FIFI PETERS: A very important story is happening in the economy. President Cyril Ramaphosa, as you might have seen, had quite a busy day on Tuesday, November 23, showing his guest President Uhuru Kenyatta of Kenya. President Kenyatta is here on a state visit, the first to the country since the Covid-19 pandemic occurred. To discuss the economic relations between the two countries, I am joined by Adrian Saville, a professor at Gibbs.
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Adrian, it’s nice to have you on the show. Just help us understand the economic importance of this trip that is happening right now, and if it is something that we should be taking note of, or if it is something that presidents do, to visit each other.
ADRIAN SAVILLE: [Chuckling] I guess it’s something that presidents do, some presidents more than others. But it is an indication or a gesture of cooperation, regional collaboration.
There are a couple of great talking points surrounding this visit. I mean ‘we can put politics aside’, but of course we can’t. If I could put politics aside and just talk about the big issues, one is the crescent-shaped or banana-shaped economic performance zone that stretches from the Western Cape to the eastern spine of southern South Africa. Africa, through Mozambique and Kenya. If you think of that crescent shape, that is a particular pocket or corridor of economic and industrial potential that is outweighing regional weight. That’s one [thing] to consider.
Another is the much broader perspective of the African Continental Free Trade Agreement, which speaks to the potential for pan-African integration and collaboration. I think that’s another topic of conversation as a backdrop.
The third is the conflict, terrorism in the region, which must be resolved at the level of several countries and cannot be resolved by a single country in isolation. This is a problem that is present in the northern parts of Kenya and Ethiopia.
And then maybe a fourth is to address imbalances, where there is a very large trade imbalance between South Africa and Kenya. So here are several talking points.
FIFI PETERS: Yes. Let’s talk about the last one, that trade imbalance, because I see that it’s basically leaning towards South Africa, or towards South Africa. We export much more to Kenya than we import. Where do you see the opportunities to balance the scale between the two countries?
ADRIAN SAVILLE: There are probably two or three very obvious areas or immediate areas. The first is that one of the aspects that paralyzes Kenya’s export capacity is logistics. Although South Africans are very good at complaining about poor logistics, transportation costs, etc., Kenya is in an even more challenging circumstance. Then [that’s] a way to correct that overwhelming imbalance. Kenya exports very little in terms of goods to South Africa, and that is a logistics problem.
The second is simply to recognize the difference in economies. This is where trade associations work particularly well, where one does something the other cannot. Kenya is developing significant pockets of excellence in services, including in fintech, in edutech. That should also be weighed in the trade perspective, because what we are talking about in terms of imbalance, the overwhelmingly reported number is the movement of goods, not the movement of services, and Kenya has the perspective of competing globally. in centers of excellence in service.
FIFI PETERS: I don’t have the Kenyan numbers, but I’m just looking at the South African numbers in front of me, Adrian. South Africa exported goods worth 7.5 billion rand to Kenya last year and imported only 329 million rand. So there is a pretty considerable gap.
We constantly read about the ‘blockbuster growth’ coming out of Kenya. It always ranks among the fastest growing economies on the continent, in contrast to the snail growth rate we have witnessed here in South Africa, despite being a key industrial power on the continent. I wonder if there is any lesson that Kenya can teach us to achieve proper economic growth.
ADRIAN SAVILLE: They are very different economies. They come with different histories, different neighborhoods in terms of geographic footprint, and who their business partners are. There are some commonalities in terms of colonial history and they are both developing nations. They face institutional challenges. I think there are some specifics, if you could add to your observation, some aspects that perhaps South Africa could lend to Kenya, like the strength of the financial institutions. The perspective emerging from Kenya is excellence in particular industries, agriculture being an example.
But I think instead of this being about ‘let us show you what we can teach you’, [it might be] ‘What can we learn from you?’ I think the much more important story here is how we can help each other, what we can do together to strengthen the neighborhood.
The fact that President Kenyatta is visiting the Aspen plant is, in my opinion, an excellent example, because here at the Aspen plant, I would dare to venture, it is one of the most impressive manufacturing companies in South Africa. If you go in that direction, looking at the size of your joint market, what can you do together? How can you help each other build that industrial enterprise and that capacity? For me that’s the story. It’s about the collaboration and partnership that can come out of this.
You wouldn’t be overlooked if you singled out the Kenyan airline as a pocket of regional excellence, which could give South Africa some lessons. I have a smile on my face.
FIFI PETERS: [Laughing] I heard that the two were apparently discussing the possibility of merging their national airlines – KQ [Kenya Airways] with SAA, potentially creating a pan-African airline. I thought, okay, this could be quite interesting, but I think a conversation for another day.
ADRIAN SAVILLE: Add Ethiopian Airlines to the mix and you have a really interesting story.
FIFI PETERS: I think we need to discuss that story, a follow-up app interview with you, Adrian, if possible, another day.
We are out of time at the moment, but thank you very much sir, for joining the program. Professor Adrian Seville is from Gibbs.