Marion Mühlberger of DB Research -

Recently, much attention has been paid to the increasing African footprint of the BRIC economies. But what about Africa's largest economy? Is South Africa losing its stake in the Sub-Saharan African economic renaissance to China and other BRICs?

South Africa is in many ways predestined to be the main trade, investment and political partner for Sub-Saharan Africa (SSA). Its main competitive advantages are geographic proximity and a complementary economic structure to the rest of SSA. Moreover, participation in multilateral trade agreements such as the Southern African Development Community (SADC) provides South Africa with favourable trade conditions. So how strong are South Africa's trade, investment and political links with SSA?

South Africa's trade links to SSA have strongly increased over the past few years. In 1990 only 4% of total South African trade was conducted with SSA, while in 2010 the share reached 12% (see chart). In contrast, SSA accounts for only 2-5% of total trade in China, Brazil and India and a mere 0.2% of total Russian trade. Of course, in absolute terms, bilateral SSA trade with China is four times as big as bilateral SSA trade with South Africa.

South Africa's trade with Africa is of a complementary nature, with South Africa providing technology intensive products and receiving resource-based products in return. South Africa's imports from African countries are heavily dominated by oil (76% of total) as well as precious stones, base metals and agricultural products. South Africa's exports to Africa are well diversified. Specialised manufactured products, such as machinery, vehicles and electronics account for 30% of all exports, while oil and agricultural products represent 9% of total exports each. Specialised manufactured products and those customised for African tastes and needs will continue to secure South Africa's share in the growing African market despite an inflow of cheap consumer goods from elsewhere. Moreover, intraregional trade is bound to benefit from further regional integration, such as the planned harmonisation between SADC, the Common Market for East and Southern Africa and the East African Community. Plans for this Africa-wide free trade area covering 26 nations were made in 2008 and negotiations, expected to last at least three years, were tipped off in June 2011.

With respect to investment, South African companies are increasingly tapping the growth potential of the rest of the continent. The share of Africa in South Africa's total outward FDI stock has risen from 5% in 2000 to 22% in 2009. To be sure, in absolute terms China's FDI stock in SSA is almost twice as big as South Africa's stock of $13.7bn. So, which South African companies are driving the push into SSA? Anecdotal evidence suggests that especially larger South African firms in telecommunications (MTN, Vodacom), retail shopping (Massmart, Shoprite), financial services (Standard Bank, FNB), and mining (AngloGold, Metorex) have expanded their operations in SSA. Revenues of MTN in SSA excluding South Africa grew by 144% between 2006 and 2010. Shoprite has more than doubled the number of supermarkets in the region in 2010 alone and Standard Bank increased its exposure to non-domestic Africa from 6% in 2000 to 9% in 2009. Given the stronger growth potential in the rest of the continent than in the saturated home market South African companies are likely to continue their expansion into SSA.

Finally, South Africa plays an active role in regional politics. As active member of the African Union it initiated the ambitious, yet slowly progressing New Partnership for African Development and is one of the major voting powers in the African Development Bank. Repeatedly, it has attempted to act as mediator in regional conflicts, most recently in Libya. These regional political efforts are manifested in President Zuma's travel itinerary. Of the 57 visits to foreign states made by Zuma since June 2009, 26 have been to SSA. Seen by the international community as the only major emerging market in Africa, South Africa has received increasing attention as regional gateway economy, for example in the form of a strategic partnership agreement with the EU.

To sum up, South Africa is set to remain an important player in SSA. Not only its geographic proximity, but also strong and well-diversified trade and investment relations and its robust regional political ties render South Africa well-suited to partake in SSA's economic renaissance, keeping pace with the increasing African footprint of BRIC economies. Moreover, given its advanced economic structure, South Africa is likely to benefit as a port of entry for investors interested in the continent, despite newly emerging powers in the rest of Africa like Nigeria in West and Kenya in East Africa.