The South African economy has close links with the global economy. Since 1994, South Africa has negotiated a host of regional and bilateral, general and preferential trade agreements to normalise trade relations with trading partners, and the country is an active member of the World Trade Organization (WTO). Established trade agreements include the United Kingdom, United States of America, Japan, Germany, China, Italy, India, Saudi Arabia, and France. South Africa is the strongest trading partner in comparison to the other countries in the southern African region (consisting of Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, Swaziland, Tanzania, Zambia and Zimbabwe). General trade agreements do not make provision for market access in specific sectors, but essentially allow for ‘Most Favoured Nation Tariff Treatment’, which is the global minimum standard for international trade relations established under the WTO. South Africa is committed to the principles of these agreements and has placed great emphasis on forming strong economic trading blocs in order to gain access to key markets. The following trade agreements are of importance:
Europe is South Africa’s largest international aid partner, as well as its largest trading partner and the largest foreign investor. The South African government has actively pursued negotiations for an agreement on trade, development and cooperation with the European Union (EU), to develop secure markets for South African businesses.
South Africa is a member of the SACU, which is made up of Botswana, Lesotho, Swaziland, Namibia and South Africa. SACU affords duty and quota - free access to the markets in member states. Only VAT is levied. The Union’s aim is to maintain the free interchange of goods between member countries. It provides for a common external tariff and a common excise tariff to this custom’s area.
The member states are Angola, Botswana, the Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe.
The SADC Free Trade Area
The SADC Protocol on Trade aim is to liberalise intra-regional trade in goods and services within the region. A free trade area (FTA) along with economic development, diversification and industrialisation of the region is the main objective. Since September 2000, the elimination of tariff and non-tariff barriers to intra-SADC trade has been introduced. A wider market for goods that are produced according to acceptable standards and are competitive is being created. The envisaged FTA will increase the common market to 215 million people, which in turn would lead to increased foreign direct investment (FDI).
The SADC vision is that of a common future, within a regional community that ensures; economic well-being, improvement of the standards of living and quality of life, freedom, social justice, peace, and security for the people of southern Africa.
United States of America
One of South Africa’s key trading partners for both South African export promotion and inward investment mobilisation is the United States (US). The traditional position, which saw the US exporting value-added products to South Africa, while South Africa exported raw materials to the US, is changing.
The African Growth and Opportunity Act (AGOA)
AGOA provides eligible sub-Saharan African with duty free access and quota free access into the United States’ market through to the end of September 2008 for those products meeting the eligibility requirements. The introduction of the Act has given a major boost to the clothing manufacturing industry in South Africa.
Brazil is South Africa’s largest trading partner in Latin America and trade with Mexico is continuing to grow. A number of South African products have high potential in the Chilean market.
Mercado Común del Sur or the Southern Common Market (Mercosur) consists of Brazil, Argentina, Uruguay and Paraguay. The SACU-Mercosur agreement was signed in December 2004. The agreement covers only a narrow range of products in industrial and agricultural goods, the parties are committed to broadening and deepening the agreement over time.
Indian Ocean Rim Association for Regional Co-operation
The Indian Ocean Rim Association for Regional Co-operation (lOR-ARC) is a project-based regional economic grouping of 15 countries covering the eastern coastline of Africa, the Arabian Peninsula, southern Asia and Singapore, Indonesia and Australia.
Japan is one of South Africa’s largest Asian trading partners. South Africa has also developed strong ties with Malaysia. Trade with Australia is currently concentrated in the areas of mining and minerals, cars and motor-components, chemicals, services and tourism. Australia is also an investor in South Africa.
China’s development has created a growing export market for Africa, with China-Africa trade volumes reaching US.8-billion in 2005, US.1-billion of which, comprised exports from Africa. Since South Africa and China established diplomatic relations in 1998, trade has grown significantly. In 2005, China became South Africa’s second-largest import trading partner, contributing 9% of total imports, and eighth-largest export partner, drawing 3% of total exports from SA.
During February 2007 South African President Thabo Mbeki and Chinese President Hu Jintao signed seven agreements on increasing trade and economic co-operation. These included protocols on phyto-sanitary requirements for trade in apples, pears, grapes and tobacco leaf. They also signed agreements on economic and technical co-operation and on co-operation in minerals and energy, as well as a memorandum on the establishment of a South Africa-China minerals and energy co-operation committee.