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Opinion: 'Continuing challenges for African trade'

Opinion: 'Continuing challenges for African trade'
Published date:
Tuesday, 28 November 2023

The beneficial effects of trade on any economy are well known, and an upscaled trading ability for SA would go a long way to improving its economic position.

Benefits would be particularly extensive if they were those flowing from innovative downstream facets of the economy which expanded value-add supply chains. 

Naturally enough, all this needs a growth-conducive context dependent on a variety of factors. Concrete steps must be taken by SA if it wants to give new focused attention on improving its trading situation.

At a recent event held at the SA campus of the Henley Business School it was generally felt that it was high time the country took action to improve its trade, to exploit the wide range of benefits this would bring. 

The need for action is heightened by the turbulent geopolitical context, with political factors increasingly affecting trade. SA must compete in a context that is dominated by trends leading away from international free trade towards a return to various forms of restricted trading, with an especially strong tendency towards the strengthening of trade blocs.

Many of these are dominated by the mega-powers in a polarised international community. 

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

The EU-Southern Africa Development Community economic partnership agreement (EPA), with its World Trade Organisation-compatible terms of free trade, has strengthened the position of EU member states as SA’s largest trading partner and dominant source of foreign direct investment.

Nevertheless, Namibia’s announcement at the beginning of November that it will not sign the EPA because many of its provisions contradict the Namibian constitution could now endanger implementation. Namibia’s membership of the Southern African Customs Union necessitates agreement by all member states for the EPA to apply.

SA should give focused attention to priorities as regards both goals to be achieved and challenges to be addressed in the wide variety of nontariff barriers and regulatory procedures now challenging its trading abilities. These must include trade agreements along with ensuring they can be used, especially in terms of regulatory compliance.

SA must also focus on selected priority economic sectors. 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 climate neutrality, which has been accepted as an urgent goal by all stakeholders. It is imperative to build strong economic sectors with complex as well as resilient value chains. 

Developing global value chains is especially important for all sectors as a factor that could enable quality growth in trade patterns that deliver sustainability in supply, as well as markets in parallel with numerous tangential gains for integrated economies. These have special importance for developing downstream products in value chains related to beneficiation of natural resources.

Expanding the many dimensions of agriculture and aquaculture in SA’s economy and trade must be among the priorities, while the commercial forestry sector with its expanded forestry value chain has particular potential. 

Much must be done for SA to access these opportunities, since it could mean greater investment into relevant research & development (R&D) as well as innovation. SA investment into R&D generally needs to be raised from the current figure of less than 1% of GDP a year to more than 3% for a minimum of 10 years, linked with a substantial shift of focus from human sciences onto the physical and other scientific fields.   

Among the problems challenging African countries is the generally weak relevance of trade, 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 low growth rates for African economies and weak trade, the population expansion in African countries is outpacing other countries and regions.

In the fragmented African market ways must be found to improve policy coherence to better co-ordinate the current regulatory system and strengthen and stabilise larger markets. Implementing and using the Africa Continental Free Trade Area is a priority for SA, as it offers new hope to promote a comprehensive trade facilitation agenda. 

Overcoming the fragmented continental economy could be improved, with 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 challenges and prospects, the need for innovative new forms of co-operation between all stakeholders, especially those from business and the government, would seem advisable for SA right now. 

Dr Maré is an adviser on international public affairs and diplomacy.

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