India and South Africa are natural allies. This is exemplified through their independent struggles from colonialism and the anti-apartheid liberation respectively, the pursuit of non-alignment, and the battle for a reformed, just, equitable, and inclusive global system that consolidates South-South Cooperation and reflects the current structures of political and economic power.
These common interests and actions of solidarity make New Delhi and Pretoria strategic normative actors in the 21st Century, notwithstanding the historical lines of complementarity. Both sides have also provided the world with iconic human rights and social justice champions in the form of Mahatma Gandhi who influenced the philosophy of Nelson Mandela, who, in turn, became the symbol of South Africa’s political transition and negotiated democratic settlement. Alongside the above features, and after 1994, bilateral relations and diplomatic engagements between India and South Africa were strengthened.
These included the establishment of the Joint Ministerial Commission (JMC) that was aimed at forging mutual and beneficial cooperation in the following areas of politics, trade and investment; communications and information technology; minerals and energy; arts, culture, sports and recreation; human resource development; and consular and immigration matters. In 2015 at the 9th Meeting of the JMC, both sides agreed to work under the framework of a five-year strategic programme of cooperation aimed at making the JMC more results oriented. The latter saw the JMC being upgraded around several priority areas: defence, deep mining, science and technology, agriculture and food processing, and insurance.
In addition, a new joint working group on trade and economic matters was also established. In terms of multilateralism, India and South Africa share a mutual basis of cooperation. The latter is to be found in the fostering of cooperation whether in G20, WTO or the broader UN system. Their membership of IBSA and BRICS adds to and provides the impetus for their identity as emerging middle powers.
The two countries are engaged in examining ways to enhance relationship. The potential does seem to be found in the prospects of strengthening political and economic ties under the Modi government. This commentary explores how India and South Africa can pursue enhanced commercial and business relations.
Prime Minister Narendra Modi’s Visit to South Africa in July 2016
In July 2016, Prime Minister Narendra Modi embarked on his first official visit to four African countries since taking office in 2014. The visit was confined to Eastern and Southern Africa and included Mozambique, South Africa, Kenya and Tanzania.
Commentators saw PM Modi’s visit as aligning to India’s traditional sphere of engagements aimed at shoring up economic ties, and firming up maritime security. However, the visit was also viewed as being one that was ‘overdue’ for the Modi administration. This was somewhat the sense in the context of South Africa. Prior to the visit, speculation was rife that the controversial issue of admission into the Nuclear Supplier Group (NSG) would dominate the meeting between Prime Minister Modi and President Zuma. Seeking backing to join the prestigious NSG, it was widely reported in Indian media that PM Modi had intended to use the visit to sway Pretoria to enable New Delhi to become part of the Group. This speculation was put to rest by announcement by PM Modi of South Africa's Agreement to support India on the issue.
The visit was also underlined by a more pragmatic need to move beyond the historical platitudes towards economic realism. Both sides agreed to increase bilateral trade to $18 billion by 2018 and to strengthen commercial ties linked to the ‘Make in India’ initiative. In addition, both sides also undertook to address shared global concerns especially in terms of strategic security issues and continual support for the reform agenda towards a more equitable, just and balanced international system.
The visit by Prime Minister Modi saw both sides sign four memoranda of understanding. These were in the areas of ICT, the Establishment of Grassroots Innovation in Science and Technology, Tourism, and Cultural Cooperation. Discussions were also held towards intensifying collaboration in the sectors of defence, energy, agro-processing, human resource development, infrastructure development as well as science, technology and innovation.
A good part of the deliberations focused on economic cooperation. A meeting of the India-SA CEO’s Forum was held in Pretoria.
Consolidating Economic Engagements
India is South Africa’s sixth trading partner. As the graphic shows, total bilateral trade between New Delhi and Pretoria was just under $9.5 billion for the period 2015-2016. South Africa imports mainly processed products from India while New Delhi buys mostly unprocessed mineral materials from Pretoria. According to the Tralac trade brief over the period 2006 and 2015, “South Africa’s exports to India peaked in 2014 at nearly $3.8bn but fell by 22 percent to 2015 as the economic slowdown associated with the commodity price slump took effect”. In addition, the same brief highlights “that South Africa’s imports from India peaked in 2013 at nearly $5.4bn and then fell approximately 35 percent to 2015”. Composition of South Africa’s imports from India comprises of non-crude based petroleum oil, followed by motor vehicles in second place and medication products in third. At the same time, South Africa’s exports include coal-based solid fuels, metal scrap, iron ores and manganese ores.
The decision to open up a regional based office of the Confederation of Indian Industries in Johannesburg was seen as a welcome move in nurturing better private sector interactions.
Promoting Private Sector Contact
As much as India and South Africa share common historical bond, the interaction between the respective private sector communities still has room for growth and development, especially if bilateral trade is envisaged to increase to $18 billion by 2018. Both sides agree that the catalyst for increased business transactions remains the significant role that the respective private sectors will play in stimulating and boosting direct and indirect investments.
According to the South African Department of Trade and Industry (DTI), investment by Indian companies in the South African market up to and including 2014 had touched $6 billion. The ministry envisages that such investment will reach $7 billion in coming years. South Africa is the third largest African investor country in India, with Foreign Direct Investment (FDI) stock of $112 million according to 2014 statistics. At the same time, South Africa’s Trade and Industry Minister, Dr. Rob Davies, applauded Indian industries for creating over 10000 jobs in South Africa in leading sectors such as software and IT as well as financial services. These included companies such as Tata (automobiles, IT, hospitality and ferrochrome plant), Mahindra (automobiles) and a number of pharmaceutical companies, including Ranbaxy and CIPLA, as well as IT companies and some investments in the mining sector.
By the same measure, South Africa’s investments in the Indian market is led by major corporates such as SAB Miller, ACSA (upgradation of Mumbai airport), SANLAM and Old Mutual (insurance), ALTECH (set top boxes), Adcock Ingram (pharmaceuticals), and Rand Merchant Bank (banking). However, some commentators were quick to point out that more needs to be done to push private sector relations further. For South African corporates, the significant issue of concern is whether there is an in-depth understanding of the structural conditions that informs the Indian market. In the past, South African companies like Shoprite found it hard to traverse India’s complex business networks and licensing system. In a similar vein, Indian corporates have to incorporate and adopt clearer policy considerations such as Black Economic Empowerment guidelines when seeking to consolidate their footprint in the South African market.
The opening up of the Johannesburg office of CII may provide the impetus towards not just strengthening a national presence for Indian companies in the South African economic landscape, but also a broader springboard into regional economies. The latter would be significant as negotiations around the Southern African Customs Union Preferential Trade Area reaches maturity.
Strengthening Business Platforms: CEO Forum and the SA-Indian Business Forum
Both the CEO Forum and the SA-Indian Business Forum have been identified as critical interlocutors that can boost economic cooperation and commercial ties. This was reinforced through the adoption of several MoUs during the CEO Forum:
- Hindustan Zinc Limited signed two MoUs with Minova Africa for development and supply of rock support systems for underground mining in India; and with Feremel for the supply and maintenance of underground mining equipment to improve safety, efficiency and productivity in modern mechanised underground mines.
- MMI Holdings and Aditya Birla Nuvo signed MoU to form a Joint Venture in the health and insurance sector in India.
- India’s Ion Exchange Safi c, a leading waste and water treatment company with a presence in South Africa, will collaborate with Stefanutti Stocks SA in large scale water and effluent treatment projects in South Africa.
- SAAB Grintek Defence and Tata Power signed an agreement for production of land electronic defence systems in India.
- An MoU signed between Pioneer Global Enterprises of India and Armscor to produce ultrasonic broken railway detector systems for Indian Railways and also includes an emphasis on technology transfer.
- Gordon Institute of Business Science has signed an MoU with ISB Hyderabad to collaborate on a senior executive programme, student exchange, faculty exchange and joint research.
- The biggest MoU was signed between the Dube Trade Port in Durban and Cipla India, which will see a 1.3 billion ZAR biosimilar plant being set up in the special export zone to produce cheaper drugs for local government and private sector supply as well as export
In addition, there was a general consensus that skills development and the promotion of small and medium industries in South Africa should be significant in boosting collaboration. It was clear during President Zuma’s address to the SA Indian Business Forum that socio-economic cooperation with India was closely aligned in advancing the country’s National Development Plan, Operation Phakisa and the 9 Point Plan for industrial development.
The engagement between India and South Africa since 1994 demonstrates that both sides are moving beyond mere historical symbolism. Under the Modi government, there seems to be a candid attempt to push the relationship towards one that is aimed at enhancing the relationship with an economic centric focus. At the same time, though, both sides need to reflect on the contours of market barriers. Improving and adopting a more assertive economic diplomacy policy will nurture a trade regime that is coherent and assuage any contradictions of Pretoria’s global economic identity. South Africa shows that it is willing to align its national economic priorities with that of India so that a win-win partnership can be cultivated. This means broadening and diversifying trade sector with a view of learning how India’s SMME development can be used as a part of the learning curve in stimulating South Africa’s economic potential. All of this points to developing and facilitating economic studies that produce knowledge networks, which can provide valuable insights for consolidating economic partnerships, both for the public and private sectors.
Sanusha Naidu is a Senior Research Fellow the Institute for Global Dialogue associated with UNISA.
The article was first published in the Extraordinary and Plenipotentiary Diplomatist Special Report: India-South Africa 2017