TRADE AND DEVELOPMENT
their industrial sector along static comparative advantage lines, except in industries that were already mature and globally competitive. This experience resonates with
ours in South Africa. Since 1994, we have undertaken significant tariff cuts. While our exports grew, manufactured exports remained predominantly resource-based products. In other words, tariff reductions did not induce the necessary structural changes in the economy to alter significantly the export basket, beyond the range of products that reflect South Africa’s static comparative advantage. South Africa’s strongest export performance in more sophisticated products has been in sectors that have been built up through past and present industrial policy, such as the automotive and components sector. Compared to many of our trading
partners, South Africa’s tariff regime is open, transparent and not overly complex. In the early 1990s, South
Africa’s average tariff was around 23 per cent. It now stands at 7.7 per cent. There has been considerable simplification of the tariff regime. In 1990, the tariff schedule consisted of 13,609 tariff lines and 28 per cent were subject to import control. By 2006, the number of tariff lines had been reduced to 6,767, a decline of around 52 per cent, and import controls were eliminated. The South Africa-EU Trade, Development and Co-operation Agreement (TDCA), the Southern African Development Community (SADC) Trade Protocol and the Southern African Customs Union (SACU)-European Free Trade Association (EFTA) Free Trade Agreement have further reduced the overall incidence of tariff protection. Once ratified by all the parties, the SACU-Mercosur Preferential Trade Agreement, signed in 2009, will provide further trade openings. South Africa’s approach to tariff
setting is strategic, selective and developmental. As an instrument of
industrial policy, tariff reform must be considered against the measure of building a diversified industrial economy capable of producing increasingly sophisticated, higher value-added products and generating employment opportunities. As a general guideline, tariffs on mature upstream input industries could be reduced or removed to lower the input costs for the downstream, more labour-creating manufacturing sectors.
Tariffs on downstream industries,
particularly those that are strategic from an employment or value-addition perspective, may be retained or raised to ensure long-term sustainability and job creation in the context of domestic production capabilities and the degree of trade and production distortions on these products at the global level. There is, a priori, no presumption
of the benefits or costs of maintaining either low or high tariffs; but the upper limits for tariff setting have been
set by the obligations South Africa has taken on in the World Trade Organization (WTO) and bilateral trade agreements.
Investing in Africa Our trade strategy and international engagements at the bilateral, regional and multilateral levels aim to support these national objectives. South Africa’s trade and investment relations with Africa are particularly important. South African companies are among the top investors in Africa in a wide range of sectors covering mining, manufacturing, retail, communications, construction, financial services, and tourism and leisure.
From available data, South Africa
is among the five largest investors in sub-Saharan Africa and holds first place in the Southern African Development Community. The African continent is also
an important destination for South African exports, comprising around
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