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How will South Africa engage the Region, the Continent and the World?

By Gerhard Erasmus
01 Mar 2019
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How will South Africa engage the Region, the Continent and the World?

In the African context, South Africa is a trading nation. What does the State of the Nation Address (SONA) 2019 say about South Africa’s trade policy? President Ramaphosa emphasised the following:

  • To stimulate growth in the economy, to build more businesses and employ more people, we need to find new and larger markets for our goods and services. We will therefore be focusing greater attention on expanding exports. In line with Jobs Summit commitments, we will focus on the export of manufactured goods and trade in services such as business process outsourcing and the remote delivery of medical services.

  • We will also be looking at establishing special economic zones that are dedicated to producing specific types of products, such as clothing and textiles, for example.

  • To improve the competitiveness of our exports, we will complete the studies that have begun on reducing the costs of electricity, trade, communications, transport and other costs.

  • We will focus on raising the sophistication of our exports.

  • The agreement on the establishment of African Continental Free Trade Area offers great opportunities to place South Africa on a path of investment-led trade, and to work with other African countries to develop their own industrial capacity. The agreement will see the creation of a market of over a billion people with a combined GDP of approximately $3.3 trillion.

  • Alongside a focus on exports, we will pursue measures to increase local demand through, among other things, increasing the proportion of local goods and services procured both by government and the private sector.

  • Increasing local demand, and reducing the consumption of imports, is important because it increases the opportunities for producers within South Africa to serve a growing market.

  • Through this we will intensify the “buy South Africa” programme.

This list sounds familiar and traditional. For several years now, the local trade philosophy has been anchored in “developmental integration”. Two years ago the South African Minister of Trade and Industry responded to the State of the Nation Address of President Zuma and discussed the “crisis of the dominant neo-liberal paradigm”. He then said the following:

Fortunately under your leadership, Mr President, we have adopted a policy framework that has begun to move us in this direction. The Trade Policy adopted in 2012 identified tariffs as tools of industrial development. It said trade policy is subordinate to industrial policy and must be informed by the needs of industrial development. It said we must utilize and defend Policy space that allows us to localize and pursue transformation. It says we must not hesitate to defend and use trade remedies and access dispute bodies when we are being unfairly treated.[1]

This seems to remain the accepted wisdom. However, the plans for boosting manufacturing and exports are dependent on several other policies and initiatives being developed, implemented and succeeding. South Africa’s attractiveness as an investment destination is one of them. What SONA said elsewhere about attracting investment, the ease of doing business in South Africa and fixing the problems at Eskom are vital components of the President’s plans for trade. South Africa also needs a proper policy for boosting trade in services.

The global trading system is in a precarious state. The WTO is in a crisis, to a large degree as a result of the actions of President Trump and what is perceived as the absence of effective rules to deal with Chinese trade practices. SONA 2019 does not reveal an agenda on how South Africa wants to engage in the reform initiatives underway in Geneva. Neither are there indications about the importance of AGOA and post Brexit arrangements.

The proposed African Continental Free Trade Agreement (AfCFTA) will not bear fruits soon. It is designed as essentially a framework for future initiatives in which the Regional Economic Communities (RECs) and other existing trade arrangements such as the Southern African Customs Union (SACU) will remain the dominant trade liberalization arrangements. The benefits of freer continental trade cannot be denied, but implementation of the AfCFTA will be incremental, will depend on national measures, and will require infrastructural improvements and investment in local manufacturing.

Only about 17% of Africa’s exports go to African destinations. South Africa is presently the biggest beneficiary of intra-African trade. The importance of the rest of the continent in South Africa’s trade profile is evident from a cursory review of key export destination and import sources. South Africa’s exports to the rest of the continent are clustered in the southern African neighbourhood. Small countries such as Botswana and Namibia are important destinations for South Africa’s exports across a range of products, including motor vehicles and parts, agricultural products, coal and iron and steel products (see South Africa’s Trade and Tariff profile 2018). Imports from African countries include crude oil and gold.

SONA 2019 does not mention the importance of the immediate region as destinations for South African goods. South Africa counts However, this Organization faces its own crisis. The 2002 SACU Agreement (negotiated under the new ANC government) has never seen full implementation. The Tariff Board, Common Negotiating Mechanism and Tribunal remain paper structures. The South African International Trade Administration Commission (ITAC) is responsible for the management of the SACU Common External Tariff but operates under South African law, not the SACU Agreement. The other SACU member states have no tariff policy space. The common SACU policies promised for industrialization, agriculture, unfair trade practices and competition have not been developed.

The consolidation of SACU (a well-integrated arrangement which de facto goes beyond trade in goods and which contributes directly to regional stability) should appear on the President’s trade policy agenda. For years now, it has been suggested that SACU needs a new Work Programme, but this initiative remains in limbo. Its revitalization requires strong leadership initiatives at the highest level.

[1] https://www.thedti.gov.za/delegationspeechdetail.jsp?id=3957

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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