant. The default position for most BRIC-Africa perspectives

is distorted by China’s appetite for commodities – especially energy.

Clearly, when analysing specific bilateral trade relationships, a more

nuanced and balanced BRIC-Africa trade portrait emerges.

In Angola, China has clearly used its commercial and diplomatic

muscle to access the country’s nascent energy sector. Meanwhile,

Brazil has leveraged softer cultural ties to gain market access. India

remains notably absent from Angola, having leaned more heavily on

the Nigerian market as a source of greater energy security. Clearly, the

case of Nigeria cautions against over-simplifications presenting China

as simply a commodity-hungry juggernaut. While Nigerian exports to

India and Brazil reached USD10 bn and USD6.7 bn in 2008 – on the

0

1

2

3

4

1998 2000 2002 2004 2006 2008

USD

bn


0%

2%

4%

6%

8%

10%India

China

Russia

Brazil

1980 1990 2000 2008

11

back of crude oil demand – Nigeria currently exports a mere USD500

mn to China. With a major oil deal between China and Nigeria in the

pipeline, this situation is likely to change, placing greater pressure on

India’s desire to expand its energy assets in Africa.

The case of South Africa epitomises the potential for more balanced

BRIC-Africa trade relations, while Kenya provides an indication of the

interest the BRIC’s, particularly China and India, have in the continent

beyond pure natural resources. For its part, Egypt has become an

increasingly relevant market for BRIC goods and services. A large

population and relatively elevated purchasing power are attractive to

the BRICs. Furthermore, Egypt offers BRIC a strategic gateway to both

the Middle East and North Africa.

The five countries outlined in this paper provide a more lucid view of

the divergent and at times competing BRIC strategies in Africa – driven

by both strategic and commercial objectives. It is abundantly clear that

the BRIC’s see Africa as more than purely a source of cheap and

abundant natural resources, and this extends well beyond the five

gateway countries analysed in this paper. It is equally clear that the

BRIC’s maintain distinctly different pockets of strength throughout

Africa, reflecting both commercial and historical symmetries. Extending

a broad brushstroke view of all BRIC engagements with Africa, and

thereby missing these crucial divergences, will ultimately lead to policy

dislocation on the continent. Understanding what each of the BRIC’s is

able to offer African countries, and where their priorities lie in

commercial engagements, lies at the heart of engendering a deeper

and more sustainable set of bilateral relationships.

Documents

23 SCN 38-599