Outgoing trade, industry & competition minister Ebrahim Patel has dismissed criticism that he ushered in protectionist trade policies, insisting that his interventions were an appropriate response to a trade environment fraught with challenges.
“I would say two things,” Patel told Business Times this week. “The first is that the narrative around protectionism is factually misplaced and, perhaps more importantly, it is outdated. The commentariat that is still stuck in a language of 10 years ago does not understand that the world has changed very fundamentally.”
He said a major example of the shift to protecting domestic industries was the US, where the administrations of both Donald Trump and his successor Joe Biden introduced such measures after years of outsourcing to take advantage of cheap labour and capacity.
“In the EU, we have seen markets … using plant-health protectionism. Now they are using green protectionism to protect their markets. The US used protection measures in skills and slapped tariffs on steel imports,” Patel said.
Part of the criticism and commentariat is not fact-based. We introduced many rebates over the past five years. You allow products to be imported free of duty. It’s typically done where there is limited local capacity, or it is an important input into another downstream industry
— Ebrahim Patel
“The world has changed. Countries are becoming more pragmatic in protecting their own industries. South Africa has been [more] patient in doing this than even the more developed economies.”
Patel, who is stepping down from public office, said countries across the world were adopting tariffs and duties as mainstream trade policy instruments to improve and preserve production capacity.
“Part of the criticism and commentariat is not fact-based. We introduced many rebates over the past five years. You allow products to be imported free of duty. It’s typically done where there is limited local capacity, or it is an important input into another downstream industry.”
He said a shift in trade policy in 2009 empowered South Africa’s economy and its industries to survive the ructions of the global financial crisis.
“At one point we were, perhaps, ahead of the curve, but the world is utilising similar measures to develop their economies and they have caught the imagination of markets as diverse as the US, Brazil, the UK, India, many Asian countries and many African countries.”
The policy continued to support South Africa through the shocks of the Covid pandemic, the 2021 July unrest, the KwaZulu-Natal floods, Russia’s war in Ukraine, severe load-shedding and Transnet’s logistics crisis.
“I would offer the thought that the results we are beginning to see, that you can measure in sectors, are signs that we are recovering from these massive headwinds. These would have ordinarily plunged any economy into recession,” Patel said.
“But the economy has been able to recover from these shocks. It is estimated that GDP could have been between 3% and 5% higher and would have been between R600bn and R800bn more had these shocks not hit us.”
Asked about the perceptions that he favoured larger businesses that could afford to pay better wages, Patel said that on his watch the department had introduced supports to improve business efficiencies and competitiveness.
“We have also put efforts into ensuring competitiveness is improved through machinery. This is what we did in the textile sector, but that is not the only one. That is vital to balance. At the end of the day, companies can only uphold labour conditions if we are efficient and competitive.”
Business Day columnist Peter Bruce wrote this week that under Patel manufacturing’s contribution to GDP had continued to slide while factory jobs remained heavily subsidised.
“Enthusiastically riding the end of globalisation and the rebirth of industrial policy, he has created new hierarchies in local manufacturing, rewarding big firms that pay high wages with protection from imports and neglecting those that don’t, or can’t,” Bruce said.
Patel responded: “A big part of what we have been able to achieve is to get a more people-centric focus on industrial policy. After a period of manufacturing’s share of GDP declining, we have had stability and manufacturing’s contribution has been relatively stable.”
Speaking at a discussion organised by the Trade and Iindustrial Policy Strategies institute this week, senior economist Saul Levin said South Africa would have to adapt to trends in global trade policies, including protectionist trade rules and tariff regimes such as the carbon border adjustment mechanisms (CBAM).
“There are risks to key exports through the CBAMs that are coming in,” Levin said. “It’s not only the EU. We’re now looking at a UK CBAM and other regions are looking at introducing border carbon adjustments and, possibly, South Africa needs to go down that road as well.”
Patel said the trade and industrial policies of the outgoing administration had laid a solid foundation for policymakers of the next administration, regardless of which parties appoint them.
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