South Africa is ranked 2nd in the Sub-Saharan Africa region when it comes to the state of globalization, according to the latest DHL Global Connectedness Index (GCI).
The GCI 2012 looks at the state of globalisation around the world and ranks 140 countries on their global connectedness levels based on international flows of trade, capital, information and people.
According to Charles Brewer, MD of DHL Express Sub-Saharan Africa, South Africa’s high ranking within the Sub-Saharan Africa region is positive for the country’s growth, as the levels of connectedness and prosperity are strongly linked. “The benefits of expanding merchandise trade are much larger than traditional models indicate,” said Brewer. “Adding to that, the gains from services trade and other kinds of cross-border flows, the estimated economic benefits double to at least 8% of global GDP.”
South Africa currently ranks 48th worldwide in the GCI and the country has significantly higher breadth (39th worldwide) than depth (80th), which reflects the relatively limited proportion of its international flows that take place within its own region.
Only 7% of South Africa’s imports and 16% of its exports are intra-regional. Brewer explains that depth refers to how much of a given activity is international (rather than domestic). Breadth complements depth by looking at how broadly the international component of a given type of activity is distributed across countries.
He says that a positive for the region is that although Sub-Saharan Africa remains the least connected region, it averaged the largest connectedness increase from 2010 to 2011, and the five countries showing the largest increase in their scores – Mozambique, Togo, Ghana, Guinea and Zambia – are all located in the region. “This improvement in rankings proves that South Africa, as well as Sub-Saharan Africa, is on the correct path when it comes to global trade and connectivity.”
Brewer says the fact that the report revealed that the migration of production and consumption of pharmaceuticals, passenger cars and mobile phones to emerging markets is also significantly positive for South Africa. “It shows that the world’s shifting economic center of gravity is reshaping industry connectedness, and that companies within these regions can adapt their strategies to benefit from the changing geography of production and consumption.”
He says that the GCI also reveals that in 2011 South Africa exported goods worth 24% of its GDP and exported services worth 4% of its GDP. “Only 16% of South Africa’s merchandise exports went to destinations within the Sub-Saharan African region. This reflects quite a concerning trend throughout the region, as intra-Africa trade continues to lag far behind our European and Asian counterparts. If we want to improve this interconnectivity, we need to look at the ease of doing business across borders in the region and work towards regional trade agreements, customs improvements and border efficiencies, to name just a few.”
South Africa’s top trade export destinations are currently China (14%), USA (10%), Japan (9%), Germany (7%) and the UK (5%).
Brewer says that from a global perspective, the GCI 2012 indicates that today’s volatile and uncertain business environment bears the lasting impact of the financial crisis. “In this period of slow growth, it’s important to remember the tremendous gains that globalisation has brought to the world and recognise it as an engine of economic progress. It is crucial that governments around the globe resist protectionist measures that hinder cross-border interactions.”