Busi Mavuso Pushes for Expanded Trading Partnerships for South Africa

We must not underestimate the dangers confronting our economy.

The consumer confidence report from last week revealed a significant downturn in sentiment.

This decline was recorded in February, coinciding with the onset of the U.S. trade wars and a deadlock in cabinet negotiations over a budget that included a proposed two-percentage-point VAT increase.

Now, a month later, the global trade conflicts appear increasingly threatening, and we still lack an agreed-upon budget.

The recent setback was the Trump administration’s implementation of 25% tariffs on automotive imports.

While the U.S. is not the largest market for cars produced here, it still accounts for roughly 5% of our light vehicle exports, bringing in around R26 billion in revenue for South Africa.

Some of those exports may successfully identify alternative markets, especially since reciprocal tariffs are likely to deter many countries, including our principal vehicle market, Europe, from purchasing U.S. vehicles.

However, the international repercussions are significant, with disruptions to global supply chains leading to increased prices and weakened demand.

We are on the verge of a worldwide reconsideration of how nations conduct international trade.

Many countries might feel the need to reduce their reliance on the U.S. as a market for their products.

A clear takeaway from the recent U.S. actions is that having a diverse range of trading partners enhances resilience against shocks from any single one of them.

I hope our vehicle exporters can find viable alternative markets for the vehicles that will no longer be sold in the U.S., but the broader lesson for our country is to expand our trade relationships.

Achieving this will require cooperation from both the business sector and the government.

The Department of Trade, Industry and Competition (DTIC) plays a key role in cultivating trading relationships at a diplomatic level and establishing trade agreements with suitable markets.

However, businesses also need to devise strategies that facilitate market access and engagement.

This need has become increasingly urgent for all stakeholders. The African Continental Free Trade Agreement (AfCFTA) is progressing and now encompasses numerous products and services, but vehicles are not yet included.

Long-standing trade negotiations, such as those with India, now warrant renewed urgency.

Last year, DTIC Minister Parks Tau pledged to enhance trade relations with India and to prioritize engagement with the global marketplace.

This is a commendable goal.

Trade has not received the prioritization it deserves from the last two administrations, but it now demands significant focus from this government of national unity, considering the current global landscape.

We should anticipate the expiration of the African Growth and Opportunity Act (Agoa) in September, which poses a risk to our auto exports and other areas of trade with the United States, particularly in agriculture.

While Agoa represents a relatively minor portion of our overall exports to the U.S., which are primarily comprised of raw materials, it will still pose challenges for specific sectors.

Last week, the DTIC addressed the geopolitical challenges we face at Nedlac, including the ramifications of losing Agoa. Collaboration between businesses and the DTIC will be crucial in navigating these challenges and identifying opportunities within the new geopolitical landscape.

We need to pursue new trading relationships, particularly with the Middle East, where our interactions have been limited mostly to oil imports.

There are potential opportunities across various markets, necessitating a proactive engagement strategy.

Trade with the rest of Africa represents a tremendous opportunity, and we must work towards expanding the AfCFTA to include a broader array of products, including vehicles.

On a positive note, we are making strides in enhancing logistics to facilitate the export of South African goods globally.

Improvements in rail and port efficiency are being observed, and more radical changes may be forthcoming, as Transport Minister Barbara Creecy has formally requested information from the private sector to foster an environment conducive to private sector involvement and investment in rail and port infrastructure and operations.

This initiative could create a competitive atmosphere in the rail and ports sector, wherein the state retains ownership of the infrastructure while private companies manage and compete to deliver superior services.

Although our ports are among the least efficient globally, envision a future where they are in competitive rivalry to provide optimal services to South African businesses.

This shift is crucial for enhancing our overall competitiveness.

As the world undergoes a significant transformation in the global trading framework, both government and business entities must adopt a proactive approach, engaging broadly to forge new opportunities.

Ultimately, these efforts will enhance the resilience of our economy and foster growth and job creation.

*This column was originally published in the Business Leadership South Africa (BLSA) weekly newsletter. The author Busisiwe “Busi” Mavuso, is the CEO of BLSA.

*The opinions expressed by Busi Mavuso in this column do not necessarily reflect those of The Bulrushes.