A historical perspective on South Africa’s trading and investment profile with Africa in recent years
The objective of this working paper is to provide some background to the South African trade and investment profile in recent years, with a special emphasis on the trade relations with the African continent. We explore the merchandise trading relationship before putting South Africa’s investment position with Africa in perspective and finally examining the SACU revenue-sharing formula and options.
South Africa’s exports to Africa have been stable at around 15% of total exports through to around 2008 and they then increased to a figure of nearer 30%. However, this increase has largely been driven by the inclusion of the BLNS (Botswana, Lesotho, Namibia and Swaziland) data in a comprehensive manner as netting out BLNS trade sees an increase to just under 20% in 2014. Botswana and Namibia are the main destinations, followed by Mozambique and Zambia. Fuels are the main export by product.
Imports from Africa are a lower percentage of the South African total, although they have risen steadily from just under 3% (sans BLNS data) to around 13% including BLNS imports, and around 11% without these BLNS imports. Nigeria and Angola are the main sources, and mineral fuels dominate by product with a share that has risen from around 45% of the total from Africa to around 65% or higher in recent years.
For South African agricultural exports new data shows that 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. 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 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. Argentina was the top single non-EU import source, followed by Indonesia. The two BLNS countries of Swaziland and Namibia head the list of imports from Africa, followed by Zimbabwe and Zambia.
Collectively, Africa accounted for some 40% to 50% of South Africa’s exports of manufactured goods in 2013, with the close neighbours the most important destinations. General and electrical machinery and vehicles are the main exports. South Africa also dominates intra-Southern African Development Community (SADC) merchandise trade.
Examining the South African foreign investment profile we find that Africa has a modest (4% to 6%) share of liabilities (owed by South Africa), but a higher share of South African investment assets held abroad are invested in Africa. The latter has steadily been increasing from around 4% of South Africa’s investments abroad in the early years from 1997 to nearly 10% by 2012. Namibia has the most invested in South Africa, while South Africa has the most invested in Mauritius.
The final section explores intra-SACU merchandise trade and the way in which the SACU revenue-pool formula impacts upon the tariff revenue-pool shares. Given the high percentages of total BLNS government revenues that these tariff pool distributions make up this formula is critical to the BLNS. The formula and these revenues are set against a background of increasing unease about their continuation and the resulting implications of changes for the future.
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