It has been good to hear a change of tack from the Department of Trade, Industry and Competition, with the new minister Parks Tau prioritising export-led growth as a vital pathway for South Africa to rejuvenate its economy. Improving our export performance can stimulate job creation and grow our 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 to 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-oriented trade strategy means we will have to confront these setbacks head on, while simultaneously backing export industries, particularly in services, that are resilient to these constraints.

South African industry also faces several headwinds to its competitiveness. The International Trade Administration Commission of South Africa (ITAC) needs to 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 many 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 European Union, implement tariff schemes that ratchet up costs for imported goods that are carbon intensive. This means our efforts to decarbonise the economy must be part of an overall export competitiveness strategy.

The DTIC 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 South Africa’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 increase costs of finished goods, which then can’t compete on global markets.

South Africa’s ability to export to foreign markets depends on being able to supply competitively, but also on trade agreements that provide preferential access. South Africa benefits from several key trade agreements, including with the European Union, United Kingdom, the Mercosur bloc in South America and most members of the Southern African Development Community. It is also a member of the African Continental Free Trade Agreement 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 and Opportunity Act (AGOA), although there have been indications that this may not be renewed after it expires next year. Government can work to widening the network of free trade agreements, for example with India with which there has 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 — although they need support to build their export capacity.

The African Continental Free Trade Area (AfCFTA) offers a promising platform for South Africa 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 cooperation within frameworks such as the Southern African Development Community (SADC) is essential for driving industrialisation through regional value chains. By establishing frameworks that enable exports into neighbouring countries, South Africa can expand its market reach and retain business within its borders.

While the focus on trade is vital, economic policies must coordinate reforms of transport, energy, logistics, and industrialisation. In recent engagements, The DTIC has acknowledged the need for a ‘whole of government’ approach that coordinates efforts across various departments.  Importantly, it has recognised the benefit of collaborating with the private sector to ensure that policies are informed by the realities of the market and that businesses receive the support they need to thrive internationally.

BLSA 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 South Africa. 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. More generally, 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. South Africa must begin to more vigorously embrace and promote an export-oriented economy that enhances our global standing and improves the livelihoods of citizens.

Ends