Context

South Africa is an open, middle-income economy, which means that international trade is central to accelerating economic growth and employment. Maintaining existing market access and expanding to new markets is one way to catalyse job creation. Trade is facilitated by conducive conditions within a free trade area, such as good infrastructure and an enabling regulatory environment, as well as by practical regional and multilateral agreements.

Although trade has significant long-term benefits, it may require short-term trade-offs. Increased competition is never welcomed by the domestic industry, which may experience higher costs of production compared to their international rivals. On the other hand, consumers may benefit from lowered prices of goods and services. It is essential to strike a balance between the needs of the consumer and producer.

As part of the Southern African Customs Union (which includes South Africa, Botswana, Lesotho, Namibia and Swaziland) with its common external tariff, South Africa no longer enters into trade agreements with third parties as a country, but negotiates trade agreements as part of the customs union. Government, in consultation with social partners, develops and negotiates South Africa’s trade positions, and thus government is the arbiter of competing domestic interests on trade. This usually translates to accommodating both importers and exporters.

Economic policy coherence is needed for optimal economic growth. Trade policy development needs to be informed by strategic drivers such as industrialisation, an inclusive economy, and education and skills development, which empower South Africans for future work and high levels of productivity. Increasing the local skill base would also be instrumental in diversifying trade from a commodity focus into more innovative, technological areas, as recommended by the National Development Plan.

Like government, BUSA is committed to trade policies that support South Africa’s developmental goals and promote inclusive growth. In this area, BUSA and government are closely aligned. BUSA represents the common interests of its members and South African business in general in trade policy discussions with government and social partners. These discussions inform the South African positions which government negotiates with other governments on trade.

Guiding principles

BUSA is committed to engaging on a trade policy that promotes economic growth and contributes to an enabling environment for South African business. All policies should pay close attention to spillover effects, especially where domestic employment is affected. While BUSA is in favour of openness, we recognise that there are sensitive industries that need cautious treatment in any free trade area. BUSA prefers to speak of “smart trade”, rather than simply “free trade”.

Government and business are currently well aligned on trade issues and have a strong consultative relationship. Business would like to maintain this level of communication on research, trade policy and technical agreements.

Trade regimes, agreements, support structures and industry incentives are not optimally designed and implemented to enable South African businesses, of all sizes, to participate fairly and competitively across national borders. The goal should be for trade to enable the country to graduate infant industry into self-sustainable global players.

BUSA accepts that trade talks are complicated negotiations, often involving trade-offs between the interests of different economic sectors and businesses, labour organisations and other stakeholders. BUSA will represent members on the basis of their common trade interests, whereas members individually represent their specific, potentially conflicting, interests to government. Government has the responsibility to make decisions that are in the best interest of the economy, in consultation with affected stakeholders.

Challenges

Trade policy is an area where government and business have aligned objectives and a mutually beneficial partnership. However, a number of complex components and different parties with different agendas constitute trade policy. This results in complicated issues, including:

• Ease of trade is affected by many domestic policies over which traders have little to no control. For example, South Africa’s ability to trade with sub-Saharan African countries is affected by trade facilitation issues such as infrastructure in those trading partner territories.
• South African trade negotiations occur within the framework of the Southern African Customs Union, rather than as a single independent country. The negotiation positions are therefore designed to accommodate economies at different levels of development.
• Countries and trading blocs are starting to look for simpler bilateral and multilateral agreements to liberalise trade. This presents a challenge to small, open markets, like South Africa, which need access to international markets while developing their own economies. Negotiating as a bloc further complicates the negotiation process for both South Africa and third parties.
• To be effective, trade policy should be supplemented by supporting domestic policies, such as a stable and clear regulatory framework for businesses, and be informed by a strong industrial policy.
• As an organisation representing members with a broad variety of business interests, BUSA sometimes has to deal with its members’ conflicting interests.
• Members also raise specific challenges, such as the negative trade effects of visa regulations and land transport costs.

Analysis

There is strong alignment between government and business trade policy positions. The strong consultative relationship between government and business, as well as ongoing relationships with social partners through the National Economic Development and Labour Council (Nedlac), benefit South Africa’s trade policy development. As a developing economy, it is important for South Africa to maintain its forward momentum on trade.

There is a complicated relationship among BUSA members around trade. As with other strategic drivers, BUSA remains focused on areas where there are common interests among members and on policies that will benefit South Africa in the long term. Where member interests conflict, BUSA remains impartial. However, members are welcome to bring their concerns to BUSA, and if these concerns are shared by other members, BUSA will represent them to government.

The way forward

Alongside government, BUSA is committed to a trade agenda which supports South Africa’s developmental goals, such as using trade to enable inclusive economic growth. BUSA communicates the feedback on trade policy from members to government and social partners, and engages in regular discussions on trade policy with social partners at Nedlac.

Conclusion

Trade is essential for sustainable growth in a developing open economy. Trade policy development calls for a coherent approach and consultative process among stakeholders. There are strong collaborative relationships between government and business on trade policy and negotiations. However, due to the diverse nature of the players, trade policy remains a complicated area. BUSA’s continued participation in trade policy development is beneficial to both South Africa and business.

Sources

BUSA. Strategic Plan 2017-2019. March 2017.

National Planning Commission. National Development Plan 2030: Our Future – Make it Work.