Another sign of collapse in South Africa
The increase in calls on the government to impose tariffs or restrictions on imports is a sign of South Africa’s weak local manufacturing base, which has deteriorated considerably over the past 15 years.
This collapse is largely due to poor service delivery, port mismanagement, and crime, which discourage companies from investing in local manufacturing.
This is the feedback from Donald MacKay, CEO of XA Global Trade Advisors, who commented on South Africa’s decision to abandon plans to introduce checks on certain Chinese imports.
Trade, Industry and Competition Minister Parks Tau issued a directive in March to introduce a pre-export verification of conformity programme for certain unregulated Chinese imports.
The programme was intended to take effect in October, but was withdrawn shortly before implementation following pushback from China, South Africa’s largest trading partner.
The proposed measures were aimed at protecting consumers and local businesses by ensuring that imported products met South African quality and safety standards before entering the country.
The products identified included aluminium cookware and cooking pots, hair relaxers, sanitary towels, office chairs and other goods.
MacKay said the original plan was for the checks to take place in China before the goods were shipped to South Africa.
The products would then be assessed against South African standards, with goods that failed to comply being prevented from being shipped.
However, he said the bigger problem with the proposed system was that it appeared to single out China.
MacKay explained that South Africa could impose standards on imported products, but those standards would have to apply equally to all trading partners and local producers.
“So if you have a standard, you have to apply it equally to all your trading partners and in fact to your domestic industry,” he said.
He said this was likely to have contributed to the decision to abandon the plan, although the government has not publicly confirmed that this was the reason.
Fix the fundamentals
He said South Africa could introduce compulsory standards for particular products, but these would need to be applied fairly to both imports and domestic production.
“If they did want to implement it, they would have to do it the proper way,” he said, pointing to compulsory standards already applied to products such as cement.
Under such a system, every country exporting cement to South Africa would have to meet the same standard, while South African cement producers would also be required to comply.
The abandoned programme also raised questions about South Africa’s trade deficit with China. However, MacKay said restricting imports would do little to address the underlying imbalance.
South Africa exports large quantities of minerals to China, while importing higher-value manufactured goods.
“Somewhere around 70% to 75% of what we export to China is simply minerals,” he said.
The result is that South Africa exports raw materials while importing finished products, a pattern MacKay linked directly to the deterioration of the domestic manufacturing base.
“This is not even going to put a dent into that sort of situation because South Africa’s whole manufacturing infrastructure has largely collapsed in the last 15 or so years,” he said.
MacKay said reversing this trend would require South Africa to address the underlying reasons companies are reluctant to manufacture locally.
He pointed to Eskom, dysfunctional ports and crime as some of the structural problems facing businesses.
“Fixing the fundamentals of why our manufacturing sector has collapsed would be necessary to change the country’s trade position,” he said.
“And then when you look at that, you kind of go, okay, that is why on manufactured goods, we perpetually run a trade deficit with most of the world, for that matter,” MacKay said.
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