Economics ISA Globalization and South Africa April 23, 2013 Globalization is the process of expanding social and economic ties between nations, and benefits each partner through enabling it to concentrate on its competencies (GPF). From thousands of years ago when Silk Road connected Asia, Africa and Europe to speed the transfer of goods, the idea of globalization fermented in the minds of every merchant. Heading towards the 19th century this idea progressed further as new ways of transportation and communication came to pass including railroads, steamships and telecommunication.
In the 21th century this idea of globalization has increased tremendously with the addition of commercial vehicles, airplanes, cellular phones and most notably, the Internet. Organizations such as the World Trade Organization (WTO) and the International Monetary Fund (IMF) make it their mandate to give aid to developing countries as they strive to globalize. South Africa has been integrated in the movement of globalization as it re-entered the international economy in 1990 after being faced with trade sanctions.
At that time emerging market economies were booming at a greater rate than the world economy (CIA). However the South African economy only began to show signs of benefit about four years later. Moreover with the addition of South Africa into the BRICS countries in 2010 (originally known as BRIC in 2001) brings opportunity to South Africans, who deal with the notion of globalization. (BRICS) South Africa has a tremendous amount of potential due to its abundance in natural resources such as gold, diamond, coal, natural gas and many other rare earth elements (CIA).
Globalization has proven to be a positive development in South Africa because it has improved trade partners including China and India, brings potential foreign investors, and gives trade rights to South Africa. Globalization makes it possible for countries to remove trade barriers, which benefits both the consumers and producers of each participating country. South Africa’s socio-economic relationship with China and India has much improved as a result of globalization. South Africa’s socioeconomic relationship with China has been booming and since 2010, China has been one of South Africa’s most prominent trading partners (Loots).
The official relationship formed in the late 1990s when there was a fall of apartheid in South Africa. This made it possible for South Africa to form a tactical economic relationship with Taiwan (officially the Republic of China) (CIA). Additionally in 1997 when the British transferred the sovereignty over Hong Kong (also known as “the Handover”) to China this sped up the recognition of the socio-economic relationship between South Africa and China. Prior to these relations South Africa and China only traded $14 million (USD) in 1992, however once the relations started to gain way in 1998 trade between the two increased to $1.
4 billion (USD). Moreover by 2010 trade between China and South Africa flourished to $25. 6 billion (USD), which shows a remarkable progression of trade over time (BRICS). Similarly to China, South Africa’s relationship with India showed analogous results. The culmination of apartheid in South Africa in 1994 made it possible for South Africa to gain global relations. Furthermore in 1994 Nelson Mandela (South African leader at the time) won the Mahatma Gandhi Peace Prize from the Indian government.
Moreover economic activity between India and South Africa also expanded at an exponential rate from 1993 of $3 million (USD) to $4 billion (USD) in 2006. This progression stayed constant even through 2010 where the trade between the two is $12 billion (USD). The trade is maintained through a free-trade agreement that both South Africa and India signed (Ministry of External Affairs India). Globalization enabled South Africa to expand its trade towards other nations and as a result South Africa’s gross domestic product (GDP) went from $124. 9 billion (USD) in 1990 to a staggering $408.
2 billion (USD) (Fedec). Expansion of world trade is a result of globalization that enables foreign investors to bring their business into developing countries. Globalization has helped bring foreign investors into South Africa, which results in further advancements in the banking and management industry. The BMW plant Rosslyn, hosted outside of Johannesburg, is an example of success in South Africa due to globalization. The plant uses state of the art equipment and well paid trained assembly line workers that are unionized. In 2006 14,000 South African BMW vehicles were exported to the US market.
Additionally 80% of the vehicles produced there are exported to Japan, US and Australia. Although it takes 3 minutes more to produce a BMW in South Africa over Germany the savings from labor costs trumps the time, as the costs are 20% of that in Germany (Wessel). This foreign investment into South Africa by BMW could have never been conceived without the affects of globalization. Furthermore in turn this foreign investment ensures growth of the banking industry as for this invested money cannot be managed without a proper functioning banking system (Matoti).
Additionally this development provides more job opportunities in South Africa and encourages a greater rate of employment. The growth in the banking industry is a direct result of foreign investment from globalization. Growth of world trade can bring issues upon a developing country and result in one country taking advantage of another. Organizations such as the World Trade Organization (WTO) secure the rights of the developing countries in a globalized world. The WTO mainly deals with tariff disputes but also deals with anti-dumping and non-tariff disagreements.
This forum for mediation results in consumers and producers knowing they can enjoy secure supplies and greater choice of goods and services that they use. Additionally this causes producers and exporters to know that foreign markets will remain open to them. The WTO has helped South Africa deal with anti-dumping reforms in the mid 1990s. Dumping is an economic situation when products of one country are brought into another country at a price, which is less than it is charged at the country of its origin. This can cause problems since it spawns unfair competition, which then kills the domestic industry of such a product.
As South Africa rejoined the global economy, they also became an active member of the WTO. By joining the WTO in 1994, South Africa had to implement certain obligations such as anti-dumping measures. This results in healthy and secure trade between South Africa and its trading partners (Joubert). Since South Africa introduced this in 1994 until present times their GDP has increased from $135. 8 billion (US dollars) to $408. 2 billion (US dollars) (Fedec). This GDP growth is secure due to the implementations of legislation made by the WTO and can only be attributed to globalization.
Globalization is the economic idea that expansion of world trade on an international scale that shortens the distance between nations and ultimately increases the world’s productivity. South Africa has been affected by globalization positively since the post apartheid era in 1994 (Baartman). Economic globalization has benefitted South Africa in many ways such as; boosting trade with China and India, bringing foreign investments in and establishing trade rights with the aid of outside organizations. The sentiments from globalization has increased South Africa’s GDP from $124. 9 billion (USD) in 1990 to $408.
2 billion (USD) as of 2012 (Fedec). Additionally these factors have enabled South Africa to become introduced into the “BRICS” emerging national economy association in 2010, along with its initial members: Brazil, Russia, India and China (BRICS). The addition of South Africa in this association is understood as a major success for South Africa from a direct product of globalization. These advancements and expansions in South Africa’s economy and GDP are the reasons that globalization has been such a positive development. Bibliography 1. Baartman, Sarah. “A Short History of South Africa. ” SouthAfrica. info. South African Government, n.
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