Trade, industry and competition minister Ebrahim Patel has downplayed concerns that the government’s localisation policy will rile trade partners and derail Africa’s free trade agreement.
Patel said the policy was consistent with SA’s international trade obligations and is necessary to build the country’s industrial capacity. He suggested that it would help build partnerships with African producers. The government wants to reduce imports by at least 20% by among other things using its procurement activities to champion locally produced goods.
Critics say the government should rather concentrate on improving the country’s competitiveness in international markets and have derided its strategy as a form of protectionism that could open SA to legal challenges.
If others do the same, that could also damage the new African Continental Free Trade Agreement (AfCFTA) that is supposed to transform the continent’s economy.
In May, Business Unity SA (Busa) cautioned the government about taking a blanket approach to localisation, saying a study had found that conditions in most industries are not yet right and input costs could be pushed up by 20%.
In a written reply to a question from the DA published in parliament on Wednesday, Patel said localisation policies are consistent with SA’s international trade obligations and building industrial capacity is the purpose of the AfCFTA to reduce overreliance by countries on the continent on imports of manufactured products from elsewhere in the world.
In response to questions from Business Day, the department said AfCFTA is intended to create a larger market in which every participating African country will use a combination of efforts including investment, procurement and competitiveness-enhancing programmes to enable their local firms to supply goods that are currently imported from elsewhere in the world, the department said.
“Within that focus, there are also opportunities for cross-
border supply-chains to be developed, using African originating raw materials in the production of African-made consumer and capital goods,” said acting director-general Malebo Mabitje-Thompson said.
“The example of chocolate illustrates this: it can combine for example the raw cocoa of West Africa with the sugar of Southern Africa and the production capacity in North or East Africa. The design of the AfCFTA and its rules of origin provide tariff
preferences to such products that will be more advantageous as compared to products originating outside of the continent,” Mabitje-Thompson said.
DA MP Mat Cuthbert had asked Patel in a written question how localisation policies could affect the AfCFTA because they are not compatible with the non-discrimination obligations and commitments contained in the agreement.
Patel said localisation policies were common and implemented by many governments across the world. “It is what governments do to enable achievement of national objectives and indeed there is today a growing consensus on the value of carefully targeted and well-implemented industrial policy measures.”
Cuthbert said Patel had failed to thoroughly address concerns around localisation.
“This [Patel’s response] shows a clear unwillingness on his part to take on board different views and he must now
take full responsibility for the consequences of his actions and their bearing on our position within the AfCFTA.”
Donald MacKay, the founder and director at XA International Trade Advisors, said through this policy SA was treating the rest of the continent “like a market for our goods, rather than as trading partners across the continent”, citing the country’s sugar master plan that seeks to reduce imports from Eswatini.
“Eswatini is of course, part of Africa, but also part of the same customs union as SA. We are meant to have common trade policies,” MacKay said.
He said SA under Patel’s predecessor Rob Davies had tried similar policies and in that period SA’s unemployment surged while per capita GDP fell. “It is not at all clear why it will work this time around, when it failed for the last 14 years,” MacKay said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.