Vast opportunities for SA in West Africa

Indeed, Nigeria-South Africa trade relations are dominated by South Africa's imports of crude oil from Nigeria, with the value of oil imports from the populous West African nation amounting to R5 billion in 2006.

Nigeria's oil has made it the only country of the region that sees the balance of trade with South Africa fall in its favour.

This emerged at a briefing to the Parliamentary Portfolio Committee on Foreign Affairs on South Africa's relations with and policy towards West Africa, held on Friday, 14 September, presented by Mxolisi Nkosi, the deputy director-general in the Africa Bilateral section in the Department of Foreign Affairs.

Nkosi said that overall, South African foreign policy towards West Africa is no different to its policy towards other regions of the continent.

“But obviously in the implementation [of inter-continental foreign policy] we take into consideration difference and nuances [between the various countries],” Nkosi said.

On relations with Nigeria in particular, the official said that South Africa believes a “strategic and constructive” partnership with Nigeria should be used to advance and consolidate the African agenda towards unity and renaissance.

Nkosi told MPs that South Africa needs “to explore the immense opportunities and potential in that relationship [with Nigeria]”.

With all other West African nations, South Africa has a trade surplus, as a result of its exports of value-added goods to countries of the region.

Most of these countries remain dependent on exports of primary products as a result of the small industrial bases in their economies, which limits their baskets of goods that can be traded, the official added.

With West Africa experiencing a boom due to the massive expansion of its oil industry in recent years, this narrow industrial base has also been limiting their potential to take full advantage of high oil prices.

Nigeria and Angola alone pump almost 80% of the oil from the West Coast of Africa, according to Dr Philip Lloyd of the Energy Research Centre at the University of Cape Town.

Oil companies and related industries need to source the precision industrial and fabrication equipment they use further afield, mostly in Europe and the United States, because of the lack of industrial capacity in the region and the limited ability to meet the standards of production they require.

Intensive oil and gas exploration in Africa over the past few years has increased its reserves by 25%, according to energy experts, and billions of dollars of investment are pouring into the region.

The United States, the largest importer of oil in the world, already sources about 17% of its oil from Africa and is looking to increase this to 25% by 2015.

As a result, South Africa, while not an oil-producer, has been eyeing the potential to meet some of the industrial demands of this high-pressure industry, with special vehicles being set up, such as the Cape Oil and Gas Supply Initiative (Cogsi) of the Western Cape provincial government.

According to a former Western Cape government official involved in Cogsi, Africa's oil-producing countries have “no capacity to fill even 10% of the industrial capacity required” for the billions of dollars of oil industry investment.

South Africa has already begun to take advantage of the supply, replenishment and servicing demands of the oil industry, and new steel fabrication yards are being planned for Saldanha Bay, a deep-water harbour, while oil rigs are now a common sight in Table Bay itself.

In order to widen their industrial bases to take advantage of the vast potential, several African countries have been looking at stipulating “local content” deals with the big oil companies in order to increase their share of the supply demands of the industry.

Nigeria itself has reportedly pushed for increased local content in terms of supply of goods to the oil industry, where its supply level stood at around 5% at the turn of the century; it reportedly is looking at increasing this to 50%.

The question remains as to whether the notion of “local content” can be widened – within, say the context of the New Partnership for Africa's Development (Nepad) – whereby “secondary points” can be accrued by non-oil producing African countries that supply precision equipment required in an oil-producing country.

It is understood that this “African content” notion is being explored by the vehicles such as Cogsi and the provincial and national government in South Africa.

However, briefing MPs in parliament on Friday, Nkosi stressed that South Africa did not “enjoy” a trade surplus with its West African counterparts and is continually striving towards the transfer of skills and technology with its continental neighbours.

South African companies already provide large volumes of foreign direct investment (FDI) into the West African sub-region, he said, citing the example of Mali, where South African mining companies account for 60% of Mali's FDI.

The South African government, he added, is working to encourage South African companies to develop long-term strategic partnerships with local partners in the region, which would facilitate such a skills and technology transfer.

South African companies are active in Nigeria, Ghana, Guinea-Conakry, Senegal, Cote d'Ivoire, Benin, Niger and Guinea-Bissau, Nkosi said in his presentation, adding that investment is dominated by the mining sector.

With Nigeria, the volume of trade between South Africa and the populous West African nation stands at around R8 billion, Nkosi said; adding that the bilateral relationship between the two countries is structured through a bi-national commission, launched in 1999.

With Ghana, there is a joint commission of cooperation which launched this year at ministerial level, cementing a partnership already strengthened by the merger of South Africa's Anglogold and Ghana's Ashanti mining companies, creating AngloGold Ashanti, the biggest gold-extracting company in Africa.

There is also a joint commission on cooperation in Mali and South Africa has been assisting the country with the preservation of the ancient Timbuktu manuscripts in a presidential project.

The same applies for Guinea, with whom relations have been “increasing exponentially”, Nkosi said, adding that South Africa is soon to deploy a multi-disciplinary team to Guinea to examine export opportunities there.

Senegal remains one of South Africa's key partners in French-speaking West Africa, and South African Airways uses its capital, Dakar, as a key refuelling stopover for its flights to Washington and New York.

Last year diplomatic missions were established in Benin and Burkina Faso, while this year Niger and Guinea Bissau are to see South African diplomatic staff posted there.

These tally up to 41 diplomatic missions in Africa, which will rise to 43 by the end of this year, Nkosi told MPs.

All in all, South Africa is looking to intensify bilateral trade with countries of the region, looking at West Africa as a key “growth point”, Nkosi said.

Article published courtesy of BuaNews