2011 Trends for the South

The world has been through a dramatic and fascinating period since the global economic crisis erupted in 2008. While the wealthy, developed nations of the North have been pitched into one crisis after another, the countries of the global South (many of whom are well accustomed to crises) have been part of a powerful new economic phenomenon: the rapid growth of South-South trade, investment and exchange. Its effects include stronger ties between Asia and South America and between China and Africa.

South-South trade is the great economic success story of the past decade. World Trade Organization (WTO) (www.wto.org) figures show South-South trade grew to 16.4 percent of the US $14 trillion in total world exports in 2007, from 11.5 percent in 2000. While the global economic crisis has slowed trade down, the overall trend for South-South trade and connections seems firmly established.

South-South trade made up 20 percent of global exports by 2010, and foreign direct investment to developing economies rose by 10 percent in 2010 due to a rapid economic recovery and increasing South-South flows.

Trade between China and Africa has surged during the decade since China joined the WTO in 2001, from around US $10 billion in 2000 to US $73.3 billion in 2007, a year-on-year increase of 32.2 percent. By 2008, it had soared by 44.1 percent to reach a record high of US $106.84 billion, according to Zhang Yongpeng of the Institute for West Asian and African Studies (IWAAS).

The surge is remarkable and recent. For example, according to accountants KPMG, between 2001 and 2009 China invested just US $215 million in Brazil. But in 2010, China invested US $20 billion in energy and chemical companies in Argentina and Brazil. And Luis Alberto Moreno, president of the Inter-American Development Bank, told the Financial Times that “seven percent of Colombian gasoline has been replaced by domestic ethanol, produced with green Indian technology – while Indian companies, including Infosys and Tata, now have 17,000 employees in Latin America and the Caribbean.”

This jump in investment has also had its downside: coming fast and furious as investment cash chases better investment profits in the global South, it has pushed up inflation and commodity prices and spawned property speculation bubbles. This, as can be seen across North Africa and the Middle East, can lead to political and social instability.

A review of the big trends bubbling under the surface in 2011 shows how important South-South exchange will be in alleviating poverty and improving lives in the run-up to the 2015 Millennium Development Goals (http://www.un.org/millenniumgoals/). It also shows up the dangers inherent in this new environment – rising inflation without economic growth can crush the poor. A focus on innovation and new thinking will be necessary to get through this year and beyond.

Some of the top trends that will have a big impact in 2011 are:

– Inflation: In 2011 it looks like we will hear a lot about inflation. As the global economy tries to stabilize and return to growth, there will be inflation surges for a wide variety of reasons. People will need strategies and new techniques to make sure they can afford the necessities of life. This will be critical if development gains from the past decade are not to be lost.

– Super cycle: Some are putting forward the theory we are entering a ‘super cycle’ (http://www.bloomberg.com/news/2011-01-23/super-cycle-leaves-no-economy-behind-as-davos-shifts-to-growth-from-crisis.html) created by better connectivity, global travel and mobility and the ease of moving around investment to create businesses and jobs. The super cycle theory claims that this will spark the greatest period of human development in history – raising all national economies – as more and more people benefit from rising living standards and opportunities.

– Switch to South-South trade: With the trend of increasing South-South trade now firmly established, there is a greater awareness now of the power of sharing ideas across the South. One example of this idea-sharing is the annual Global South-South Development Expo (http://www.southsouthexpo.org/) run by UNDP’s Special Unit for South-South Cooperation Unit (http://ssc.undp.org/).

– New technologies: The spread of new technologies around the world will continue and bring many changes. Africa is seeing increasing access to high-speed Internet as new undersea cables are laid around the continent. Mobile phones will continue to be a critical tool for many to stay in touch and boost incomes.

– MDGs on horizon in 2015: The Millennium Development Goals (MDGs) target of 2015 is just four years away. This will face the headwinds of the global economic crisis and urgent attention will be needed to make sure gains are not lost as 2015 approaches. The role played by South-South trade will be a critical partner in aiding goal achievements.

– Cities: A surge to the urban was pronounced by 2007 and we are now living in a majority urban world. Innovation and sharing experiences and knowledge will play a key role in ensuring this is not a disaster. A recent book, Arrival City by Canadian journalist Doug Saunders, detailed this urban surge occurring across the global South, the largest movement of people to cities and urban and semi-urban areas in human history. It follows the pattern that was seen in Europe in the 19th century, as economies change and people seek the new opportunities promised by cities, or find rural economies unsustainable.

– The China model of development: The big talking point will be China’s economic model for eradicating poverty on a mass scale. A new book by Dambisa Moyo, How the West Was Lost: Fifty Years of Economic Folly – And the Stark Choices Ahead, investigates the mistakes made in developed, Western nations and what can be learned from the experiences in the global South.

– Food crisis: At the beginning of February, the Food and Agricultural Organization (FAO) issued a warning about the risk of a new global food crisis after its food price index reached a record high in January 2011. The FAO also issued an alert about severe drought in China, the world’s largest wheat producer. Flooding in Brazil and Australia have also devastated crops, much of which are exported to countries across the South. There is also risk to crops from flooding in southern Africa. Wheat, corn and soybean prices are rising, and prices reached a peak just as they did in 2008 (FAO).

Even developed countries normally used to food surpluses are at risk. In the US, corn reserves are at a 15 year low (US Department of Agriculture), and the price of corn has doubled in past six months.

A billion people go to bed hungry every night; someone starves to death every 3.6 seconds – 75 percent are children under five, according to the World Food Programme (http://www.wfp.org/1billion).

China’s Booming Wine Market Can Boost South

A great South-South opportunity has emerged with the recent boom in wine drinking in China and the pursuit of quality tastes. Matching high-quality wine producers from the global South – including South Africa, Chile, Morocco, and Lebanon – with China’s thirsty wine drinkers could deliver a major income boost.

In the past year China has become the world’s fastest-growing wine market with newly wealthy seeking sophisticated tastes and young working women seeking the health benefits of wine (http://www.healthtree.com/articles/red-wine/). Yearly wine consumption in China is expected to increase by 20 percent to 126.4 million cases by 2014, a fact that is grabbing the attention of old and new-world wine producers.

Women are driving China’s growing market for wine, which is perceived as a symbol of affluence, a benefit to health – in moderation – and good for the skin. A new report from the International Wine and Spirit Research (IWSR) group says wine consumption in China and Hong Kong jumped 100 per cent between 2005 and 2009, from 46.9 million to 95.9 million cases.

Import taxes have been reduced as China entered the World Trade Organization (WTO), and this has prompted foreign wine brands to lunge into the market.

The government is trying to get people to switch away from high-strength alcoholic drinks by increasing the tax on them.

Awareness and experience varies widely amongst the winemakers of the global South. Some countries, such as South Africa, Chile and Argentina, have long-standing international reputations for producing quality wine, and use sophisticated branding and marketing campaigns to connect with their customers. But other countries, including Lebanon, Tunisia and Zimbabwe, have lower profiles and do not pack the same brand punch. But all these countries help show the role viticulture can play in economic development. By tapping into this Chinese wine drinking boom, they could reap rich rewards.

In Lebanon, viticulture – the harvesting of grapes for wine (http://en.wikipedia.org/wiki/Viticulture) – has prospered despite the country’s wars and instability.

Lebanon has a long and illustrious history of winemaking stretching back 5,000 years. The modern Lebanese wine industry dates itself from 1857, when Jesuit monks at Ksara in the Bekaa Valley began importing vines from Algeria. After World War I, when the French took control of Lebanon, its vineyards expanded to satisfy France’s thirsty imperial troops.

Then Lebanon was hit by the brutal civil war of the 70s and 80s. And things have remained unstable and uncertain since.

But despite this, well established businesses like Ksara (http://www.ksara.com.lb/), Kefraya (http://www.chateaukefraya.com/) and Musar (http://www.chateaumusar.com.lb/english/cave.aspx), and small boutique producers, thrive.

Massaya (http://www.massaya.com/old/wine.htm) is one of Lebanon’s most dynamic and successful wineries, owned by brothers Sami and Ramzi Ghosn. Both are Christians like many of the Lebanese winemakers. They have been able to succeed in an area fraught with tension from past conflicts.

Another winery is using the business to revive a community and restore old skills. In the hills east of Beirut, the BBC found Naji Boutros – who used to be an investment banker in London – and his wife Jill. Boutros started Chateau Belle-Vue in Bhamdoun (http://www.chateaubelle-vue.com/), in the village where he grew up. As well as producing wine, the Chateau finances community projects and a library.

The two kings in the global South of wine exports are South Africa and Chile. Both countries have very strong brand awareness in export markets and both have triumphed after years of boycotts due to the political situations in the respective countries (Chile’s military dictatorship and South Africa’s Apartheid regime).

Wine-making is one of South Africa’s oldest industries and plays a key part in the economy (http://www.wine.co.za/), with exports growing from less than 50 million litres in 1994 to more than 400 million litres in 2008 – year-on-year growth of 17 percent.

Since the end of the racist Apartheid regime (http://en.wikipedia.org/wiki/South_Africa_under_apartheid) in the mid-1990s, various government and industry initiatives have begun to reverse the iniquities of the country’s wine-making industry. South Africa has been pioneering switching black Africans on to the pleasures and profits of wine making and drinking.

Like Argentina, Chile (http://www.winesofchile.org/) has a strategic plan for its wine industry by 2020. It hopes to be “the Number One producer of sustainable and diverse premium wines from the New World by the year 2020.”

Chile – recovering from the severe earthquake on February 27, 2010 – uses a sophisticated marketing strategy to promote its wines, including websites, social networking media and events and tastings. Since 2007, it has unified its marketing efforts under one umbrella organization, the Vinos de Chile, and it also offers wine tourism to further develop a close relationship with drinkers, The Wines of Chile Experience (http://www.chilewinetourism.com/), launched in 2010.

Chile’s neighbour Argentina (http://www.winesofargentina.org/) is the world’s fifth largest producer of wine,

The country has seen its domestic consumption of wine shrink as tastes changed, and has also experienced very extreme economic fluctuations. It has had to raise its game in order to earn income from exporting. This has been a spur to the wine industry and it has seen growth since 1996.

Wine growing has a long history in Argentina, going back to its Spanish colonial foundations in the 1500s. Argentineans drank large quantities of wine domestically in the 1970s but this tailed off in the later decades.

That had been balanced by a great export success with wines from the malbec grape. The flavour of this wine and its brand image has proven to be a weighty ambassador for Argentinean wines in general. By keeping a competitive price, Argentinean wine has flourished during the global economic crisis as people have moved to less expensive brands. The country cleverly has a wine marketing strategy based on Australia’s experience. This is an ambitious plan with the goal of capturing 10 percent of the global wine market share by 2020.

Argentina also aggressively pursues new markets by visiting them regularly and doing wine promotions and tastings with potential customers. It also brings people to the country to visit the wineries and experience Argentinean culture and food.

In North Africa, Algeria, Tunisia and Morocco have a long history cultivating wine and have been winning awards since the 1859 Fall Exposition in Paris. Over the years quality control was an issue as political and economic factors disrupted access to global markets. But in the last few years governments have been working to support the industry and regain its past reputation.

Winemaking in North Africa goes back to the Romans and the Phoenicians. Despite Islam prohibiting the consumption of alcohol, the industry has survived. The industry is currently being re-organized to make the most of a free trade agreement with the European Union.

Tunisia has a long, rich winemaking heritage known the world over. About half of Tunisia’s vineyards are dedicated to producing grapes for wine production rather than for sale as table grapes.

Over the last 20 years, Les Vignerons de Carthage, a cooperative of 10 cellars located in the Cap Bon region of Northern Tunisia, have been working under the leadership of Belgacem D’Khili, a Bordeaux trained oenologist to improve and maintain wine quality.

They have kept the old vines, persevered with hand-harvesting and traditional techniques, but have modernised the cellar equipment, the storage and overall approach to hygiene.

North African wines are being collectively marketed by resellers like Cotes d’Afrique (http://www.cotes-d-afrique.co.uk/tunisianwine/history.aspx).

Morocco, too, has become a respected wine maker and has a robust domestic wine-drinking market. Morocco’s oldest winery, Celliers de Meknes (http://www.lescelliersdemeknes.net/), told the Global Post how it handles the delicacies of wine-making in a majority Muslim country.

“We are tolerated,” said Jean-Pierre Dehut, the export manager for Celliers de Meknes. “But the tolerance requires that we stay within certain boundaries.”

Celliers de Meknes sells some 30 million bottles of wine per year — 25 million in Morocco.

A little-known wine producer, Zimbabwe has been producing wines since the early 1950s and commercially since 1965, according to Zimbabwe Tourism. Production peaked in the 1980s and later suffered from an export ban. Despite the country’s economic and political problems, the wine industry has grown. New techniques, equipment and grape varietals have been introduced and winemakers have been trained in Germany, Australia and South Africa. Regular visits from outside consultants have helped with raising standards.

Apart from economic problems the industry struggled with viruses and climate. But since the 1990s the industry has started to win international wine competitions

One of the successful wineries is Mukuyu Winery (http://www.africanbeersandwine.com/pages/wine.html), which produces an average of 1.5 million litres per year from 100 hectares under vines. Over the past 13 years, Mukuyu wines have won Silver and Bronze medals at the International Wine and Spirit Competition in London, and regional wine tasting competitions in South Africa.

By David South, Development Challenges, South-South Solutions

Published: January 2011

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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