The move by South Africa to tighten quality controls of unregulated imports from China is welcome. It protects consumers from potentially dangerous goods and prevents local industries from competing with inferior and cheap products.
It is imperative that South Africa trades with the world on its own terms and levels the playing field. To this effect, the department of trade, industry & competition has increasingly taken steps to protect local industries from cheap imports and the loss of jobs.
The department has also recently slapped hefty tariffs on structural steel coming from China and Thailand.
The government has said it is considering a similar course of action on car imports from China and India.
At face value, these might in some quarters be seen as progressive steps to protect domestic industries battered by cheap imports. However, South Africa cannot tariff its way back to being an industrial powerhouse. Anti-dumping duties on their own are a blunt instrument and a refuge for those who have failed to innovate and build their industrial base.
The illusion of protection tariffs will not move the needle on the urgent need for the country to develop a coherent, implementable plan that will set the country back on a path of re-industrialisation.
Tariffs don’t protect an economy on their own. If anything, they slowly suffocate innovation and prop up zombie firms.
No amount of protectionism will revive industries that fail to innovate in a world where consumer needs are fast evolving.
South Africa has seen a rapid deindustrialisation for more than two decades, marred by incoherent, pie-in-the-sky industrial policies that have largely ignored the voice of business, ending up with inward-looking plans that have held the country back.
Trade minister Parks Tau has an opportunity and goodwill to reset the country’s industrial trajectory and develop a long-term plan to reindustrialise this economy — a plan that should have the buy-in of key social partners: business and labour.
Tariffs must be more targeted and proactive than reactive in trying to buy time for companies and industries that in some instances are dismally run with the hope that the state will provide trade protection. Companies must earn their right to win market share or we run the risk of having ineffective zombie monopolies and a highly concentrated economy.
Lessons are aplenty around the world on how to build a strong industrial base and smart trade policy that encourages free enterprise and innovation for the benefit of the end consumer.
A case in point is Malaysia, whose trade policy focuses on accelerating digital adoption, enhancing high-value manufacturing (semiconductors, electric vehicles and renewable energy) and strengthening supply chain resilience to attract high-quality foreign direct investment.
Italian economist and scholar Carmelo Ferlito better illustrates this point in his argument that tariffs distort entrepreneurial calculation, breed rent-seeking behaviour and artificially keep inefficient firms on life support at the expense of true innovation.
This is not the path South Africa wants to pursue. What is needed is a coherent industrial policy, supported by a smart energy policy that lowers the cost of business and makes South African manufacturers and producers internationally competitive.
It took a crisis in the chrome industry and smelters becoming idle for the government to wake up to the drag high energy prices are on the economy and the country’s industrial base.
The government must come to the party and be deliberate in slashing the costs of energy to give successive administrations long-held aspirations of reindustrialising this economy. This can only be done via a long-term plan that will outlive this administration.
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