- On 22 May, Minister of Trade, Industry and Competition, Parks Tau, stated that South Africa has submitted a revised framework proposal to the United States (U.S.), focusing on expanding trade and investment relations between the two countries.
- The proposal includes purchasing Liquefied Natural Gas (LNG) from the US, provisions related to the African Growth and Opportunity Act (AGOA), and favourable conditions for US companies to investing in mining, ICT and automotives in the country.
- The announcement followed a highly publicised and tense televised encounter between South African President Cyril Ramaphosa and U.S. President Donald Trump at the White House. The discussions were intended to mend rapidly deteriorating bilateral relations and safeguard critical trade links essential to South Africa’s economy.
- Last week, Minister of Communications and Digital Technologies Solly Malatsi issued a policy directive that seeks to relax Black Economic Empowerment (BEE) policies in the ICT sector.
- The equity equivalent plan is an alternative to black economic-empowerment laws, which generally require 30% Black ownership in businesses operating in the country and will apply to any company operating in South Africa’s information and communications technology sector.
- Critics argue that the policy directive is meant to appease the US and make it easier for Elon Musk’s Starlink to enter into South Africa without complying with empowerment laws. This prompted the Minister to be called before the Communications and Digital Technologies portfolio committee to explain the process and logic behind the directive.
- It is worth noting that the auto industry in 2019 signed up for a similar workaround that involved the largest car manufacturers — including BMW AG, Ford Motor Co. and Toyota Motor Corp. — setting up a fund that would bring disenfranchised groups into the sector.
Protecting Key and Expanding International Partnerships
- South Africa has taken a proactive stance in safeguarding its international trade relations in the midst of increased unemployment, stagnant growth and growing inequality.
- Regarding the U.S., AGOA has historically provided South Africa with vital access to U.S. markets, and its uncertain future has prompted South Africa to seek a new trade deal with the U.S. and diversify its products destinations, particularly for agricultural products.
- The U.S. remains a vital trading partner, with over 600 U.S. companies operating in South Africa, employing around 148,000 South Africans. It is a relationship that has to be preserved, even in the face of provocation.
- The proposed deal in automotives, seeks to mitigate the potential loss of AGOA benefits. According to some reports, if the deal is agreed to, South Africa will be able to export 40,000 vehicles annually to the U.S. duty-free, in exchange for purchasing Liquefied Natural Gas from the U.S.
- As part of expanding its partnerships, Deputy President Paul Mashatile recently visited France to reinforce bilateral relations and explore new avenues for cooperation with specific focus on trade and investment.
- Mashatile further called on business delegates to collaborate with the government in a concerted effort to double trade within two years. He emphasised the need to attract increased Foreign Direct Investment (FDI), foster Public-Private Partnerships (PPPs), and mobilise financial resources.
- On the other hand, Minister Tau stated that South Africa will be looking to build relations with countries that had a similar export basket, while also pursuing long term market potential and capitalising on strategic trade agreements.
- The strategy, he noted, would not only enable more efficient trade alignment but also unlock long-term market opportunities and enhance the country’s ability to leverage strategic trade agreements for sustained industrial growth.
- He further highlighted that the process would entail a comprehensive assessment of market access dynamics and the barriers hindering export development.
- This includes analysing the economic and regulatory conditions in target countries, identifying opportunities to attract investment in support of South African private-sector initiatives, and critically evaluating South Africa’s competitive positioning in selected international markets.
- These efforts are expected to inform strategic policy interventions aimed at enhancing the country’s export performance and global trade footprint.
