BRICS to further economic interests of Saudi Arabia, S. Africa 

(MENAFN - Arab News) The recently announced Saudi Arabia South Africa Holding (SASAH) will potentially create business opportunities for both countries and may support the continuing Saudi efforts to diversify the economy by opening yet another gate to join the leading emerging economies known as BRICS.

BRICS is a five-member economic of Brazil, Russia, India, China and South Africa.

The strategic partnership, which was announced by the South Africa Saudi Arabia Business Council on June 11, was initially launched as a joint venture company during the Fourth Saudi Arabian South African Joint Committee held in Riyadh in April and attended by Saudi Minister of Commerce and Industry Tawfiq Al-Rabiah and his counterpart South African Rob Davies.

"The establishment of a new joint holding company, Saudi Arabia South Africa Holding (SASAH), will potentially create business opportunities worth 2.5 billion," Davies said. The minister also viewed this development in-line with South Africa's strategy of seeking out new sources of investment and trade with dynamic economies - as trade and investment with most of South Africa's traditional partners are either "declining or stagnant."

Also, the co-chairman of the Saudi Arabia South Africa Business Council, Iqbal Surve, said at a media briefing in Cape Town that SASAH was a special purpose vehicle "SPV" to enhance business activities between the two consortiums from both countries and to improve and enhance the business relationships between Saudi Arabia and South Africa.

As stated by Surve, SASAH will be made up of different business sectors, including real estate, health services, agriculture, trading, technical services, automotive industries, mining and minerals, construction, power construction, petrochemicals downstream and engineering and will be a legally registered entity in their respective countries and achieve the legal requirements of investment authorities and tax regimes of both countries.

SASAH is also designed to help the two countries to invest in profitable business ventures aiming to create mutual business opportunities in "mining, petrochemicals and agriculture."

The company will also be entitled for free, 5 percent equity in any joint venture initiated and promoted through it. The holding company would also have the opportunity of taking equity and will have the first right of refusal up to 20 percent equity in any joint venture.

There is also the scope for Saudi Arabia's sovereign wealth funds to make investments in the holding company. It may become also a major shareholder in some strategic joint ventures.

Although both Saudi and South African sides have not identified owners of the holding company, it seems that the owners are private investors and the role of the Saudi sovereign wealth funds are to guarantee and support as needed.

However, regardless of the ownership of the company the good news is that it will not be used as a tool to monopolize the economic relations between the two countries, as indirectly mentioned by Surve when he said "SASAH would not be the only means of interacting between the two countries, but that the company would make it easier for the two to do business and enhance relations between the two countries."

Therefore, we need to view SASAH as one of multiple means to promote economic diversification by enhancing performance of non-oil economic sectors in Saudi Arabia through partnership with leading emerging economies.

This Saudi tendency towards emerging economies in the long lasting journey to diversify the economy was revived by the Custodian of the Two Holy Mosques King Abdullah upon his historic visit to China in January 2006 with his wide-ranging talks with Chinese President Hu Jintao and signing five bilateral economic agreements.

During his visit to China, King Abdullah expressed his interest to further strengthen Saudi-Sino-relations by telling the Chinese president that "China was the first country I visited after becoming the king."

Since then, Saudi Arabia is intensifying its movement toward economic diversity through global partnership especially with BRICS countries.
In fact, the fruits of this tendency are so obvious in the Saudi economy.

The industrial infrastructure is now more diversified. It could be seen in the development of the downstream product offering of the petrochemicals industry, and the drive toward creating local car industry by producing aluminum from what will become the world's largest aluminum complex.

Other components of car industry such as Nylon 66, carbon black, rubber and specialty polymers are being or going to be produced through joint partnerships between SABIC (Saudi Basic Industries Corp.), Aramco and other Saudi companies.

Other joint ventures with companies from water-rich countries such as Ethiopia, Ukraine, the Sudan and Brazil are made to secure food for the Saudi population.

Also, some positive developments in the area of solar energy have occurred through partnership with Austrian, British and South African companies. Yet major breakthroughs are expected in this frontier.

One big apple of all fruits of the Saudi drive towards a more diversified economy and greater degree of active participation in the global economy was the recognition of the top 20 leading economies of the world of Saudi Arabia as one of them.

It's worth mentioning that Saudi Arabia and South Africa have signed at least eight bilateral agreements since the historical visit of the South African all time human rights Icon President Nelson Mandela in November 1994 to Riyadh when received then by King Fahd and Crown Prince Abdullah at King Khaled International Airport.

Since then, the economic ties strengthened and bilateral trade between the two countries amounted to more than 4.4 billion in 2011. Saudi Arabia is now exporting mineral, chemical and paper products, stone and glassware, and plastics. Saudi Arabia is expected to be the largest oil exporter to South Africa after the embargo of Iranian oil takes place on July 1.

South Africa exports prepared foodstuff, base metals, vegetables, chemicals and machinery. The two countries have made a recent agreement to double the total value of bilateral trade between them by 2015 and the most recent Joint venture company is in line with such a target.