The departments of Trade and Industry, and Economic Development, which are merging to become the Department of Trade, Industry and Competition (DTIC), will focus on six areas over the next five years.
For this year, the priority would be the African Continental Free Trade Area (AfCFTA), which would facilitate entry into more markets for South Africa’s products, Trade and Industry Minister Ebrahim Patel said during his budget vote speech, in Parliament, on Thursday evening.
The AfCFTA will connect 1.2-billion people into a single bloc where local products will be traded between countries, with minimal tariffs.
The AfCFTA was the basis for increased intra-African trade, said Patel.
The implementation phase was launched on Sunday, at a Special African Union Summit meeting, in Niger, after 45 countries signed the agreement and 27 countries ratified it.
The AfCFTA is intended to come into effect on July 1, 2020.
Patel posited that the agreement would fundamentally change and reshape the country’s economy.
He highlighted that exports to other African countries supported 250 000 South African jobs, and that it was the fastest growing portion of the country’s manufactured exports.
Patel indicated that cementing the detailed modalities and benefits of the AfCFTA would entail considerable work for the DTIC.
Starting immediately, it will finalise a tariff schedule, listing products to be covered by the AfCFTA and the rules of origin, which sets out what qualifies as a locally manufactured article.
Rules of origin have yet to be concluded in sectors such as the clothing and textiles, automotive and sugar sectors.
The department would engage business and labour at National Economic Development and Labour Council (Nedlac) on these areas and would finalise agreements between all countries by the end of this year, said Patel.
Patel indicated that over the period, the department would develop agreements on expanded trade in services, on investment protections for African companies operating in each other’s markets, on strengthened competition policy on the continent and on trade-related intellectual property rules.
“This is the work of a generation, a truly historic mission, to realise the dream of generations of African leaders to build a single, prosperous and united Africa,” enthused Patel.
To realise the benefits of this, Patel emphasised the need to deal with many challenges, including building a strong domestic and Africa-wide customs administration, swift payments systems between countries, proper infrastructure connecting African countries, and getting the country’s industry to be AfCFTA-ready through competitiveness-enhancing support.
This would require a collaborative approach between business, employees and government in the country, he noted.
In terms of trade with countries beyond Africa, the department continues to consider the best ways of increasing the volume and managing the composition of its exports in a shift away from exporting raw materials and importing finished goods.
This will entail agreements with large trading partners such as China and the European Union to change the patterns of trade. The department will also work with local businesses and public agencies to promote beneficiation.
In the next few week, the department will focus on finalising terms on an agreement between the country and the UK in case of no Brexit deal, to protect exports and jobs.
It will also engage with the US around the African Growth and Opportunity Act.
In terms of domestic trade, the department will refocus its trade policy so that tariff relief that is offered to domestic companies forms part of a package of reciprocal commitments to upgrade and improve the country’s industrial performance.
Meanwhile, the second focus of the department will be to support improved industrial performance, dynamism and competitiveness of local companies.
The third focus entails improving the levels of investment in the country and helping to achieve the target set by the President Cyril Ramaphosa in 2018.
The fourth focus involves promoting economic inclusion, meaning an opening up and changing of the country’s market structure, through both industrial funding to new groups and competition policy.
The fifth focus will be to promote a more equitable spatial and industrial development.
The sixth and final focus area will be to improve the capability of the State.
These six focus areas come during a time when the departments are starting to merge to form the new DTIC, with the merger process set to be completed by March next year.
Moreover, it is during a domestic economic environment that Patel characterised as tough, while global growth is uncertain and fragile. Therefore, this will require government and business to do more to change performances and outcomes and to engender a strong, growing economy that provides opportunities for its citizens.
“There are no quick fixes if we want to build a high-growth, high-employment, high-inclusion economy.”
Patel indicated that the country could not rely on strong global economic growth and high mineral prices to pull it forward, as economic challenges in a number of countries may constrain their trade with South Africa, and the amount they pay for goods.
Despite these challenges, the country has a number of strengths that it can build on, the Minister said.