We are yet in another week of profound uncertainty in trade policy. Whatever the outcome of South Africa-U.S. engagement is at the end of the week, what is clear is that we will not be back to the environment we were in at the start of the year, where there was some form of stability and predictability.
The new world brings increased costs to businesses as planning becomes ever more challenging. In agriculture, the numbers are precise: the U.S. market remains important, accounting for roughly 4% of exports, but all concentrated in a few industries such as citrus, nuts, table grapes, wine, and ostrich products, among others. There is also geographic overexposure of the Western Cape, KwaZulu-Natal and Mpumalanga, amongst others.
The impact is even more significant in the auto industry and others.
Either South Africa reaches a relatively favourable deal with the U.S. or not, the path ahead will remain challenging, as we see that even countries that have reached a “deal” still face relatively higher tariffs, as we see with double-digit figures in Vietnam, the EU, and Japan, amongst others. This means much of the outcomes depend on the U.S. posture, more than the offerings by other countries.
The long-term approach for South Africa remains focused on export diversification. But all this happens at a time when other countries are seeking the same approach, which increases competition in any markets we explore.
As South Africa, we also need a mindset shift and start embracing more Free Trade Agreements, and encourage our SACU members to follow suit, as this will help in fast-tracking our engagements in market diversification. The cautious approach of the past decade may not apply this time around.
Under such an environment, it may be helpful for South African businesses and academia to start scanning the markets and regions they may expand to, so that insight can supplement the efforts of the government initiative to enhance diversification.
Indeed, this will be a long process, as there are relationships and logistical arrangements that may need to be established before any meaningful trade. It is also in this place that the government trade fairs and representatives in our various embassies will have to adopt a more proactive approach in assisting the South African businesses.
This process will take time and be costly, but that is the nature of this changing environment.
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