'We must level playing field with India'

The playing field between SA and India must be levelled if the countries want to reach their full trade and investment potential, Busi Kuzwayo, SA's consul-general in Mumbai, said this week.

While several Indian companies, including Tata, Mahindra and Cipla, have significant operations in SA, stricter regulations in India hamper SA Inc's involvement on the sub-continent.

"SA's presence in India is not as much as we would like," Kuzwayo said.

Restrictions on foreign ownership forced Shoprite to close up shop in India earlier this year due to further delays in the long-awaited liberalisation of the retail sector. Other sectors with onerous local ownership requirements include financial services, where First National Bank is the only local bank to acquire a licence to operate in India. Strict regulations also scuppered a proposed tie-up between MTN and India's Bharti Airtel last year.

SA companies with operations in India include SABMiller, Acsa, De Beers, Nando's, Old Mutual and Sanlam. "There are a number of deals in the pipeline, but there is quite a bit of red tape to deal with," Kuzwayo said.

While the trade balance is still in SA's favour, the country exports mainly raw materials to India, particularly coal, while mostly value-added products are imported.

"We do not see a lot of South African brands here, but there are a number of forums that exist to help get trade and investment barriers removed," Kuzwayo said. These include the SA-India chief executives' forum and IBSA, which facilitates dialogue between the governments of India, Brazil and SA.

The Indian economy is, unlike SA, classified as a developing economy under World Trade Organisation rules and, therefore, enjoys higher import tariff protection, making it virtually impossible for SA manufacturers to compete in the Indian market. "India is very good at protecting its industry, and priority is given to local manufacturers," Kuzwayo said.

Local manufacturers also struggle to compete with imported products from India, where manufacturers in special economic zones benefit from significant government support, including 10-to-15-year tax holidays and subsidised loans.

SA was, for example, a huge importer of Indian pharmaceutical products, while "not a single aspirin" was exported to India, said Stavros Nicolaou, president of local industry association Pharmisa. Only the automotive sector in SA enjoyed any kind of government support, he said.

The countries have been talking for years about a preferential trade agreement, which could see duties on certain products reduced to zero. Kuzwayo said duties on agricultural products, in particular, were hampering SA's exports, where huge potential existed. Wine, a huge growth industry in India, attracts duties of 30%, which makes it difficult for local producers to compete.

According to a study by the Trade Law Centre of Southern Africa, last year, a free trade agreement (FTA) between the countries would benefit SA by $1.2-billion and India by $715-million in the period to 2020. It is unlikely, however, that an FTA, which would reduce tariffs on most products traded between the countries, will be concluded.

Other sectors that offered potential were infrastructure development, jewellery design, manufacturing and IT skills training, Kuzwayo said. SA can also learn from India's low barriers to enter the labour market, as well as a programme to deal with rural poverty, where government promises 100 days of employment for one member of every household, she said.

• The writer travelled to Mumbai as a guest of Jet Airways