Talk that the government is considering imposing tariffs — as high as 50% — on imported vehicles from China and India is understandable. But it could turn out to be more hurtful to South Africans and less effective as a tool to spur on the much-needed growth of South Africa’s motor industry.
Over the past few months, this newspaper has reported on the phenomenal popularity of Chinese auto brands. Most have hitherto been imported here as fully built units.
From the government’s point of view, these imports are a threat to existing jobs in the motor industry — an industry that is strategically important to South Africa’s manufacturing aspirations.
While it has received considerable support from the fiscus over the years alongside the clothing and textile sectors, the industry is facing formidable challenges.
For a start, it is one of the sectors that have benefited handsomely from the Africa Growth & Opportunity Act (Agoa). A unilateral US law granting duty- and quota-free access to thousands of African exports, Agoa is currently being reviewed for extension by US legislators and the White House.
The deterioration of relations between South Africa and the US has made South Africa’s ongoing participation in Agoa uncertain.
Donald Trump, America’s 45th and 47th president, has imposed punitive trade and economic measures on South Africa, citing, without proof, claims that white Afrikaners are facing state-sponsored genocide and land confiscation.
Worse, after months of negotiations towards a new reciprocal bilateral trade agreement, no pact seems within reach. This fuels uncertainty among South African exporters to one of the world’s markets.
Amid the growing unpredictability of trade with the US, trade with the Global South — especially China and India, the world’s most populous nations — was supposed to be part of a strategy to cushion South Africa’s economic operators against the impact of US tariffs.
This is not without its own problems. The biggest challenge is the massive surplus enjoyed by China with South Africa.
While sympathetic towards the trade imbalance, China’s corrective measures have been slow to yield fruit. This is both in the context of SA-Sino bilateral relations and within the wider Brics+ context.
South Africa is a key member of Brics — a club founded by Brazil, Russia, India and China and then expanded two years ago.
Chinese vehicles pose a multi-faceted challenge.
They are stylish, easy on the eye, good quality and affordable to South Africa’s shrinking middle class.
International trade rules, which are under threat from America’s anti-multilateralism, offer sufficient legitimate protections to countries like South Africa.
For example, South Africa’s motor assemblers and parts makers may petition the International Trade Administration Commission for duties against Chinese vehicles if they believe these are being dumped onto this market.
The automotive industry master plan has ambitious milestones, which have yet to be realised.
A much more progressive posture would be for Pretoria to have a strategic dialogue with Beijing about a comprehensive economic partnership.
China’s efforts to follow US, Japanese, Korean and German auto players have been slow to take off. Only recently have concrete plans started taking shape towards assembling Chinese vehicles in South Africa.
These plans should be accelerated. And tariffication of the auto trade isn’t exactly the way.
Higher tariffs on these vehicles will make them unaffordable to teachers, nurses and police officers.
Significantly, the tariff route would undermine the spirit of balanced economic development and mutual respect — the tenets that define the alliance among Brics+ members.
A much more progressive posture would be for Pretoria to have a strategic dialogue with Beijing about a comprehensive economic partnership.
Luckily, China and India don’t have to start from scratch. A template exists. Japanese, American and German carmakers have benefited from support programmes linked to assembling cars in South Africa.
With all its faults, the sector has been among trailblazers on what can go right in partnerships between original equipment manufacturers (OEMs) and local players in the value chain, especially the post-sale market.
The tariff route is inadvisable. Instead, the government must be urged to ensure the sector’s master plan is implemented and new OEMs are properly inducted.
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