However, South Africa's “developmental trade” policy is often torpedoed by self-destructive compromises to trading partners, wrong strategies and corrupt behaviour by leaders. South Africa's export growth for the past two decades has been at least 11% slower than its peers, India, Brazil and China.
Most of South Africa's exports remain raw materials. The country needs to export value-added manufacturing products which create more jobs, more wealth and for more people. Exporting raw materials creates fewer jobs and less wealth for fewer people.
The value-added manufacturing exports from South Africa are mostly resource-based, with the total share of resource-based manufacturing exports being 60% of the total manufacturing exports. Most of South Africa's imports are advanced manufactured goods, which are value added, the bulk of them technology and capital-intensive goods, such as vehicles, machinery and equipment, and consumer goods, such as white goods and electronics. The current collapse of the global trade talks in the WTO and a lack of credibility in the post-war Western-dominated trade institutions and rules have given South Africa and other developing countries the policy space to come up with developmental trade strategies more appropriate to their own circumstances. Such policy space was absent in the past.
South Africa's “developmental trade” policy, set out in the Trade Policy and Strategy Framework, has several pillars. The first is to secure a more equitable trade dispensation at the global level. In the Doha round of global trade negotiations it had to make more tariff cuts than any other WTO member.
This is because during the Uruguay Round of global trade negotiations in the early 1990s, the new ANC government had wrongly accepted South Africa’s designation as a developed country and now, with all its development problems, it has to cut tariff barriers at the same levels as industrial countries.
The second is South Africa's “developmental trade” with Africa, which focuses on establishing a continent-wide free trade area in Africa. Securing an Africa-wide free trade area is now of bigger priority than the establishment of a customs union in the Southern African Development Community (SADC). South Africa's exports to African countries have been mostly higher value-added manufactured goods. Its exports to industrial and emerging powers are dominated by exporting raw materials. The challenge for South Africa is to make trade to all countries, whether Africa, industrial or emerging powers, dominated by higher value-added manufacturing goods, rather than raw materials.
South Africa's trade strategy in Africa is being undermined by South African leaders striking personal self-enrichment deals with individual African leaders outside the formal strategy of the country. It is also undermined by individual South African leaders corruptly exploiting the resources of vulnerable African countries for private enrichment.
A case in point is what happened in 2013, when 13 South African National Defence Force troops were killed in the Central African Republic (CAR) by rebels who overran their base. It turned out later that the troops were partly deployed to protect business interests in CAR of ANC tycoons.
The third pillar of South Africa's “developmental trade” strategy is to deepen its trade relationship with the Brics (Brazil, Russia, India, China and South Africa) countries. This is part of South Africa's “South-South” approach to trade – trading with other key developing countries to provide alternative markets to that of industrial countries for the country's products. However, the danger here again is that client relationships guide country-to-country policies. South Africa's nuclear deal with Russia undermines its own policies to expand renewable energy, which may create more unskilled jobs at lower costs, possibly more manufacturing and small businesses. Similarly, “developmental trade” with China is undermined by patronage deals by South African politicians.
The fourth pillar of South Africa’s “developmental trade” policy is the establishment of a free trade area between South Africa and the Southern African Customs Unions (SACU) and Mercosur, which came into effect last year. Some of the products that Mercosur produces compete directly with those in South Africa/SACU.
The fifth pillar of South Africa’s developmental trade strategy is its trade agreement with the European Union; the country’s largest trading party, the European Partnership Agreements (EPAs). The EU still subsidises its agriculture, giving its export products an unfair advantage. Advanced manufactured products from South Africa that create more jobs, more wealth and more growth still face higher tariffs in the EU, compared to raw material which creates fewer jobs, less wealth and less growth.
A sixth pillar is South Africa's trade with the US. More recently, South Africa renewed its trade agreement with the US under the African Growth and Opportunity Act (Agoa). Then US President Barack Obama threatened to end duty-free entry of South Africa's citrus and wine products, after South Africa imposed health restrictions on the import of US beef, poultry and pork.
Kevin Lovell, chief executive of the SA Poultry Association (Sapa), said the US, through Agoa, forced South Africa to accept US poultry products, reducing the country's food safety standards to allow the US poultry products to enter the local market, or face the Agoa deal not being signed by the US.
To be successful, South Africa's “developmental trade” strategy must safeguard South Africa's public interest and by striking smarter case-by-case deals with industrial, developing and African countries.
William Gumede is chairman of the Democracy Works Foundation. His latest book is Restless Nation: Making Sense of Troubled Times