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Coffee and rum riddle

Nov 08 2012 06:54 *Geoffrey Chapman


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IT'S not that I am against consuming coffee or rum, but I fail to understand the appeal of setting up bilateral trade agreements with Cuba and Jamaica.

Trade and Industry Minister Rob Davies' visit to Brazil, a fellow Brics nation and emerging global market player with demonstrated economic growth, I understand - but what can Cuba and Jamaica offer South Africa?

Cuba has a population of just over 11 million people and has had negative population growth for the last four years. Jamaica has a population of less than 3 million people and a population growth rate so low it may as well be zero.

Let’s review what the two countries import, as it is through South African exports that we will experience growth and job creation.


 
Taking into account what the two countries import, I have no doubt that some of Cuba and Jamaica’s imports could come from South Africa but consider the following: the combined Cuban and Jamaican population is roughly 14 million people – not even one-third the size of South Africa’s; it is also essentially remaining stagnant.

Further, the combined gross domestic product (GDP) of the two countries is roughly 5% of Brazil’s. To put it in clearer perspective, Cuba and Jamaica’s combined GDP is roughly one-quarter that of South Africa’s.

Apart from the fact that the market is small, South African goods battle to compete in the international market as is and throwing in the large transport costs faced in getting our goods to Cuba and Jamaica will only make this more pertinent.

Besides, why would Cuba and Jamaica source their goods from afar when they can do so from their existing trade partners, who are far closer geographically than South Africa?

With such a small combined market, what would be the point of capturing even a quarter of it, especially when the transport costs are significant? I think South Africa should focus its efforts locally.

The value of South African exports to Southern African Development Community member countries increased by nearly 255% between 2002 and 2011 and as the region becomes more integrated, transport costs will drop.

Further, China’s continued investment in the area means opportunities will continue to pop up and South Africa needs to be able to capitalise on these when they do.

Consequently, I fail to understand why a South African delegation is visiting Cuba and Jamaica in the hopes of setting up bilateral trade agreements.

Are we looking to import coffee and rum (and increase the trade deficit further), or are we setting ourselves up to break promises when the regional opportunities appear?

 - Fin24

*Geoffrey Chapman is a guest columnist and trade policy expert at the SABS.
 

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