South Africa must use the 30% tariff slapped on its exports to the US by President Donald Trump as a “galvanising moment to become competitive”, says former diplomat Ravi Pillay, a faculty member at the Gordon Institute of Business Science.
“The incentive we have is a R265bn potential loss in trade and more than 250,000 jobs directly linked to that trade,” says Pillay, who is also a non-executive director at the Consumer Goods & Services Ombud.
“We need to do things differently, push the envelope more, create more — and more effective — multi-stakeholder partnerships. South Africa has a legacy of collaboration and we need to draw deep now to really get on with it and make dramatic shifts locally.”
“It’s time for bold decisions,” Pillay says. “Like why don’t we make Northern Cape the generation capital of South Africa from a solar energy point of view? Let’s put 50-million solar panels there, and the transmission lines will start coming. We need some creative derisking of projects, we need to see very tangible and significant things happening on the ground.”
He acknowledges there has been some progress, for example at ports where private sector involvement has improved the rate of container turnover. But it’s not enough.
It’s time for bold decisions — like why don’t we make [Limpopo] the generation capital of South Africa from a solar energy point of view? Let’s put up 50-million solar panels, and the transmission lines will start coming
— Ravi Pillay
“We need to push much harder and really challenge the relevant people in charge of those absolutely key services. Say to them, we need by a certain date to see throughput increasing by 200%. We need targets in place and they need to be made public so that team South Africa can follow the journey and help where we can.”
There’s no shortage of potential support for government, Pillay says. “It’s just about having a framework and an enabling mechanism of working together and trusting each other to make changes happen, and happen faster.”
South Africa’s stifling regulatory environment, unfriendly investor policies and budget fiasco are not helping to create the predictability, reliability and consumer trust needed to attract investment, he says.
“As different stakeholders in society, government and business we really need to come together and try a new way of problem solving, because our traditional methods have not worked. The global environment is changing dramatically, as we’re seeing, and as a country we need to commit to a new type of compact to solve our problems. It’s all about speed. We need to get on with it, get projects on the ground. We can’t continue letting things slide in front of us.”
There’s a willingness on the part of business, he says. The question is how deep the government’s willingness goes.
“Promises are cheap. Only when we see tangible evidence of significant improvements will that question be answered.”
Areas plagued by water and electricity shortages have seen no improvement in 15 years.
“There may be willingness on the part of government but, as with fixing our roads that are damaging the axles of trucks, we have to show tangible results to attract investment.”
The number of trucks on these potholed roads is evidence that freight rail is not being fixed fast enough to grow the economy at the required rate, he says.
“It’s about being more bold and committing to strong, large-scale infrastructure projects and turning the tide. It needs a new type of thinking. We’re still using the old playbook.
“Engagement between business and government is happening but the type of partnerships we’re engaging in are not fit for purpose. We’re not creating the right environment for large-scale infrastructure projects. We need to adopt a new, fresh approach, a different problem-solving way of getting things done.”
He “desperately” hopes the Trump tariffs will be the wake-up call the government needs. Cuts in South Africa’s US export markets would be devastating for the Eastern Cape, centre of the auto industry.
“I’m hoping that potential implication will help our partners in government to come to the party in a very drastic and different way, and be more explicit to stakeholders about how exactly they can help.”
For example, using a more intuitive, intelligence-driven database to better exploit trade opportunities.
We need to use this tariff shock as a galvanising moment to start increasing our speed of decision-making and investment-friendly policies
“There are various tech companies in the country that can help with these things. It’s about identifying potential levers of support, getting the due diligence done and then getting on with it.”
On the diplomatic front, without compromising its principles or values, South Africa needs to be “extremely pragmatic”.
Meanwhile, it’s important to prepare the way for South Africa’s new ambassador to the US by “fixing things tangibly on the ground here, so that whoever it is can take some solid competitiveness issues as part of his agenda to attract and grow trade between the two countries. Competitiveness is key. We need to take that 30% tariff as a challenge to improve our competitiveness.”
Competitiveness is key to economic growth, which Pillay says is still not being prioritised in visible ways.
“If economic growth was being prioritised, we would have seen the evidence around us. We’re not seeing the jobs growth, we’re not seeing the opportunities. So fundamentally, our policy reform has to be fast-tracked. It’s about predictability and reliability. These are key criteria investors look for.
“Imagine in a few months or a year going to the US and saying, ‘We have investment export zones in South Africa with uninterrupted energy at X cents per kWh, good infrastructure, easy access to Durban port by road and rail.’ These are the stories we need to be telling, and investors will come.”
He speaks from experience, having been an economic diplomat in Switzerland between 1998 and 2002. “It’s exactly how foreign direct investment happens.”
Instead, South Africa’s regulatory environment remains cluttered with red tape and the traction and speed needed to meet its looming export crisis are nowhere in evidence.
“We need to use this tariff shock as a galvanising moment to start increasing our speed of decision-making and investment-friendly policies. We need to have smarter, more practical stakeholder partnerships that have accountability metrics linked into the relationship — and not just speechmaking.”
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