by Virginia Muwanigwa This is the first in a four-part series on trade issues in southern Africa.
Rhetoric coming from South Africa is positive enough at political level but needs to be matched by the actions sanctioned by business people in the country.
“The trade imbalance between South Africa and the region is too big, too wide. It negates the development of the other countries and so is not in the interests of South Africa,” says the Deputy President Thabo Mbeki.
South Africa’s Chamber of Business (SACOB) says that African markets are too poor to merit high priority in trade initiatives. However, it is in the interest of South Africa that the playing field is levelled because one effect of the skewed trade and economic development in the region has been the influx of “illegal aliens” to South Africa in search of better living conditions that cannot be found in their own countries.
South Africa’s protectionist policies and export incentives have riled its neighbours, mainly Zambia and Zimbabwe, who have difficulty penetrating the South African market although the latter has carved niches all over the region.
The Herald, a Zimbabwean daily, reports that in Lusaka, Zambia, supermarkets owned by South Africans sell goods from home, including milk.
Some protectionist tariffs from the apartheid era continue to distort trade practices with devastating effects on the industries of South Africa’s neighbours.
The General Export Incentive Scheme (GElS) offers export incentives of up to 100 percent on some goods, resulting in some South African goods being far cheaper in neighbouring countries than at home.
Several meetings between representatives of South Africa and Zimbabwe to work out a new pact to replace the expired 1964 agreement resulted in three technical committees being set up to examine the implications.
South Africa’s 1992 termination of the 1964 agreement and the GElS have resulted in serious deindustrialization in Zimbabwe while creating a trade imbalance of four to one.
The committees set up are on textile and clothing, agricultural production, and footwear and leather. Some progress has already been made where South Africa’s textile and clothing industry has recommended to its government reductions of up to 50 percent on its punitive tariffs on Zimbabwean exports. It has also waived its demand that Zimbabwean goods should have a local content of up to 75 percent saying that “is no longer an issue between the two parties”.
The South African Minister of Trade, Alec Erwin agrees that trade is biased in favour of his country and solutions need to be found.
”We are conscious of the trade imbalance and the need for a mutually beneficial solution because we realise there is a great deal of scope to improve flows of trade between our two countries,” he says, adding that his country is eager to reach an agreement with Zimbabwe – its biggest trading partner in Africa.
It is also hoped the agricultural committee would pave the way for Zimbabwean beef products into South Africa, instead of the latter importing from Europe.
While South Africa has seemed open minded during bilateral talks overall it has expressed its preference for a multilateral trade agreement with the SADC and its adherence to the World Trade Organisation (WTO) regulations.
The Herald reports that the institutionalised protectionism of South Africa in the economy and the ensuing trade imbalances have invoked talk of a trade war in the region.
South African industrialists, mainly white, have been accused by their counterparts in the region of believing that they have the “absolute right to exploit open markets to their north while keeping their own tightly closed”.
Neighbouring countries which were subjected to South African military destabilisation now see a continuation of that process with economic weapons. They see the same objective — to turn the region into a captive market for South African industry.
Some of South Africa’s neighbours are exploring retaliatory measures. At the World Economic Forum (WEF) in South Africa in May, Zimbabwe’s president Robert Mugabe said his country might be forced to impose retaliatory punitive tariffs on South African imports.
With Zimbabwe buying an estimated US$5 billion (Z$50 billion) worth of South Africa’s goods per annum, South Africa cannot afford to turn a deaf ear to the warnings.
At the WEF meeting in South Africa, industrialists from that country were criticised for flooding the region with their goods while taking advantage of protectionist tariffs.
Already some analysts are encouraging Zimbabwe and its neighbours affected by South Africa’s business arrogance to target strategic areas of South Africa’s export economy with selective tariffs while intensifying diplomatic pressure on the government.
Meanwhile, the volume of traffic passing through Beira in Mozambique has increased as a result of South Africa’s punitive 125 percent duty on goods in transit which has forced other countries to divert.
The upgrading of the facilities at the Beira port has also attracted more business, ‘The Limpopo railway from Maputo to Zimbabwe showed an increase of 34 percent, while traffic on the Machipanda line between Beira and Zimbabwe rose by 11 percent,” says the Chairman of the Mozambique Railways, Mario Dimande.
Still on alternative trade routes for SADC countries, the Maputo Corridor project, an initiative between Mozambique and South Africa, is expected to attract an increased flow of people and goods across the two countries’ border boosting economic recovery.
African Business, a London-based monthly magazine reports that the bi-lateral project, worth RI.25 billion (US$32 million) linking Gauteng with Maputo will see road, rail and harbour facilities in Mozambique upgraded, a welcome move after the devastation of the 17-year civil war.
The link will cut the current distance between the two locations from 122 kilometres to 86 kilometres. The customs and immigration offices will be served by officials from both countries under the same roof.
The project is also expected to reduce the monopoly of South Africa’s major port, Durban, as Maputo will be an estimated 150 kilometres closer to Gauteng than Durban. “Durban and Maputo will compete with each other,” says Mac Maharaj, South Africa’s Transport Minister, adding that the port that delivers on price and services is the one that will get the business.
It is also a positive move on South Africa’s part that it is seeking to upgrade Mozambique’s competitiveness in trade as this is biased in favour of the latter.
In the first nine months of 1995, Mozambique imported from South Africa goods worth US$312 million but exported only US$18 million of its own.
“…our country is in a particularly weak position to face the challenges of globalisation and liberalisation, which calls for additional efforts on the part of the international community to mitigate the adverse effects of the current trends of the world economy,” reads a paper prepared by the Mozambican minister of Industry, Trade and Tourism, Oldemiro Baloi, to the IX Meeting of the United Nations Conference on Trade and Development (UNCTAD).
Zambia is losing over US$1 00 million annually due to lack of a level playing field with South Africa. The Zambia Association of Manufacturers (ZAM) chairman Mark O’donnel says, “South Africa has a lot of protective tariffs in some cases as high as 80- 90 percent.
”When you add Value Added Tax (VAT) on the exports, you find that Zambian goods cannot compete with their goods,” he adds.
As a result, Zambia’s exports to South Africa last year were US$15 million while she imported up to 20 times that amount. The Ministry of Commerce, Trade and Industry is meanwhile trying to negotiate a preferential trade agreement with South Africa and the Southern African Customs Union (SACU) to secure a market for some of their goods.
“Zambia exports are at present not in a position to penetrate that market because of high external tariffs of the customs union,” says Oliver Sikafweba, director in the ministry.
A consultative meeting has been set for August this year, where SACU will meet to discuss Zambia- SACU trade issues.
The Export Board of Zambia (EBZ) feels that there will not be much coming out of the August Heads of State Summit in this regard. ‘The conclusion of the trade protocol in August may not be finalised soon because South Africa is dragging its feet on the matter,” says EBZ executive director Mwansa Musonda.
Economic analysts urge concerted efforts towards harmonisation of trade policies as “full economic cooperation cannot be effective in a situation of persisting disparities among trading partners”. (SARDC)
