Time to ramp up regional trade
Catherine Grant Makokera and Deidre Penfold
The focus of the Covid-19 pandemic has been firmly on dealing with the health crisis in the short term. This has meant limiting not only the movement of people, but also goods, with potential long-term implications for the region. However, this is not the time to abandon a regional integration or cooperation agenda. Now is the time to be planning a package of support measures that can assist South African exporters. We need to strengthen the trade ties among African countries and ensure coordination of the trade response of the continent. It is time to ramp up trade among ourselves in Africa as the disruption to global value chains continues.
Globally, the response has been to ensure the continued flow of essential goods such as medical supplies, food and energy. In South Africa, the International Trade Administration Commission (ITAC) introduced a full rebate of customs duties and a VAT exemption on certain critical supplies, from immune boosters containing vitamin C to diagnostic testing instruments. South Africa also introduced export control regulations on some essential goods. To assist traders, the European Union (EU) and South Africa have relaxed requirements presenting documents so that electronic versions can now be used in order to speed up the delivery of traded goods.
These trade-related measures are important as we need to make sure that every job in the economy that can be retained, is retained. It has long been proven that firms engaged in international trade are likely to employ more people. Exports typically have high economic value and low health risks. Sectors in the South African economy are interconnected both within the country, but also with global supply chains.
There have been some unfortunate consequences for trade from the regulations adopted by the government in attempting to control the spread of Covid-19 in South Africa. Instead of a top-down approach that allows trade to flow freely unless it is directly contributing to the spread of the disease, the government has worked from the bottom up and become caught up in defining detailed exceptions to an effectively closed economy.
With more complex regulations, there are bottlenecks created that hamper the free flow of goods and services.
Right now, we should not be blocking exports, but rather encouraging those firms that can keep production running safely to fill their existing orders. This requires an approach to cargo management that is more rational and allows for congested storage facilities to be cleared.
Ships are starting to pass by South African ports, and this could compromise both our ability to export, and also access to important products and inputs.
All borders of the republic are closed for the movement of people and are likely to remain so until we reach lower lockdown alert levels. There are exceptions for transporting fuel and essential goods. Importantly, South Africa is working with neighbouring countries in the Southern African Development Community (SADC) to harmonise and facilitate cross-border transport operations across the region during the Covid-19 pandemic.
Initial SADC regulations are aimed at keeping value chains operational in the areas of food and agricultural production, medical equipment and medicines, fuels, and humanitarian relief. We should not undermine these regional processes with complicated regulations in South Africa that make it difficult for transporters to efficiently move around.
South Africa’s medium-term response to the Covid-19 crisis needs to factor in our role as a regional player. For example, ensuring stability of revenue flows for members of the Southern African Customs Union (SACU).
At a time like this, it is easy to concentrate on national or even local level issues and to lose sight of South Africa’s role in the world, especially in our region of southern Africa. The World Trade Organisation’s recent trade outlook for 2020 indicates that the volumes of global trade in goods could tumble by 13% in an optimistic scenario, or by as much as 32%. South African exporters will need access to markets regionally if they are to continue to be able to employ workers.
President Cyril Ramaphosa is continuing to lead the African Union during this critical period. It has been particularly encouraging to see his willingness to involve the business community and engage in both the health and economic implications of Covid-19 for the continent. Unfortunately, the implementation of the African Continental Free Trade Agreement (AfCFTA) is likely to be delayed until 2021. That does not mean we should lose sight of the overall objectives of increasing intra-African trade and strengthening regional value chains.
South Africa’s medium-term response to the Covid-19 crisis needs to factor in our role as a regional player. For example, ensuring the stability of revenue flows for members of the Southern African Customs Union (SACU).
The global financial crisis of 2008 showed us the confusion and uncertainty in SACU that can result from drastic changes to trade flows. We also need to support the health responses in neighbouring countries by making sure there is a supply of essential equipment and products where possible.
Now is the time to be planning a package of support measures that can assist South African exporters. We need to strengthen the trade ties among African countries and ensure coordination of the trade response of the continent. If anything, the Covid-19 crisis has highlighted the importance of access to traded goods, built on strong policies to encourage trade in services and electronic commerce. Let’s not waste this opportunity for South Africa and the region.
Deidré Penfold is the Executive Director of the Chemicals and Allied Industries Association. Catherine Grant Makokera is Director at Tutwa Consulting Group.
This blog was first published in the Daily Maverick