Jakarta: Indonesian Ambassador in Pretoria Salman Al Farisi believes the investment-led model is one of the most suitable mechanisms of cooperation between the two countries. Indonesian business people must consider investing in African countries which in turn will increase exports.
"The economic situation in South Africa is still very challenging for us to be able to penetrate market deeper and bring diverse Indonesian products here. However, in 2019, we got some positive indications, ranging from the commitment of several companies in Indonesia bring representatives in South Africa, to new investment plans from South African companies to Indonesia," the ambassador said in a statement issued on Friday, January 3, 2019.
"Some agreements, such as the Défense Cooperation Agreement and MoU in the Fisheries Sector, have almost reached the final stage. We hope that 2020 will bring more encouraging development," he added.
Since 2015, trade volume between Indonesia and South Africa shows a fluctuate trend. The Indonesian Ambassador was not overly concerned about trade balance in 2018 which showed a surplus for the South African side. Increased purchases of capital goods from South Africa was a good sign of a productive activities in Indonesia, mainly related to the need for intensive infrastructure development in recent years. Indonesia still has a great potential to increase its exports such as automotive products, palm oil and food and beverage products to Sub-Saharan African countries.
Tariff barriers still considered hindering trade relations between Indonesia and South Africa. During his working visit to Cape Town, December 18-19 2019, the Coordinating Minister for Maritime Affairs and Investment, Luhut B. Pandjaitan, met with the Minister of Trade and Industry of South Africa, Ebrahim Patel. During the meeting, Minister Patel welcomed the preliminary discussion on the Preferential Trade Agreement (PTA) where he expected a concrete step to begin with a study by a technical team in the beginning of this year. Minister Patel also indicated several investment potentials by Indonesian businesses people, especially the relocation of the textile and footwear industry.
The condition and economic situation of South Africa and the surrounding countries under accreditation of the Indonesian Embassy in Pretoria have influenced the Indonesian Government’s strategy in its efforts to expand the market for Indonesian products. Low spending of household sector in 2019 has shown that South African consumers are still financially cautious. With the slowing economic growth at around 0.7 percent in 2019, South Africa facing the problem of 29.1 percent unemployment rate which brought it as the country with the highest unemployment rate in the world.
By helping hand accelerating the local economy through the opening of new jobs, it will ultimately increase awareness, demand and purchasing power of the people for Indonesian products. This can be done among others by exporting semi-finished products from Indonesia, while the process of finishing products should be done through partnerships with local parties. The Coordinating Minister for Maritime Affairs and Investment supports the importance of Indonesia's outbound investment which will increase the Level of Domestic Components (TKDN) and exports abroad.