BRICs Build North Africa’s Economy with double-digit trade and investment growth

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North Africa’s economies are profiting from fast-growing trade and investment from the BRIC countries, according to a new report from the African Development Bank (AfDB).

The Report, titled, “The BRICs in North Africa: Changing the Name of the Game?” says the group, which comprised Brazil, Russia, India and China during the time covered by the report (South Africa joined in 2011) is drawn to the region due to a growing need for raw materials and minerals; an amenable investment and regulatory climate; its relatively large population and overall GDP; low production and labour costs, and geographical proximity to European and Middle East markets.

The AfDB estimates total investment by the BRICs was between USD70 billion to USD 90 billion by the end of 2009, with the lion’s share attributed to China (USD35 billion) and India (USD26 billion).  Brazil and Russia are becoming more significant with investments of USD10 billion and USD5 billion.

The nature of trade and investment is wide-ranging, going right across the spectrum from consumer goods to heavy industrial plant.  Areas of operation include tourism, telecommunications, cars, electronics, construction, oil and gas and chemicals and fertilizers.

The abundance of primary commodities such as oil and phosphates in the region fuelled the initial trade demand from the BRICs.  Brazil, Russia, India and China are among the top ten consumers of oil and phosphates in the world and are major consumers of iron.

Later, North Africa’s growing population of 170 million or more than 15% of the African total and its total gross domestic product of USD 550 billion (over one-third of total African GDP) proved an attractive consumer export market for the BRICs.

For instance, BRICs exports to Algeria shot up from a mere 1% in 1990 of the total to almost 15% in 2008. In 1990, Egypt’s imports from BRICs countries were 3%, but by 2007 the figure had soared to almost 20%.

Brazil is a major exporter of electronic goods, telecoms equipment and motor vehicles to Tunisia, so much so that Tunisia became the biggest export market for Brazilian cars in the Arab world.
In Algeria and Morocco, China is the dominant supplier of electronic equipment, shoes and clothing, and light industrial products.

Not only are the BRICs exporting to North Africa, they are also manufacturing there.  One attractive factor is labour costs.  For China, wages are lower in Egypt than at home.  Whereas Chinese labour costs might be USD150 a month, they can be as low as USD46 to USD100 a month in Egypt.

Manufacturing in North Africa also allows for cheaper and faster transportation of finished goods to the prosperous markets of the European Union, the Mediterranean and the Middle East.