South Africa needs more urgency in its efforts to negotiate a trade deal with the US before President Donald Trump’s August 1 deadline for agreements before a 30% tariff on products to the US takes effect.
It appears South Africa — unlike developed countries and other emerging markets — has been slow to negotiate a trade deal with the US. The reality is, it is unlikely South Africa will meet the August 1 deadline. The country must pro-actively apply for an extension of the deadline for agreements to be concluded.
South Africa is also in danger of being caught in the crossfire of Trump’s anti-Brics campaign. Trump has threatened to charge a 10% levy on top of current tariffs on imports from the Brics bloc, the economic group of 10 emerging-market nations, of which South Africa is a member.
Unless a deal is reached, more than 300,000 jobs could be lost. Reserve Bank Governor Lesetja Kganyago has warned the agriculture and automotive sectors are the most vulnerable to the US tariffs. South Africa exports value-added manufactured products to the US, such as automotives, which have a higher economic multiplier impact at home. South African car exports to the US have already dropped more than 80% since the tariffs were announced. Vehicle exports to the US dropped by 73% in the first quarter of the year, declining by a further 80% and 85% in April and May, respectively, said the Automotive Business Council (Naamsa).
“The US tariffs directly threaten thousands of jobs in our sector, disrupt hard-won industrial capabilities, and risk devastating communities such as East London, where the auto sector forms the economic heartbeat of towns,” said Naamsa CEO Mikel Mabasa this week.
The Eastern Cape industrial hubs risk being turned into “ghost towns”.
South Africa also exports fruits, a sector that employs low-skilled workers. The citrus belt, with towns such as Citrusdal in the Western Cape, risks being economically devastated by the tariffs. South Africa is the world’s second-largest citrus fruits exporter behind Spain — with the industry valued at about R35bn and employs more than 35,000 workers. About R2bn worth of citrus is exported to the US each year.
But South Africa also has towns outside the citrus belt that produce niche products for the US market — such as the Madimbo Valley in Limpopo that produces macadamia nuts, which are also now in danger. South Africa is a leading producer of macadamia nuts, and the US is one of its biggest export markets.
The competitiveness of South Africa’s export industries has already been undermined by government corruption, incompetence and ideologically fundamentalist policies, which have led to state failure, infrastructure collapse and supply chain disruptions, and consequently significant business closures, job and revenue losses.
In its critical negotiations over tariffs with the US, South Africa must assemble a special team led by the business sectors actively exporting to US markets, and heavyweight South Africans in Trump’s inner circle. The negotiations are of such a critical nature that traditional diplomacy will not suffice. South Africa has an advantage in that there are many South Africans within the Trump inner circle that can leverage in these high-stakes negotiations. It is critical that ideological, colour or party affiliations are not criteria for appointing negotiators.
Given the urgency of the negotiations countries have taken various approaches. Japan, for example, has established a special task force with key specialists across all economic, business and government sectors to lead their negotiations with the US administration. In the final leg of talks with the US, Indonesia’s President Prabowo Subianto negotiated directly with Trump. He described the talks as a “gruelling process” and an “extraordinary struggle”.
The US desperately needs critical minerals and rare earth elements — the supply of which is dominated by China. South Africa can offer the US access to these critical minerals and rare earths
Vietnam offered the US key concessions, and the country’s strategy focused on Trump’s business instincts. A communist-led country, Vietnam refrained from taking ideological positions against Trump. India held five rounds of talks with the Trump administration. It offered concessions and made it clear that it had no intention of dethroning the US dollar as the world’s reserve currency.
South Africa must take cues from these countries’ successes with the Trump administration. It urgently needs to establish a task team, like Japan, to conduct fast-pace negotiations. Its strategy must be to have business leaders trading with the US leading a negotiation task team, supported by government officials.
South Africa must pro-actively offer the US opportunities. The country’s Land Expropriation law, which makes provision for expropriation without compensation, must be withdrawn. Contrary to popular arguments, that the expropriation law will not lead to mass expropriation, property rights involve not only land but intellectual property, pensions, shares and the bonds of locals and foreigners, including Americans.
The US desperately needs critical minerals and rare earth elements — the supply of which is dominated by China. South Africa can offer the US access to these critical minerals and rare earths. The country must also abolish the current BEE — which gives slices of local and foreign companies to politically connected “political capitalists” — and replace it with alternative empowerment models which focus on the employment of youth, building of public infrastructure, transferring technology and skills, supporting science, technology, engineering and mathematics subjects at black schools and giving opportunities to manufacturing SMEs.
Without the necessary urgency and business and civil society expertise in negotiations with the Trump administration, South Africa faces certain economic devastation.
• Gumede is professor of practice at the School of Governance, University of the Witwatersrand and author of South Africa in Brics (Tafelberg)
For opinion and analysis consideration, e-mail Opinions@timeslive.co.za
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