Nigeria-South Africa trade, what an imbalance

Within days of his election victory in April, President Muhammadu Buhari called President Jacob Zuma to explain that his government wanted to build a far stronger relationship between their two countries. And the two had face-to-face meetings both at Buhari’s inauguration in May and the African Union summit in June.

This new chapter starts from a low base. The bi-national commission between the two countries turned 16 years old in October, but a plethora of bureaucratic irritants still snag the relationship. Only halting progress has been made towards a free trade zone.

Part of the problem is the commercial imbalance. There are more than 100 substantial South African companies in Nigeria but only two significant Nigerian investments in South Africa. Bilateral trade hit about $3bn in 2012, but most of that was Nigeria’s oil shipments to South Africa.

A rebalancing of ties could increase cooperation with incentives for small and medium-sized Nigerian companies to invest in South Africa, financial backing for technology transfers and more intellectual exchanges.

To corral support for the free trade area, a few high-profile and job-creating joint ventures would speed things up. Building successful joint projects would dissipate some of the antipathy towards big South African suppliers of goods and services.

For now, there is a weird double standard under which Nigerians complain about imports of goods and services from South Africa but not those from Europe or Asia. The underlying problem was the near collapse of Nigerian manufacturing in the 1980s.

This year’s start up of a Ford assembly plant just south of Abuja, which will import South African components, could revitalise the two countries’ trading and technical relationship. Other companies such as Toyota, Kia and Peugeot are planning similar regional tie-ups.

Both governments could provide incentives for additional deals. Two of Buhari’s economic priorities – expanding Nigerian manufacturing and processing and clamping down on illicit financial outflows – would greatly benefit from cooperation with South Africa. Lessons could be learned from South Africa’s Motor Industry Development Programme: it has created about 280,000 jobs in its auto and component industry.

One of Africa’s fastest-urbanising countries, Nigeria has to create hundreds of thousands of jobs around its cities. There could be benefits for both sides if South Africa developed more partnerships and joint ventures instead of shipping finished goods to Nigeria.

The volume of trade would grow as would the number of jobs in both countries. Both governments could offer advantages on tariffs and state procurement to such companies. Building African manufacturing capacity and creating jobs is exactly the foundation that enthusiasts for strong bilateral ties need when they make their case in the corridors of power and beyond.

Author: Patrick Smith is Editor-in-Chief of The Africa Report. He has edited the political and economic insider newsletter Africa Confidential since 1992 and was associate producer on a documentary about the 2004 coup attempt in Equatorial Guinea commissioned by Britain’s Channel 4 television.

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