By 
It has been good to see a change of tack by the department of trade, industry & competition, with the new minister, Parks Tau, prioritising export-led growth as a vital pathway for SA to rejuvenate its economy.
Improving our export performance can stimulate job creation and grow the economy as businesses scale up to meet international demand. Developing the manufacturing sector, as is the plan, and boosting service exports would create a more balanced national economy that is less vulnerable to fluctuations in global commodity prices.
Developing exports will help foreign exchange earnings, which improves the current account balance and provides an upward stimulus to the value of the rand. That enables higher imports without weakening the currency and helps improve overall economic resilience.
Pivoting to an export-led growth model is no easy feat given that the logistics crisis has severely affected our export performance and electricity shortages have damaged manufacturing. An export-orientated trade strategy means we will have to confront these setbacks head on, while backing export industries, particularly in services, that are resilient to these constraints.
SA industry also faces several headwinds to its competitiveness. The International Trade Administration Commission of SA should adjust tariffs on intermediate inputs to ensure we can deliver competitively priced final outputs. We must also deal with relatively high labour costs and costs related to our infrastructure challenges that introduce frictional costs on the way to foreign markets. Structural reforms should ultimately improve competitiveness, supporting export-led growth as markets everywhere become more accessible.
Our competitiveness is also facing being eroded by the carbon intensity of our economy as major trading partners, starting with the EU, implement tariff schemes that ratchet up costs for carbon intensive imported goods. This means our efforts to decarbonise the economy must be part of an overall export competitiveness strategy.
The department under previous minister Ebrahim Patel developed a localisation policy aimed at promoting local content and enhancing domestic production. While well intended, it has stifled innovation and increased the cost of production. The World Bank has found that SA’s industrial policy focused on localisation has damaged our export performance — the use of forced local content requirements, tariffs, import licences and local ownership procurement rules increases the costs of finished goods, which then can’t compete on global markets.
SA’s ability to export to foreign markets depends on being able to supply competitively, but also on trade agreements that provide preferential access. SA benefits from several key trade agreements, including with the EU, UK, the Mercosur bloc in South America and most members of the Southern African Development Community (Sadc). It is also a member of the African Continental Free-trade Agreement (AfCFTA), which is gearing up and will substantially widen duty-free trade across Africa.
US markets are also accessible thanks to eligibility under the African Growth & Opportunity Act (Agoa), though there have been indications that this may not be renewed after it expires next year. The government can work to widen the network of free-trade agreements, for example with India with which there have long been negotiations.
Apart from mainstream formal sector businesses there are opportunities to enable more entrepreneurs, including women-led businesses and small and medium-sized enterprises, to benefit from the opportunities provided by our trade agreements — though they need support to build their export capacity.
The AfCFTA offers a promising platform for SA to leverage its relatively advanced industrial base to boost regional trade and potentially change the dynamic of how the rest of the world and Africa engage. Regional co-operation within frameworks such as the Sadc is essential for driving industrialisation through regional value chains. By establishing frameworks that enable exports into neighbouring countries, SA can expand its market reach and retain business within its borders.
While the focus on trade is vital, economic policies must co-ordinate reforms of transport, energy, logistics, and industrialisation. In recent engagements the department has acknowledged the need for a whole of-government approach that co-ordinates efforts across various departments. It has recognised the benefit of collaborating with the private sector to ensure policies are informed by the realities of the market and that businesses receive the support they need to thrive internationally.
Business Leadership SA has long advocated for a coherent strategy that prioritises enhancing infrastructure capacity at ports and railways to facilitate smoother trade flows. This must be synchronised with improved market access through trade agreements, as well as efforts to reduce red tape that pushes up the costs of doing business in SA.
We are encouraged by plans to streamline government processes and to adopt a more data-driven approach that will assist in identifying market trends, assess competitiveness and evaluate policies aimed at boosting exports. There is a need for substantial investment in technology and skills development to enhance productivity and competitiveness.
By investing in enablers of competitiveness and fostering public-private partnerships, the economy can be placed on a high-growth, job-creating trajectory. SA must begin to more vigorously embrace and promote an export-orientated economy that enhances our global standing and improves the livelihoods of citizens.
Mavuso is CEO of Business Leadership SA.
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