Assessment of South African as a Strategic Market for Dubai Exports and Candidate location for OTO

Transcription

1 Assessment of South African as a Strategic Market for Dubai Exports and Candidate location for OTO

2 Summary The objective of this report is to analyze South Africa Market for focus by Dubai Exports and show justification for the establishment of a DE Oversea Trade Office. Highlights of the results of the analysis: According to Encomiast Intelligence Unit EIU,South Africa is a large consumer market with a population of 49 Million. Domestic demand increased by 3.4% per annum in real terms during GDP growth in real terms stood at 2.7% during World Bank Doing Business indicators 2012 for South Africa, showed medium ranking for most of the indicators with the exception of, Trade across borders, in which South Africa rank was ( 144 out of 183 economy),however this point can be viewed in favour of the establishment of an OTO in South Africa in that the OTO will provide on the -ground support needed by the exporters. Global Competitiveness report 2012 shows overall good rankings in competitiveness indicators for South Africa, for example South Africa ranks on related indicators like market size and goods market efficiency were 25 and 32 out of 142economies South Africa imported around 100 Billion US$ in 2011 accounting for 0.6% of world imports, while annual growth of imports was 24% between Confirming the market demand is significant. Total UAE exports and re-exports to South Africa tuned to 1 Billion AED in 2011 having increased by about 8% per year over the period ,an indicator of the importance of South Africa as trade partner to UAE. In 2011 UAE Trade balance of non- oil trade with South Africa stood at 2.6 Billion AED in favour of South Africa,this a smaller deficit than deficit with many other UAE partners and is a positive point in favour of trade with South Africa. Exports of UAE to south Africa in 2011 reached about 450 Million AED, up by nearly 31%on 2010,re-exports topped 366 Million AED in the same year,up also by around 29% on 2010 South Africa registered a high complementarity index with UAE of about 30% compared to around 54% and 29% for India and Egypt. Complementarity index shows the degree of the match of imports of country(in this case South Africa) with exports by a partner(in this case UAE).The index is useful, for example when comparing a country with which a trade agreement is planned to be forged with other countries with which already there is a Preferred Trade Agreement. However South Africa Trade Complementarity indices with main partners (China, Germany) were high, suggesting strong presence of these partners in the South African market But a very positive point for South Africa market as strategic market for UAE and a candidate for a Dubai Exports OTO, is the large regional demand by SADC and SACU underscoring the 2 P a g e

3 importance of South Africa as a gateway for export from UAE to these two trade block. In this context it worth mentioning that SADC imported 1 Billion US$ goods from South Africa in 2011 while SADC and SACU imported 167 and 109 Billion US$ worth of goods respectively from the world in 2011,indicating the large potential market available for UAE. Many of the products which UAE is capable to export are charged few percentage higher duties than similar products from other parts of the world, on simple average basis, when entering South Africa market as shown in the appendix. This underscores the importance of forging a Preferred Trade agreement or other types of trade facilitation agreements with South Africa and the need intensify promotion efforts and export facilitation by DE. It is recommended DE discuss with ESMA the forging of an mutual recognition of standards agreement with South Africa as a first step. ESMA has currently a number of agreements on mutual recognition of standards (see the appendix 3) 1. Introduction To evaluate South Africa as strategic market for UAE exports this report will analyze four main criteria for the country: 1. South Africa Economy and Trade 2. South Africa FTA with countries who are competitors to UAE 3. UAE trade complementarity with South Africa versus South Africa trade complementarity with UAE competitors 4. South Africa FTA with countries who are not real competitors of UAE but rather are potential markets to UAE through using South Africa as gateway to these markets e.g. SADC,SACU 2. South Africa Economy and Trade Table 1 Economy Annual data 2011 Historical averages (%) Population (m) 49 Population growth 0.4 GDP (US$ bn; market exchange rate) Real GDP growth P a g e

4 GDP (US$ bn; purchasing power 555 Real domestic demand growth 3.4 parity) GDP per head (US$; market exchange 8,332 Inflation 6.5 rate) GDP per head (US$; purchasing power 11,326 Current-account balance (% of -4.9 parity) GDP) Exchange rate (av) :US$ 7.3 FDI inflows (% of GDP) 1.8 (c) Economist Intelligence Unit 2012 Trade Major exports 2010 % of total Major imports 2010 % of total Platinum 11.4 Petrochemicals 13.9 Gold 10.4 Equipment components for 6.5 cars Coal 6.7 Motor cars & other 5.1 components Cars & other 5.2 Petroleum oils & other 4.2 components Leading markets 2011 % of total Leading suppliers 2011 % of total China 15.1 China 14.7 US 9.1 Germany 11.5 Japan 7.9 US 8 Economist Intelligence Unit World Bank Doing Business Indicators 2012 for South Africa Table 2 Indicator Ease of Doing Business 35 Starting a business 44 Trading Across Borders 144 Getting credit 1 Protecting investors 10 4 P a g e Doing Business Rank out 183 economies

5 Enforcing Contracts 81 Resolving Insolvency Global Competitiveness Indices (GCI)for South Africa Table 3 Rank out of 142 countries Score1-7 GCI GCI (out of 139) GCI (out of 133) Institutions Infrastructure Macroeconomic environment 55 5 Goods Market Efficiency Labour market efficiency Financial market Development Technological readiness Market size Innovation and sophistication factors (10.0%) Business sophistication Innovation UAE Trade with South Africa Total UAE exports and re-exports to South Africa tuned to 1 Billion AED in 2011 having increased by about 8% per year over the period Fig(1) 5 P a g e

6 INDON 0 Spain 1 South 1 Australia 1 Germany 2 France 2 Brazil Qatar KSA India Total Exports+Re-exports Billions AED Fig(2) 6 P a g e

7 -16.4% Australia Spain South Africa Brazil India France Qatar Germany INDONESIA KSA 2.8% 7.9% 14.0% 19.9% 24.2% 26.4% 28.5% 37.2% 100.9% Total exports& re-exports growth p.a -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% Trade balance with South Africa is negative but much smaller than many of UAE partners In 2011 UAE Trade balance with South Africa stood at 2.6 Billion AED in favour of South Africa,this a smaller deficit than with many other UAE partners Exports of UAE to south Africa in 2011 reached about 450 Million AED up by nearly 31%on 2010,reexports topped 366 Million AED in the same year up also by around 29% on 2010 Table 4 Imports Non-oil exports Re-exports Kg AED Kg AED Kg AED ,403,551 4,835,204,589 89,632, ,428,187 13,247, ,830, ,502,044 12,531,472,879 74,196, ,742,550 14,151,988 1,012,585, ,495,337 2,477,777,240 53,141, ,125,287 21,313, ,453,722 7 P a g e

8 2010 1,394,482,973 3,304,667,348 83,937, ,581,723 15,856, ,271, ,584,430 3,519,431,031 77,934, ,089,052 17,956, ,183, Top Exports to South Africa 2011 Table 5 South Africa Precious Metals & Stones Plastics 161,668, ,497,878 Glass & Glassware 42,463,298 Paper & Paperboard 15,105,202 Ceramics 13,533,905 Source: UAE National Bureau of Statistics 7. UAE Trade Complementarity Index with South Africa The trade complementarity (TC) index can provide useful information on prospects for intraregional trade in that it shows how well the structures of the partner s imports and the exporting country exports match. It is a useful indicator when considering the formation of a l trade agreement with a specific partner.tc indices are reported by world bank World Integrated Trade Solutions The complementarity indices for UAE with selected partners are reported in the table below. It can be seen that India, South Africa, Egypt, Australia and Brazil have the highest complementarity indices with UAE.Germany is enjoying trade preference in South Africa because of Free Trade agreement of South Africa with EU.It is to be noted that Germany and Italy both members of EU, have very high complementarity indices with South Africa, higher than UAE South Africa complementarity.. Table 6 UAE Complementarity with selected partners 2011 TC Australia Brazil Canada Germany Egypt, Arab Rep Indonesia P a g e

9 India Russian Federation South Africa South Africa FTA s with countries who are competitors to UAE Top competitors tor UAE in the South African market are: Europe: Germany Italy Asia: China,Malaysia Americas: USA South Africa initiated the first trade agreement with the European Union (EU) at the turn of the 21st century. Whilst the Trade and Development Cooperation Agreement (TDCA) was put into place following prolonged negotiations, this was followed by the implementation of the Trade protocol with neighbouring member states of the Southern African Development Community (SADC). Agreements with the European Free Trade Area (EFTA) and the Common Markets of the South (Mercosur) were subsequently concluded. In between, trade negotiations with the United States (US) were initiated but eventually collapsed; discussions with India and China were also engage but a formal trade agreements are yet to be launched formally Mercosur i ( Members are:argentina, Brazil, Paraguay, Uruguay, and Venezuela). and SACU concluded a preferential trade agreement (PTA), a less comprehensive deal than a FTA. The PTA involves the selection of a few products to be liberalized for the two main negotiating parties. Whilst this arrangement is weak, the fact that it has only recently been concluded renders its impact on trade hard to analyze. Whilst the same issue applies for the FTA between SACU and the EFTA which came into effect in May 2010 South Africa Trade Complementarity indices with main partners were high, suggesting strong presence of these partners in the South African market. Table 7 South Africa Trade Complementarity with main partners 2011 TC 9 P a g e

10 China Germany Italy Malaysia South Africa, a gateway to SADC and SACU courtiers SADC imported 1 Billion US$ goods from South Africa in 2011 while SADC and SACU imported 167 and 109 Billion US$ worth of goods respectively from the world in 2011.This large demand of demand by SADC and SACU implies the importance of South Africa as a gateway for export from UAE to these two trade blocks, this market can be reached by re-export via South Africa directly or after undergoing value addition in South Africa thereby UAE products acquiring a status of South Africa origin thereby enjoying lower tariffs when entering SADC and SACU Among the 10 to imports to SADC, Plastics, Paper and Paperboard and electrical equipment and chemicals are produced in UAE,an indicator of trade complementarity,other products can be supplied to SADC and SACU from other Asian countries through UAE 10. South Africa Market Trade restrictiveness As can be seen from the table in appendix many of the products which UAE is capable to export are charged few percentage higher duties than similar products from other parts of the world on simple average when entering South Africa market 10 P a g e

11 Appendix 1. South African Development Community member states Member states of SADC are Angola, Botswana, Democratic Republic of the Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe 2. South African Customs Union members Botswana, Lesotho, Namibia, South Africa, Swaziland 3. Countries with Which ESMA has an agreement of mutual recognition of standards Syria Jordan Palestine Tunisia Algeria Libya Sudan USA IEC India Turkey Argentine Russia 11 P a g e

12 Korea Vietnam 4. South Africa Exports to SADC and SADC imports from the world Product code Product label South Africa's exports to Southern African Development Community (SADC) Value in Value in 2010 Value in Southern African Development Community (SADC)'s imports from world Value in Value in Value in TOTAL All products Machinery, nuclear reactors, boilers, '84 etc '27 Mineral fuels, oils, distillation products, etc '87 Vehicles other than railway, tramway '85 Electrical, electronic equipment '73 Articles of iron or steel '72 Iron and steel '39 Plastics and articles thereof '48 '34 Paper & paperboard, articles of pulp, paper and board Soaps, lubricants, waxes, candles, modelling pastes '38 Miscellaneous chemical products '15 Animal,vegetable fats and oils, cleavage products, etc '40 Rubber and articles thereof '22 Beverages, spirits and vinegar Essential oils, perfumes, cosmetics, '33 toileteries '31 Fertilizers '21 Miscellaneous edible preparations Salt, sulphur, earth, stone, plaster, lime '25 and cement '17 Sugars and sugar confectionery Furniture, lighting, signs, prefabricated '94 buildings '28 '90 '11 '20 '32 Inorganic chemicals, precious metal compound, isotopes Optical, photo, technical, medical, etc apparatus Milling products, malt, starches, inulin, wheat gluten Vegetable, fruit, nut, etc food preparations Tanning, dyeing extracts, tannins, derivs,pigments etc P a g e

13 '04 '19 '36 Dairy products, eggs, honey, edible animal product nes Cereal, flour, starch, milk preparations and products Explosives, pyrotechnics, matches, pyrophorics, etc '10 Cereals Edible fruit, nuts, peel of citrus fruit, '08 melons '29 Organic chemicals '82 Tools, implements, cutlery, etc of base metal '44 Wood and articles of wood, wood charcoal '76 Aluminium and articles thereof '30 Pharmaceutical products Edible vegetables and certain roots and '07 tubers '49 Printed books, newspapers, pictures etc '86 13 P a g e Railway, tramway locomotives, rolling stock, equipment '70 Glass and glassware Other made textile articles, sets, worn '63 clothing etc '69 Ceramic products Residues, wastes of food industry, '23 animal fodder '83 Miscellaneous articles of base metal '02 Meat and edible meat offal '74 Copper and articles thereof Stone, plaster, cement, asbestos, mica, '68 etc articles '78 Lead and articles thereof Articles of apparel, accessories, not knit '62 or crochet '03 '89 '16 Fish, crustaceans, molluscs, aquatic invertebrates nes Ships, boats and other floating structures Meat, fish and seafood food preparations nes '09 Coffee, tea, mate and spices Tobacco and manufactured tobacco '24 substitutes '18 Cocoa and cocoa preparations '61 Articles of apparel, accessories, knit or crochet '64 Footwear, gaiters and the like, parts thereof '88 Aircraft, spacecraft, and parts thereof '96 Miscellaneous manufactured articles '99 Commodities not elsewhere specified '26 Ores, slag and ash

14 '95 Toys, games, sports requisites '12 Oil seed, oleagic fruits, grain, seed, fruit, etc, nes '35 Albuminoids, modified starches, glues, enzymes '01 Live animals Impregnated, coated or laminated '59 textile fabric '37 Photographic or cinematographic goods '56 Wadding, felt, nonwovens, yarns, twine, cordage, etc '42 Articles of leather, animal gut, harness, travel goods '79 Zinc and articles thereof '55 Manmade staple fibres '57 Carpets and other textile floor coverings '54 Manmade filaments '05 Products of animal origin, nes '58 Special woven or tufted fabric, lace, tapestry etc '06 Live trees, plants, bulbs, roots, cut flowers etc '51 Wool, animal hair, horsehair yarn and fabric thereof '65 Headgear and parts thereof Pearls, precious stones, metals, coins, '71 etc '91 Clocks and watches and parts thereof '52 Cotton '41 Raw hides and skins (other than furskins) and leather '66 Umbrellas, walking-sticks, seat-sticks, whips, etc '13 Lac, gums, resins, vegetable saps and extracts nes '60 Knitted or crocheted fabric '92 Musical instruments, parts and accessories '97 Works of art, collectors pieces and antiques '47 Pulp of wood, fibrous cellulosic material, waste etc '67 Bird skin, feathers, artificial flowers, human hair '80 Tin and articles thereof '53 Vegetable textile fibres nes, paper yarn, woven fabric '46 Manufactures of plaiting material, basketwork, etc '75 Nickel and articles thereof '50 Silk '45 Cork and articles of cork P a g e

15 '81 '14 '43 Other base metals, cermets, articles thereof Vegetable plaiting materials, vegetable products nes Furskins and artificial fur, manufactures thereof South Africa Exports to SACU and SACU imports from the world Product code Product label South Africa's exports to Southern African Customs Union (SACU) Value in Value in 2009 Value in Southern African Customs Union (SACU)'s imports from world Value in 2009 Value in 2010 Value in 2011 TOTAL All products '01 Live animals '02 Meat and edible meat offal '03 '04 Fish, crustaceans, molluscs, aquatic invertebrates nes Dairy products, eggs, honey, edible animal product nes '05 Products of animal origin, nes '06 Live trees, plants, bulbs, roots, cut flowers etc '07 Edible vegetables and certain roots and tubers '08 Edible fruit, nuts, peel of citrus fruit, melons '09 Coffee, tea, mate and spices '10 Cereals '11 Milling products, malt, starches, inulin, wheat gluten '12 Oil seed, oleagic fruits, grain, seed, fruit, etc, nes '13 Lac, gums, resins, vegetable saps and extracts nes '14 Vegetable plaiting materials, vegetable products nes '15 '16 Animal,vegetable fats and oils, cleavage products, etc Meat, fish and seafood food preparations nes '17 Sugars and sugar confectionery '18 Cocoa and cocoa preparations '19 Cereal, flour, starch, milk preparations and products '20 Vegetable, fruit, nut, etc food preparations P a g e

16 '21 Miscellaneous edible preparations '22 Beverages, spirits and vinegar '23 Residues, wastes of food industry, animal fodder '24 Tobacco and manufactured tobacco substitutes '25 Salt, sulphur, earth, stone, plaster, lime and cement '26 Ores, slag and ash Mineral fuels, oils, distillation '27 products, etc '28 Inorganic chemicals, precious metal compound, isotopes '29 Organic chemicals '30 Pharmaceutical products '31 Fertilizers '32 '33 '34 '35 '36 '37 Tanning, dyeing extracts, tannins, derivs,pigments etc Essential oils, perfumes, cosmetics, toileteries Soaps, lubricants, waxes, candles, modelling pastes Albuminoids, modified starches, glues, enzymes Explosives, pyrotechnics, matches, pyrophorics, etc Photographic or cinematographic goods '38 Miscellaneous chemical products '39 Plastics and articles thereof '40 Rubber and articles thereof '41 Raw hides and skins (other than furskins) and leather '42 Articles of leather, animal gut, harness, travel goods '43 Furskins and artificial fur, manufactures thereof '44 Wood and articles of wood, wood charcoal '45 Cork and articles of cork '46 Manufactures of plaiting material, basketwork, etc '47 Pulp of wood, fibrous cellulosic material, waste etc '48 '49 Paper & paperboard, articles of pulp, paper and board Printed books, newspapers, pictures etc '50 Silk Wool, animal hair, horsehair yarn and '51 fabric thereof '52 Cotton Vegetable textile fibres nes, paper '53 yarn, woven fabric '54 Manmade filaments P a g e

17 '55 Manmade staple fibres '56 Wadding, felt, nonwovens, yarns, twine, cordage, etc '57 Carpets and other textile floor coverings '58 Special woven or tufted fabric, lace, tapestry etc '59 Impregnated, coated or laminated textile fabric '60 Knitted or crocheted fabric '61 Articles of apparel, accessories, knit or crochet '62 Articles of apparel, accessories, not knit or crochet '63 Other made textile articles, sets, worn clothing etc '64 Footwear, gaiters and the like, parts thereof '65 Headgear and parts thereof '66 Umbrellas, walking-sticks, seat-sticks, whips, etc '67 Bird skin, feathers, artificial flowers, human hair '68 Stone, plaster, cement, asbestos, mica, etc articles '69 Ceramic products '70 Glass and glassware Pearls, precious stones, metals, coins, '71 etc '72 Iron and steel '73 Articles of iron or steel '74 Copper and articles thereof '75 Nickel and articles thereof '76 Aluminium and articles thereof '78 Lead and articles thereof '79 Zinc and articles thereof '80 Tin and articles thereof '81 Other base metals, cermets, articles thereof '82 Tools, implements, cutlery, etc of base metal '83 Miscellaneous articles of base metal Machinery, nuclear reactors, boilers, '84 etc '85 Electrical, electronic equipment '86 Railway, tramway locomotives, rolling stock, equipment '87 Vehicles other than railway, tramway '88 Aircraft, spacecraft, and parts thereof '89 Ships, boats and other floating structures '90 Optical, photo, technical, medical, etc apparatus P a g e

18 '91 Clocks and watches and parts thereof '92 Musical instruments, parts and accessories '94 Furniture, lighting, signs, prefabricated buildings '95 Toys, games, sports requisites '96 Miscellaneous manufactured articles Works of art, collectors pieces and '97 antiques '99 Commodities not elsewhere specified P a g e

19 6. Tariff applied in South Africa for products imported from UAE against tariff for imports from the world 19 P a g e Simple Av. Tarrif for export From UAE to South Africa Simple Av. Tarrif for export From the World to South Africa Animal/veg fats & oils & their cleavage products; AHS AHS 5.21 Animal/veg fats & oils & their cleavage products; MFN MFN 7.54 Prep of meat, fish or crustaceans, molluscs etc AHS AHS Prep of meat, fish or crustaceans, molluscs etc MFN MFN Sugars and sugar confectionery. AHS AHS Sugars and sugar confectionery. MFN MFN 3.88 Cocoa and cocoa preparations. AHS AHS 9.59 Cocoa and cocoa preparations. MFN MFN 9.33 Prep.of cereal, flour, starch/milk; pastrycooks' AHS AHS Prep.of cereal, flour, starch/milk; pastrycooks' MFN MFN 19.8 Prep of vegetable, fruit, nuts or other parts of AHS AHS Prep of vegetable, fruit, nuts or other parts of MFN MFN Beverages, spirits and vinegar. AHS AHS Beverages, spirits and vinegar. MFN MFN 20.1 Inorgn chem; compds of prec mtl, radioact element AHS AHS 0.76 Inorgn chem; compds of prec mtl, radioact element MFN MFN 0.76 Organic chemicals. AHS AHS 0.53 Organic chemicals. MFN MFN 0.65 Pharmaceutical products. AHS AHS 0.79 Pharmaceutical products. MFN MFN 0.56 Fertilisers. AHS 0 31 AHS 0 Fertilisers. MFN 0 31 MFN 0 Essential oils & resinoids; perf, cosmetic/toilet AHS AHS 7.36 Essential oils & resinoids; perf, cosmetic/toilet MFN MFN 9.77 Plastics and articles thereof. AHS AHS 4.4 Plastics and articles thereof. MFN MFN 6.64 Rubber and articles thereof. AHS AHS 5.87

20 Rubber and articles thereof. MFN MFN 8.71 Paper & paperboard; art of paper pulp, paper/pape AHS AHS 4.56 Paper & paperboard; art of paper pulp, paper/pape MFN MFN 4.68 Ceramic products. AHS AHS 8.35 Ceramic products. MFN MFN 8.62 Glass and glassware. AHS AHS 5.36 Glass and glassware. MFN MFN 7.41 Natural/cultured pearls, prec stones & metals, co AHS AHS 6.97 Natural/cultured pearls, prec stones & metals, co MFN MFN 4.4 Iron and steel. AHS 0 72 AHS 0.02 Iron and steel. MFN 0 72 MFN 0.03 Articles of iron or steel. AHS AHS 3.84 Articles of iron or steel. MFN MFN 6.94 Aluminium and articles thereof. AHS AHS 3.01 Aluminium and articles thereof. MFN MFN 3.61 Ships, boats and floating structures. AHS 4 89 AHS 2.3 Ships, boats and floating structures. MFN 4 89 MFN 2.22 Furniture; bedding, mattress, matt support, cushi AHS AHS 8.97 Furniture; bedding, mattress, matt support, cushi MFN MFN i 20 P a g e