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Continuing Challenges for African Trade 

Article compiled by John Mare, largely based on proceedings of an Africa-Europe Centre for Trade & Investment (AECIT) Round Table which took place at the Henley Business School SA campus. First published in the Business Day on 28 November 2023.

The beneficial effects of trade on any economy are well known and an up-scaled trading ability for South Africa would go far to improve its economic position in many ways.  Benefits would be particularly extensive if they were those flowing from innovative downstream facets of the economy which expanded value-add supply chains could deliver with trade as the driving force. driving force.

Naturally enough all this needs a growth-conducive context dependent on a variety of factors and concrete steps must be taken by South Africa if it wants to give new focused attention on improving its trading situation. At a recent event which was held at the South African campus of the Henley Business School to discuss South African trade it was generally felt that it was high time that South Africa should take action to improve its trade for the wide range of benefits this would bring.

The need for action is heightened by the current turbulent geo-political context with an increased relevance of political factors impacting trade. South Africa must compete in such a context which is one increasingly dominated by trends leading away from international free trade towards a return of various forms of restricted trading regimes with an especially strong tendency towards the strengthening of trade blocs many of which are dominated by the mega-powers in a multi-polarised international community.

This reality is illustrated recently by the news that while favourable terms of trade offered by the USA to South Africa and some other African countries meeting certain criteriae in terms of AGOA (the African Growth and Opportunity Act) are to continue, influential members of the US Senate already want an out-of-cycle review of South Africa which could lead to it being out of AGOA within a year.

The European Union (EU) – Southern Africa Development Community (SADC)- Economic Partnership Agreement (EPA) with its WTO compatible terms of free trade, has strengthened the position of the EU and its member states collectively as South Africa’s largest trading partner and dominant source of  Foreign Direct Investment (FDI). Nevertheless Namibia’s announcement at the beginning of November this year that it will not sign the EPA because many of its provisions contradicted the Namibian constitution could now endanger the EPA’s continuing implementation because Namibian membership of the Southern African Customs Union (SACU) necessitates signature by all SACU members for the EPA to apply to all including South Africa. 

South Africa should give focused attention to priorities as regards both goals to be achieved and challenges to be addressed in the wide variety of non-tariff barriers (NTBs) and regulatory procedures currently challenging it’s trading abilities. These must include trade agreements along with ensuring, especially in terms of regulatory compliance, that they can be utilized. 

South Africa must additionally focus on selected priority economic sectors. Of these of special importance are sectors linked to the green circular bio-economy and its related value-chains which are essential for the modern economy as well as for a transition to a climate neutral economy, something which has been generally accepted as an urgent goal by all stakeholders. It is imperative to build strong economic sectors with complex as well as resilient value chains. The relevance of developing Global Value Chains (GVCs) is especially important for all sectors as a factor that can well enable quality growth in trade patterns which deliver sustainability in supply as well as markets in parallel with numerous tangential gains for integrated economies. These have special importance for developing down- stream products in value chains related to beneficiation of natural resources. Expanding the many dimensions of agriculture and aquaculture in South Africa’s economy and trade must be among priorities while the commercial forestry sector with its expanded forestry value chain has particularly tremendous potential  

Much must be done for South Africa to access these opportunities with this inter alia meaning greater investment into relevant R&D as well as innovation. South African investment into R&D generally need to be raised from the current figure of less than 1% pa to more than 3% pa for a minimum of 10 years linked with a substantial shift of focus from human sciences onto the physical and other scientific fields.  

Among major problems challenging African countries are the generally weak relevance of trade, and especially intra-African trade, with an ongoing preponderance of commodities accompanied by a lack of manufacturing or processing in African economies and trade. In parallel with weak growth rates for African economies and trade, the continuing high growth rates of the populations in African countries continue to outpace those of all other countries and regions. 

In the fragmented African market ways must be found to improve policy coherence to better coordinate the current regulatory system, strengthening the creation of stabilized larger markets. Implementing and utilizing the AfCFTA is a priority for South Africa as it offers new hope to promote many facets of a needed comprehensive trade facilitation agenda. Overcoming the fragmented continental economy provides improved between a range of national agencies playing an essential role in the implementation of integrated border management or single window platforms.  Ongoing challenges of supportive infrastructure both physical and digital should be regarded as priorities.

Taking together the current challenges and prospects, the need for innovative new forms of cooperation between all stakeholders and especially those from business and government would seem very advisable for South Africa right now.

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