India-South Africa Bilateral Trade and Investment

Strong bilateral ties between India and South Africa offers immense opportunities, particularly in renewable energy, technology, manufacturing, and agriculture. Aligned interests under the BRICS and IBSA frameworks create a promising environment for trade, entrepreneurs, and investors.

India and South Africa share a historically profound and strategically significant relationship shaped by shared struggles against colonialism and apartheid. This bond is strengthened through platforms like BRICS, which facilitates political and economic collaboration. Alongside China and Russia, India and South Africa also actively participate in the IBSA Dialogue Forum with Brazil to address social, economic, and political issues of global importance.

Ongoing discussions for a preferential trade agreement between India and the Southern African Customs Union (SACU) hold the promise of reduced trade barriers and enhanced market access, fostering greater trade volumes and investment.

Strengthening bilateral trade and investment

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In August 2024, South Africa’s Trade, Industry, and Competition Minister Parks Tau reaffirmed the commitment to bolstering bilateral trade and investment during the launch of the India-South Africa Chamber of Commerce (ISACC). Tau emphasized opportunities for Indian companies in South Africa’s manufacturing sector, particularly in renewable energy, automotive components, and healthcare.

On the Indian side, ISACC representative Atul Padalkar noted the potential of the new organization, saying that while there are “about 130 Indian companies in South Africa…there are only about 20 South African companies present in the Indian market,” indicating the scope for cross-border economic and commercial engagement.

Key trade pillars

Over the last five years, India-South Africa bilateral trade has grown from US$8 billion to US$13 billion, with coal constituting 62 percent of South Africa’s exports to India.

In fact, South Africa’s mineral wealth forms the backbone of its exports to India, including coal, copper, manganese ore, gold, and bulk minerals. India’s industrial sector, hungry for these resources, finds South Africa a vital partner. Meanwhile, India’s major exports to South Africa include petroleum products, vehicles, pharmaceuticals, telecom equipment, and construction machinery.

Bilateral trade performance

In 2023, bilateral trade stood at US$18 billion, with India’s exports worth US$10 billion and South Africa’s exports US$8 billion.

A target of US$18 billion has been set, with a focus on increased private-sector engagement and government collaboration to address trade barriers. This figure is projected to more than double, reaching US$40 billion over the next decade, driven by diversified sectors and strengthened political and economic ties. The inclusion of the African Union as a G20 member during India’s presidency has further solidified relations.

• In July 2024, India recorded a trade deficit of US$31.6 million with South Africa, exporting US$750 million and importing US$782 million.
• India’s exports to South Africa increased by 0.3 percent compared to July 2023, while imports declined by 19.2 percent.
• In 2022, India exported goods worth US$8.32 billion to South Africa, marking an annual growth of 15.1 percent since 2017. South Africa exported US$9.14 billion to India in 2022, with a modest annualized growth of 1.2 percent since 2017.India and South Africa share a historically profound and strategically significant relationship shaped by shared struggles against colonialism and apartheid. This bond is strengthened through platforms like BRICS, which facilitates political and economic collaboration. Alongside China and Russia, India and South Africa also actively participate in the IBSA Dialogue Forum with Brazil to address social, economic, and political issues of global importance.

Source: Trading Economics

 Source: Trading Economics

Investments

Celebrating 30 years of diplomatic ties in 2023, India and South Africa have cultivated robust mutual investments.

• India has invested US$70 billion across Africa, spanning sectors like oil and gas, mining, banking, pharmaceuticals, and automotive.
• Indian funding includes US$12.26 billion in lines of credit supporting 193 completed projects, with 154 ongoing or in pre-execution stages.
• South Africa ranks 37th in FDI into India, with cumulative investments of US$595.87 million from 2000 to 2023.

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South African companies in India: Sanlam (Insurance), Old Mutual (Financial Services), Life Healthcare (Healthcare), SAB Miller (Brewery), Momentum (Insurance), Naspers (E-commerce), Smollan (Retail).

Indian companies in South Africa: Tata Group, Tech Mahindra, Sun Pharma, HCL Technologies, Mahindra & Mahindra, Larsen & Toubro, Infosys, and ICICI Bank, among others.

Emerging business opportunities

As both nations aim to deepen their economic partnership, several high-growth sectors offer immense potential:

1. Information technology: India’s expertise in IT can support South Africa’s digital transformation in areas like banking, healthcare, and public infrastructure. Collaborations in fintech and cybersecurity are poised to drive financial inclusion and innovation.
2. Food and beverages: India’s food processing industry is well-positioned to cater to South Africa’s expanding market, offering processed fruits, vegetables, dairy, and poultry products to its growing population.
3. Green infrastructure: Joint efforts in renewable energy, clean coal technologies, and efficient power transmission can address mutual goals of energy security. India, a global leader in renewable energy, is set to play a crucial role through initiatives like the International Solar Alliance, which aims to fund solar projects across Africa.
4. Automotive industry: India’s cost-effective vehicle manufacturing continues to cater to South Africa’s growing automotive market, further strengthening trade ties in this sector.
5. Pharmaceuticals: With South Africa’s healthcare reforms and introduction of the National Health Insurance (NHI), India’s pharmaceutical industry stands to benefit significantly, offering affordable medicines and healthcare solutions.

Double Taxation Avoidance Agreement (DTAA)

The India-South Africa DTAA, effective since 1997 and revised in 2014, aims to eliminate double taxation, prevent fiscal evasion, and foster transparency. Key provisions include:

• Tax residency: Clear rules to resolve dual-residency conflicts.
• Permanent establishment (PE): Defines taxable profits from a PE in the other country.
• Taxation limits: Caps on dividends (10 percent), interest, and royalties (10 percent).
• Information exchange: Facilitates tax enforcement through robust data sharing.
  This agreement simplifies tax compliance, reducing burdens for investors and promoting bilateral trade.

Conclusion

India-South Africa relations exemplify strategic alignment built on historical solidarity and shared goals. However, despite the promising outlook, logistical challenges due to distance, existing trade barriers, and global economic uncertainties require strategic mitigation. Improvements to connectivity, streamlined trade processes, and robust diplomatic engagement will be critical.

Initiatives like BRICS and the India-SACU trade agreement negotiations could play a key role in facilitating reduced trade barriers and enhanced market access, fostering greater trade volumes and investment.

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