…Does RSA’s hegemony encourage or limit growth for fellow SACU members?
South Africa accounts for 95% of all imports from China into SACU, whilst Botswana, Lesotho, Namibia, Swaziland (BLNS) share the remaining combined 5%. This is a commendable position for South Africa’s large economy but the scepticism lingers around their capacity to encourage a balanced and fair trade regime within the SACU region. SACU as a customs union has a common external tariff on imports with revenue benefiting all members. In the region, South Africa imports more goods due to economies of scale and its greater capacity for bulk imports more than the others. Too much productive capacity and gains favours the dominant economy’s trade as percentage of GDP (Gross domestic product). Hypothetically, trade income benefits overall economic resources which boosts the economy in finances, infrastructure, employment, value chains, etc. The other economies (BLNS) also enjoy a minor share (5%) of direct imports from China, Europe, South and North America’s. Indirect imports, which are re-imported via South Africa suppress the contribution towards economic resources.
In 2016 South Africa imports from China were R 189 billion (95% of SACU aggregate). SACU imports from RSA was R 139 billion, which is 74% of what RSA gets from China and ships to SACU members (consider imports from major destinations Europe, USA included). The combined direct imports of BLNS from China is a measly R 8.5 billion (5%) which means that they are largely dependent on re-traded goods instead of direct imports. In light of the above, the BLNS countries can strategize their import capacity to attract between R50 billion to R100 billion to their trade reserves and create direct jobs and directly fund economic resources, cooperatively and without hostility towards RSA. South Africa’s niche income is found in the multi-billion “manufacturing sales”, which attributes to high economic revenue, cashflow and trade surplus with SACU and China. At secretariat level, policies and trade remedies should be transparent as this is in the best interest of all member states. I avoid populist sentiments, however policy makers can draw credible input if they dissect analytical input, so far cooperation is lacking in the region. Indirect trade provides the equal bargaining power just as indirect imports to avoid product dumping, skewed productivity, employment constraints and infrastructure setbacks. However indirect imports cannot afford infrastructure in other SACU states as it does in South Africa.
South Africa’s key imports from China in 2016 were; electrical equipment (R104 billion), machinery (R 36 bln), clothing (R 18.4 bln), footwear (R 8 bln), furniture (R 7.8 bln), plastics (R 7.2 bln), vehicles (R 6.6 bln). Surprisingly food imports are low but clothing, electronics and furniture supersedes all. South Africa is known to have hiked tariffs for clothing and vehicles under the disguise of protecting their local markets but imports are yet flooding their markets. While South Africa’s car imports from China are ballooning, are others allowed make their own policies on vehicle imports, without persuasion from anyone? Are we also allowed to make our own policies on clothing import, which is surely not possible in a custom union, are we bound to one members gains while they fail to develop us?
We as a country can omit the mantra that we are “too small and inefficient”, because the import and re-import records indicates progress in market upswings. Japan faced the same dilemma with China but took a differential path by producing “high quality goods” or niche products, which sets it apart from China rampant low quality products. For any country to keep consuming, they must maintain a wealthy or stable middle class, but if we don’t industrialize by creating jobs and with lower inflation, then income classes are eroding. We have to encourage a fair-trade regime between South African companies and their regional counterparts and subsidiaries to achieve three key development aspects, integration and indigenisation and empowerment. Are they helping to advance development; are the companies interested in providing fair cross-border subsidies for their foreign companies; do they encourage indigenisation to enable equitable ownership; is there unfairness in job and resources allocation. Retained investments, re-investments, training, tertiary education scholarships and corporate social investment will also make significant injections. These factors will elevate trust and shift away from protectionism that hinders regional integration. South Africa’s social factors like the historic ethnical lines, the class divide and political structure has spill-over effects in regional integration. Private companies also apply unprecedented bureaucracy and barriers that undermine member states’ goals.
Milliards of companies unfairly structure executive positions, high end salaries, employee benefits, etc for South Africans, while foreign offices experience resource and capacity drawbacks. Complexities in social, racial affiliations, nepotism, etc at the helm of South Africa’s private and public institutions are questionable, sabotaging indigenisation, domestication and share of ownership across the border. This complex historic status quo has no solution yet, but strongly hinders regional integration. A country that carries a 95% trade risks in a region require robust safeguards to affirm member states’ trust and dependency. Additionally, South Africa also benefits from other preferential trade partnerships such as BRICS (with Brazil, Russia, India, China and RSA) and TDCA (with EU). In conclusion will the giant only feed itself or create equal smaller giants, quo vadis? (For detailed information request a copy of 2017 Trade Analysis Research paper on SACU by Rodney and the Trade Law Centre) God bless.