Gauteng Business 2016 edition

SPECIAL FEATURE Brics:

SPECIAL FEATURE Brics: the opportunities for Gauteng Why South Africa’s smallest province stands most to gain from the country’s inclusion in the BRICS group of countries. One of the biggest advantages of South Africa’s relationship with BRIC (Brazil, Russia, India and China) is that the country can benefit through the flow of foreign direct investment and increased trade. Bearing in mind that South Africa holds the key to the door through which BRICS, especially China, wants to do business with the rest of Africa, it has become even more important for South Africa to take the lead in Africa’s new industrial revolution – even amidst undertaking the huge task of radical economic transformation. Despite mixed reactions to our inclusion in BRICS, and some critics saying that other emerging countries with faster economic growth than South Africa could have been included, South Africa joined the bloc as the ‘jeweller of the world’ and as a ‘Gateway to Africa’, offering fellow BRICS members improved access to a very large consumer base in the African continent in addition to mineral resources, including oil and platinum. Although all regions in South Africa stand to benefit from the BRICS partnership, the economic, demographic and labour statistics for Gauteng give the province quite an advantage when it comes to economic benefaction in this regard. Also counting in favour of Gauteng is South Africa’s availability of vast natural resources such as gold, diamonds and platinum, excellent infrastructure, es- GAUTENG BUSINESS 2016 74

SPECIAL FEATURE tablished corporate footprints, a culture of innovation, easy access to finance for business, a stable macro- and micro-financial climate, an advanced banking system and functioning regulatory frameworks, of which most either reside in the province, or are governed from there. Opening more doors of opportunity is the fact that Gauteng is the leading economy in the country and SADC region, and a key player in Africa’s business landscape, contributing 11% to Africa’s economy. Yet, no matter how one looks at it, the facts underscore the strategic significance of Gauteng, the fourth biggest economy in the continent, in strengthening economic trade and partnerships with African and BRIC countries. In the BRICS context, Gauteng is viewed as the ‘Gateway to Africa’ – an attractive place for investments on the continent – for a number of reasons. The province offers: • Easy access to African markets. • Functional national institutions protecting the right of investors. • Clear and consistent economic policies in line with national policies. • Good infrastructure and facilities; high-quality road, rail and air networks. • An investor-friendly environ ment. • A large pool of young, highly skilled labourers, whose skill sets match the needs of modern manufacturing, finance, and engineering industries. • A large pool of skilled labour for the manufacturing, trade and transport sectors. • Low land and commercial building costs. • Believe it or not, Gauteng’s electricity is among the cheapest in the world. The recent global economic crisis, which started in the United States, had a huge impact on the world economy. It especially impacted the economic recovery expectations of developed countries. As the countries with the most active economic growth in the world, BRICS countries face a great challenge. They need to adjust their development strategies when facing the new challenge in order to achieve rapid and sustainable economic development. Economy Gauteng outflanks other provinces in a number of key economic metrics. It has continuously outperformed South Africa’s other eight provinces when measured in terms of their respective provincial contributions to national GDP and in comparisons of provincial real annual economic growth rates. In 2015, Gauteng contributed 36% to national GDP (up from 34.5% in 2011)—well above the second and third largest contributions from KwaZulu-Natal (16%) and the Western Cape (17%) respectively. The contributions of the remaining six provinces to national GDP were all below 10%. Furthermore, average growth rates in Gauteng have comfortably exceeded the national average in the past decade— the province’s annual average growth rate between 2001 and 2011 was 4.6%, above the national average of 4%. In addition, the province boasts a comparatively wealthy consumer base, with a population that has, on average, both the highest earners and biggest consumers on the continent. According to the 2011 Census, annual average household incomes in Gauteng (R156 243) far exceed the national average of R38 734. All of the above contributes to the fact that Gauteng is South Africa’s strongest economic performer, and a very favourable partner to both contribute to the BRICS relationship, and benefit form it as well. However, one cannot lose sight of the fact that the global financial crisis had a major impact on the world economy and the economic recovery prospects of the BRICS countries as well. Neither South Africa, nor the Gauteng province was immune to this blow. Leading economists have warned that BRICS, as a group of developing countries (with the most active economic growth in the world), will have to adjust their development strategies in order to achieve rapid and sustainable economic development in this new climate. In this regard, developing its economic hubs with the introduction of five new business corridors was a brilliant strategy by the Gauteng 75 GAUTENG BUSINESS 2016