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South Africa: Tariff policy – does it matter?

Trade Reports

South Africa: Tariff policy – does it matter?

South Africa: Tariff policy – does it matter?

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In recent years South Africa has increasingly turned to changes in the SACU tariffs to stimulate its economy. These changes have included both decreases in the case of inputs into domestic manufacturing and increases in the case of the importation of those goods directly competing with the domestic sector. It is only the latter category that we concentrate on in this paper.

Some analysts decry the increases as reverting to a past era of protectionism that increases consumer costs, while others welcome the moves to stimulate the economy and generate more jobs. We make no judgement on the economic merits of these tariff increases but rather set out to report on their consequential effect on import flows and assess their relative importance in terms of import values.

At the start we acknowledge a difficulty in assessing the impacts of the tariff increases and in particular judging their ‘success’ or otherwise in decreasing import flows as this ignores the counterfactual. Would imports have increased in the absence of tariff increases? Over a short period in a static analysis of this nature and acknowledging possible counterfactuals we cannot make a definitive judgement on this.  

In many of the cases the data shows that import decline is more related to non-tariff market factors (for instance the global financial crisis, world price spikes, significant decrease in local demand etc.) than the increase in tariffs itself. This seems to question the effectiveness/success of the tariff adjustment policy. Many products continued to show import growth even after the tariffs were introduced. Usually one should have expected the tariff increases to have had an immediate impact on trade (e.g. the following year) but this was not the case, as imports continued to fluctuate quite markedly (some products, for instance, reached import peaks two years after the tariff was introduced).

The authors are Trade Negotiations Coordinator (SACU) and tralac Associate, respectively. This paper reflects the views of the authors and does not represent the view of the SACU Secretariat. It was developed as part of the ‘Geek Week’ data training workshop held at tralac during the week of Monday 11 April to Friday 15 April 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.


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