Sun, 9 Feb 2025
22.7 C
Durban

Unchartered waters for SA exporters

Home Transport & Logistics Exports & Imports Unchartered waters for SA exporters

THE Department of Trade, Industry and Competition has embarked on a renewed export drive to lower the risk of slow domestic growth and identify high growth opportunities for South African exporters.

At an engagement in October, the deputy minister of Trade, Industry and Competition, Andrew Whitfield, told Exporters Eastern Cape: “It is a burning issue for our country, and all of you play a critical role in ensuring that we work together to achieve rapid, inclusive, and sustainable growth and job creation. We are also committed to collaborating in a far more pragmatic manner with provincial and municipal governance towards addressing the challenges faced by Nelson Mandela Bay, which accounts for over 50% of the province’s Gross Domestic Product.”

“Bolstering our international competitiveness and expanding export markets is key to the Eastern Cape and South Africa’s economic recovery,” he said, noting the need to streamline export processes, lower trade barriers, and offer financial and technical assistance to local exporters.

Eastern Cape exports

In his Let’s Talk Exports column, Quintin Levey, Exporters Eastern Cape chairman says, “General manufacturing is a significant part of the provincial economy, primarily driven by the automotive sector, the largest manufacturing sector in the Eastern Cape. The province hosts four of the seven Original Equipment Manufacturers (OEMs) operating in South Africa and up to 100 major component manufacturers. Nelson Mandela Bay alone accounts for 45% of local vehicle production and provides 51% of South Africa’s vehicle exports, with over 100,000 vehicles shipped annually through the Port of Port Elizabeth.

He says the Eastern Cape citrus producers contribute 25% of the province’s GDP with 24,508 hectares under production. The Eastern Cape is the fifth-largest exporter of lemons in the world and produces soft citrus fruits such as mandarins, oranges, and grapefruit. Additionally, the province hosts the largest percentage of the country’s livestock, producing 30% of the country’s milk, 36% of its wool, and 75% of its mohair, with 70% of the mohair exported to Italy and China.

Trading partners

Levey says South Africa’s current export markets are dominated by China, the United States, and Germany followed by Mozambique.

Trade relations between South Africa and the US are due for review and there are concerns that president-elect Donald Trump, who takes office in January 2025, will not be as supportive of the African Growth Opportunities Act (AGOA) as Biden. On the other hand, the African Continental Free Trade Area (AfCFTA) appears to be picking up pace and could present opportunities for local exporters.

The impact of unfavourable US trade policies could be severe. Allianz Research published a report, What to watch: The return of Donald Trump and the implications of a Republican Sweep scenario. The report includes a table of the value of cumulated 2025-26 direct export losses from increased US import tariffs excluding currency impacts, for the top 30 most impacted countries. It estimates South Africa’s losses at US$ 1,6 billion in a contained trade war scenario and US$ 3,3 billion in a fully-fledged trade war scenario.

South Africa’s exports to the US have increased substantially since AGOA was enacted in 2000. Based on 2022 exports, South Africa was the largest AGOA beneficiary, exporting US$3.6 billion – mostly vehicles and parts, fruits, precious metals, and chemicals. AGOA non-oil imports were US$5.7 billion in 2022 – a record amount and quadruple that of 2001.
AGOA allows South Africa, as an eligible country, duty-free access to the US market for over 1,800 products, in addition to the more than 5,000 products that are eligible for duty-free access under the Generalized System of Preferences program.

The Trade Preferences Extension Act (TPEA) of 2015 extended AGOA for 10 years through September 2025. The authorisation of AGOA is within Congress’ purview and South Africa will be lobbying for its extension. Ebrahim Rasool has been appointed ambassador to the US. He has said that the US is a trade and investment partner of choice, and he will be addressing the full review of bilateral relations between SA and the US.

Closer to home, the AfCFTA was mandated by the African Union in 2012 and trading under the agreement commenced in 2021. It aims to create a single continental market with a population of about 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion.

Levey says the opportunity of exporting to Africa is augmented by the AfCFTA which aims to unite African countries and eliminate trade barriers, fostering intra-Africa trade and encouraging value-added production. This has the potential to accelerate economic growth and attract investments within the continent.

He says the significant growth in exports to Mauritius (185% increase between 2017 and 2022) and the substantial goods exported to Rwanda in recent years exemplifies the positive impact of the AfCFTA.

“The AfCFTA not only opens up new markets for South African exporters within Africa but also unlocks growth opportunities for the economy. The successful implementation of this agreement holds the promise of reciprocal market access, providing a mutually beneficial trade environment for African countries.

“The readiness of twelve countries, including South Africa, to commence trade in a diverse range of products is a positive step. From food and beverages to steel products and household goods, the scope of potential trade under the AfCFTA is broad and promising. The eagerness of African countries to engage in trade and implement incentive plans further signals a shift towards fostering economic collaboration within the continent,” says Levey.

Business Day (27 November 2024) quotes Volkswagen Group Africa MD Martina Biene as saying the AfCFTA is the key to South Africa’s future economic success.

Whitfield said the Eastern Cape is perfectly positioned as a gateway for expanding export markets due to its five ports, providing the province with a unique competitive advantage.
Whitfield assured exporters that urgent interventions were being pursued to address infrastructure constraints, with specific attention on the province’s ports and the north-south railway corridor.

“Several urgent interventions are being pursued in parallel to sectoral structural reforms aimed at opening rail and port networks to private operators,” Whitfield said.

Most Popular

First stage of large-scale dagga project underway

AN initial R100 million investment in an indoor cannabis cultivation project by Medigrow at the Coega special economic zone in Gqeberha got underway in...

January new vehicle sales spark optimism

NAAMSA | The Automotive Business Council expressed optimism that the positive momentum of the fourth quarter of 2024 continued into the first month of...

Key player left out of Industrialisation Think Tank

SEIFSA applauds the establishment of an Industrialisation Think Tank housed in the Department of Trade Industry and Competition (DTIC) but is concerned by the...

Agric minister campaigns for diversity as SA joins international treaty

MILLIONS of farmers in Africa cultivate traditional crop varieties, save seed for the following season and exchange seed with their neighbours and other farmers. Minister...