Until mid-November 2013 it was not possible to accurately assess the profile of South Africa’s agricultural trade. It was only at that date that the South African Revenue Service (SARS) announced the revision of trade statistics that entailed the inclusion of the trade data between South Africa and Botswana, Lesotho, Namibia and Swaziland (BLNS) which was previously excluded in the compilation of trade statistics. This revision covered trade data from 2010 to 2012 and then moving forward direct trade with the BLNS will be included to provide accurate reflection of South Africa’s trade. The objective of this paper is to take advantage of trade data that comprehensively includes the BLNS and allows for a full picture of the agricultural trade profile for South Africa. For agricultural products we have used the World Trade Organisation (WTO) definitions.

For South African agricultural exports, Africa is significantly more important than the EU as a destination, while the aggregate BRICs (Brazil, Russia, India and China) are more important than the first single destinations of Hong Kong, United Arab Emirates and the United States of America. This new data highlights the importance of the BLNS countries of Botswana, Lesotho, Namibia and Swaziland and emphasises how this improved reporting of BLNS trade is allowing a comprehensive analysis of South Africa’s agricultural trade. Furthermore, for South African destinations within Africa the feature is that immediate or very close neighbours dominate the list.

By product South Africa exported R105.5 billion worth of agricultural exports in 2014, which constitutes 10.8% of the country’s overall total exports for the year. The top 20 products at the HS 4 level accounted for 66.1% of these total agricultural exports during 2014, while the top five accounted for 36.8% of the total (indicating that exports are relatively concentrated). These top five were citrus fruits, wine, maize, grapes and apples and pears.

The EU is the main source of South African imports, and this share is increasing: from 25.7% in 2010 through to 32.4% in 2014. Similarly, the import share from BRICs is also increasing, while the aggregate share from each of Africa, ASEAN and BLNS declined over the period.

Overall the global South African picture is one whereby exports were 54% above imports for 2014 (although note that by conventional measures imports are undervalued). For the EU these ratios are similar, while the real importance of Africa is highlighted where South African agricultural exports to the continent are around four times the comparable imports. For the BLNS exports are around three times that of imports, while for the BRICs exports are only one half of imports.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

In recent papers tralac has written extensively on Lesotho and trade related issues. Sandrey (2015) confirmed that manufacturing and in particular the textiles and clothing sector is the main contributor to the growth of Lesotho’s formal Gross Domestic Product (GDP), but this sector is stagnating in the face of competition from low-cost Asian producers and rising labour costs. Access to the US market under the African Growth and Opportunity Act (AGOA) means that Lesotho is vulnerable to increased competitive pressures from Asia and other developing countries. 

The objective for this paper is to extend the review of tralac’s clothing analysis in recent times to concentrate in detail upon Lesotho’s export performance in the US market. The most recent data since 2010 when intra-SACU data became more reliable clearly indicates the importance of the US market to Lesotho. Our analysis will also pay attention to the tariff preferences that Lesotho and several other developing countries and countries with FTA-related preferences into the US enjoy over non-preferential access suppliers.

We have chosen the US market as it is the main global market for the generally middle- to low-end products that Lesotho manufactures, although we recognise that Lesotho is very conscious of trying to move into at least some higher-end products for markets such as the EU. To provide a comprehensive analysis of the US market we examine the leading exports at the more disaggregated HS 4 line level and even the very detailed HS 10 line by line level to assess where Lesotho may be performing better in this US market, and conversely where Lesotho is losing market share to show who is displacing Lesotho.

This paper strongly emphasises the problems associated with the quality of Lesotho’s trade data reporting. These problems are ubiquitous in Africa, but what is surprising in Lesotho’s case is that accurate trade data is essential to clearly establish its claims to a fair share of the SACU (Southern African Customs Union) tariff revenue pool, a revenue pool that is based upon intra-SACU imports and contributes around 50% of Lesotho’s total government revenues. This paper focuses on Lesotho’s export data, and in particular exports of clothing to the United States, and although this export data is not linked to the intra-SACU import data it is nonetheless disconcerting to report on problems in the export data. For this reason we used US importing data from the ITC exclusively for our detailed analysis, and at other more general times we use both direct Lesotho data and partner mirror data, and although there are some major differences between these two sources we make no attempt to reconcile this.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

Despite increased global competition, the textile and clothing (T&C) industry is a very strategic sector for Southern Africa that has significant forward and backward linkages and huge employment creating capacity in both the formal and informal sectors. For South Africa, the T&C sector’s importance cannot be overemphasised, given the sector’s extensive employment of low-skilled labour. Trade liberalisation between 1995 and 2002, the entry of China into the World Trade Organisation in 2001, and the volatility of the exchange rate from 2003 onwards, however, has left the South African clothing and textiles industries particularly vulnerable. This has seen a substantial portion of the textiles and clothing sold in South Africa being imported and employment levels correspondingly have suffered. Illegal import practices which are now common have exacerbated the industry’s demise.

Government’s response to the influx of imports mainly from China through the imposition of quotas over the period 2007 to 2008 proved largely ineffective against the surge of low-cost substitutes. This tells us that the present clothing manufacturing business model does not match the capabilities required by fast fashion retailers. As a result, South African manufacturers have not been able to compete for a bigger share of the domestic market, despite the long lead-times on products coming from countries such as China and India.

For Southern African countries, the South African market provides an opportunity for trade given South Africa’s economic significance in the region both in terms of market size and as a source of foreign direct investment, with the latter being a limiting factor in most countries in the region. The continued efforts towards establishing an expanded market amongst countries in east and Southern Africa through the establishment of the Tripartite FTA provides opportunities and constraints for the T&C industry in Southern Africa. This is mainly because the shifting of market boundaries and the improvement of market access is going to have a significant impact on the size, structure and competitiveness of industries in TFTA (COMESA, SADC and EAC) member states due to the variable geometry within industries.

The objectives of this paper are, therefore, to determine the extent to which South Africa is importing T&C products from SADC and other TFTA members, and to consider factors that may be impeding imports from these countries (including tariff analysis and rules of origin, among others). Finally, a review of South Africa’s imports from China, compared with other imports, is presented.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

The South African Rand experienced an almost continual state of depreciation over the period 2011-2015, culminating in a massive risk premium shock to the currency, and an acceleration in the rate of depreciation, in December 2015. Economic theory shows that the ultimate economic impact of a currency devaluation will depend on a range of factors, the most important of which are the export and import price elasticities in the devaluing country. These elasticities in turn depend heavily on the country’s market power, i.e. whether it has a ‘small’ or ‘large’ economy.

South Africa is a ‘small’ country in respect of its global market power, and most studies have confirmed that it fulfils the Marshall-Lerner condition for a devaluation to be BOT improving. This paper does not contradict this finding, but in a simulation of the disaggregated impacts of a ‘devaluation’, finds that the overall economic effect of the fall in the value of the currency is contractionary.

Not every sector contracts, however, and some sectors benefit from improved export and import-substituting competitiveness. Interestingly, the winners and losers of the ‘devaluation’ are highly consistent with the current industrial policy emphasis of the South African Department of Trade and Industry (the IPAP). However the Rand’s loss in value does not support the financial, technological, and human capital development of the economy, since the tertiary sector unambiguously loses out as a result of the ‘devaluation’.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

Outside of South Africa there is little traditional manufacturing capacity in Sub-Saharan Africa that is able to make an impact in global export markets. Perhaps the only sector that has consistently performed at this level is the textile and clothing (TC) sector, but even here its performance has been for the most part modest. South Africa has, in recent years, adopted protectionist measures in the form of quotas on Chinese imports and increased tariffs to the WTO bound rate of 45%, but this has done little to revive the South African productive sector. What has been more significant has been the performance of the smaller BLNS countries of Lesotho, in particular, and Swaziland as they react to preferential access into the increasingly protected South African market.

The objective for this paper is to assess the trade profile of the TC sector in the BLNS countries over the last six years, with this six year period chosen as reliable BLNS trade data is not readily available prior to that time. The data is sourced from the International Trade Centre (ITC) and expressed in US dollars using both direct trade data as supplied by the country itself or mirror data as assessed by trading partners.

Since 2001 SACU’s share of the global narrower clothing (excluding textiles at this stage) export market (including intra-SACU exports) has varied from a low of 0.17 % during 2005 following a high of 0.53% in 2003. Over the last few years this global share has stabilised at around 0.20%. While this may seem a reasonable contribution to a vast market, further examination shows that around 60% of this is intra-SACU exporting and a very large percentage of the remainder is to the single US market.

It is on this ‘outside’ market of the US that export attention is focussed, and here we find that the contribution is now almost entirely from Lesotho under the tariff preferences of the Africa Growth and Opportunity Act (AGOA). It is also disconcerting to learn that even though the US is the major ‘outside’ export market for not only SACU but also the nascent sub-Saharan countries the total combined sub Saharan share of the US market is lower than Cambodia’s and of course significantly lower than China’s.

Despite South African endeavours to protect its clothing market, its imports have been stable in recent years, while those for both Lesotho and Swaziland are increasing. China is the main supplier to South Africa, with intra-SACU imports stable at around one quarter of the total South African imports in recent years. A striking feature of the BLNS trade is that there is very limited intra-BLNS trade in any direction.

This Trade Brief was prepared during the tralac Geek Week of 11-15 April 2016. Maria Immanuel is a Trade and Investment Analyst at Namibia Trade Forum, and Ron Sandrey is a tralac Associate.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

As the process of regional integration continues with countries in Africa now committed to establish a continental free trade area (CFTA), it is in South Africa’s interest to ensure that it remains one of the major players within this envisaged expanded market.

The objective of this paper is to look at South Africa’s export profile with Africa. More specifically, we would like to analyse the performance of South Africa’s manufactured exports in this market and determine whether South Africa has been gaining or losing market share.

South African companies have made great strides in mining, retail, construction / manufacturing, financial services, information and telecommunication services, and the tourism sector. These successes demonstrate the ability of Africa to offer significant opportunities to investors and, more specifically, investors from the continent.

Can we expect South Africa’s role as a major investor and trading player to continue? We note that other players have come to the fore. These include Nigeria which recently became the largest economy in Africa in terms of Gross Domestic Product (GDP), surpassing South Africa in 2014. Other emerging players such as Kenya in the east are offering investment opportunities and a favourable trading environment for interested and potential investors and traders.

South Africa finds itself in a unique position to benefit significantly from a larger and integrated African community. However, a number of factors are necessary for such an integration to happen. These include elimination on non-tariff barriers among African countries; reduction in transport costs; minimal delays at border control posts; and less red tape or bureaucratic procedure that heighten the cost of doing business in Africa.

Africa provides an opportunity for South Africa and other African countries to increase their trade and it is up to Africa to ensure that this becomes a reality. With the appropriate political will, an integrated Africa is possible.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

With a GDP (PPP) of over US$ 707 billion South Africa is currently the second largest economy in Africa after being surpassed by Nigeria in recent years. The country is considered one of the key emerging markets with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; and a stock exchange that is Africa’s largest and among the top 20 in the world.

The economy has slowed down, partly attributed to the prolonged strikes in most critical sectors and energy or more specifically electricity supply constraints. Maintaining the structural integrity of its electricity generation network is perhaps one of the most pressing challenges facing the South African economy. The power system has come under severe strain due to maintenance backlogs and a failure to bring new generating capacity timeously online to match economic and social development demands. The inability of South Africa to service its electricity needs has led to downward revisions of economic growth and investor confidence for the economy. As South Africa relies strongly on the exports of its precious metals to finance its current account deficit the impact of load shedding on mining operations (which are energy intensive) has contributed to a strong depreciation of the rand as well as a stalling of economic growth and downward revisions in growth forecasts.

Real GDP growth shows no sign of increasing and has slowed to 1.5% in 2014 from 1.9% in 2013. This slowdown has meant that job creation is hampered pushing unemployment to over 34% in 2014 when considering the broad unemployment rate (this includes discouraged workers). The African Development Bank in 2015 had focus a growth rebound of up to 2% in 2015 according to projections based on improvements in the global economy, the successful completion of major government projects (including the Medupi power station), and new investment plans. However, the economic conditions that prevailed in 2015 will see South Africa, falling way off that projection. Third quarter data from Statistics South Africa revealed that the economy grew by a mere 1% year on year as the drop in commodity prices keeps dragging the mining sector down. For 2016, the International Monetary Fund (IMF) has just adjusted its projection for South Africa’s growth to 0.7% and 1.8% in 2017 from its October estimate of 1.3% and 2.1% respectively, citing weak commodity prices and high borrowing costs. The IMF’s forecast is a full percentage point lower than the economic growth rate forecast by the National Treasury for 2016.

This, however, is not good news considering that for the National Development Plan (NDP) Vision 2030 of eradicating poverty and reducing inequality, the economy must grow at a sustained 6% GDP annually. The rest of the paper is structured as follows. Firstly we provide a brief overview of South Africa’s trade and industrial policy. This is followed by a section of the country’s trading relationships and trade performance with select partners. We then look at the latest review of ITAC investigations for the 2015 period and the impact this has on SACU. The paper concludes by looking ahead; considering prospects for 2016.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

The aim of this paper is to illustrate an Excel spreadsheet* simulation that can be used to determine the trade creation and trade diversion effects of a Free Trade Agreement (FTA). As a case study it is assumed that Zambia is entering into an FTA with South Africa. The impact is evaluated in terms of trade creation, trade diversion, the price effect, the tariff revenue loss and the welfare gains if Zambia reduces tariffs on selected products imported from South Africa. The 2014 applied Most Favoured Nation (MFN) tariffs are used as base tariffs.

The calculations are based on the partial equilibrium model developed by World Integrated Trade Solution (WITS) (2011), called the SMART model. The WITS SMART model is a useful internet based simulation model that allows users to run various tariff reduction simulations. One of the benefits of the SMART model (compared to the Excel spreadsheet simulation) is that it shows the impact on all countries that export to the selected country, and not only the partner countries. The drawback is that it only allows for consistent cuts in tariffs across all products within the selected product groups. The aim of the Excel spreadsheet simulations is therefore primarily to allow for flexibility with regard to product specific tariff reductions.

For the advanced Excel user, the added benefit of the Excel spreadsheet simulation is that sensitivity analysis with regard to parameters can potentially be quicker and easier than with the internet based simulations. For the novice Excel user, the disadvantage could be potential errors in formula or data inclusion, which could return wrong estimates. It is therefore advised that if users are not particularly interested in product specific tariff cuts, they should use the internet based WITS SMART model rather than the Excel spreadsheet simulation.

* An Excel spreadsheet accompanying this Working Paper is available on request. Please email Trudi Hartzenberg (This email address is being protected from spambots. You need JavaScript enabled to view it.) to request a copy

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

A decade ago the news that the four South American countries of Brazil, Argentina, Uruguay and Paraguay that make up the core group of Mercosur (in Spanish, Mercado Común del Sur) had signed a preferential trade agreement (PTA) with SACU was greeted with some enthusiasm in that it may advance the trading relationships between the two regional blocs. In reality some ten years on the agreement is still not in force, and indeed many at the time were sceptical of the agreement given its limited nature. The exclusion of the sensitive manufacturing products such as vehicles and electrical equipment and sugar and beef on the agricultural side highlights that the deal is largely political and symbolic on the trade side.

Meanwhile, South Africa’s economic and trading relationships with the BRICs (Brazil, Russia, India and China and more recently South Africa), China’s relationships with the continent of Africa and the integration of Africa itself into free trade areas such as the Tripartite FTA and the Continental FTA have moved to the forefront of public attention. For future trading relationships we also need to factor in global economy factors where economic growth in both China and Brazil is slowing. The growth rates in China during 2015 were the slowest for 25 years, and this combined with falling oil and commodity prices is creating global uncertainty. Similarly, the Brazilian economy shrank 4,5% year-on-year in the third quarter of 2015.

The objective of this paper is not so much to examine the political economy of the Mercosur – SACU PTA or even the BRICs or African integration but rather to examine the sometimes overlooked profile of trade between the core group of Mercosur and the continent of Africa. To do this we use trade data from the International Trade Centre (ITC) and report this trade from the African perspective.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.

Export taxes have been used as long as international trade has taken place, both as a generator of revenue and also for strategic reasons. However, despite the unambiguously negative (inefficient) nature of export taxes, when viewed from the perspective of global welfare, they continue to be used in world trade, especially among developing and middle income countries.

Export taxes are most popular for primary sectors, which is not unexpected given that these dominate the exports of developing countries, the primary users of the taxes. Sugar, coffee, cocoa, forestry products, fishery products, leather, hides & skins products; and metal & mineral products are the sectors most impacted by export taxes.

Solleder (2013) suggests that the use of export taxes, far from being on the decline, is actually increasing among developing nations. Africa is no exception, and its countries have both historically and currently made use of export taxes as well as simple quantitative export restrictions or outright bans. In fact, African countries dominate other continents in the use of export taxes, with 91% of African countries making use of them, as opposed to Asia – 76% – and the Americas – 71%. Some of the notable countries which do not make use of export taxes are the USA, Peru, Iceland, most of the EU (export taxes are not prohibited vis a vis external trade), Algeria, Libya, Eritrea, Somalia, South Korea, Japan, Australia and New Zealand.

The extent of export taxes among developing and middle income countries is of interest to economists, since the conditions under which an export tax will be welfare-raising are somewhat limited. In fact, the pervasive logic and common sense of Ricardian trade predictions suggest that any form of trade barrier would fail to raise welfare, undoubtedly from a global perspective but also usually from a country perspective as well. Economic theory shows that, for an export tax to be domestically welfare-raising, certain specific conditions relating to the market power of the exporting nation must be met, failing which the tax may raise some revenue, but will ultimately be negative-sum for the exporting country and indeed for the world.

This paper attempts an introduction to an analysis of export taxes for Africa. It starts with a review of theoretical considerations in order to understand the central research question. Next an overview of the historical and current use of export taxes and restrictions in Africa is provided, in order to contextualise the issue. The final section contains a Computable General Equilibrium (CGE) simulation of the use of export taxes in the case of Namibia’s Uranium and Thorium ore exports. Policy implications and some recommendations are drawn out in the conclusion to the paper.

Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.