By Thebe Mabanga and Simon Nare
South Africa is taking proactive steps to protect the country’s economy by granting block exemptions to exporters in response to looming US tariff hikes.
This strategic move aims to cushion the blow of proposed unilateral 30% tariffs set to take effect just after midnight on Friday.
Additionally, the government is rolling out a comprehensive working capital and finance facility.
This initiative is designed to assist businesses in covering the escalated costs triggered by the impending tariffs.
These details emerged during a joint press briefing by International Relations Minister Ronald Lamola and Trade and Industry Minister Parks Tau on South Africa’s response to the US tariffs.
Last Thursday, United States President Donald Trump announced that a 30% tariff will go ahead as first announced on “Liberation Day” back in April and initially paused for 90-day period, until last week.
Lamola, Tau and President Cyril Ramaphosa have committed South Africa to keep negotiating with the United States. Ramaphosa has also called for trade diversification.
The US is South Africa’s third biggest trading partner, accounting for 7,5% of SA’s exports, and comes after the European Union (17%) and China (11%) as first and second.
“Thus, we will continue to engage the US with a view to concluding a deal that advances the interests of both countries.” the ministers said in a joint statement.
“South Africa seeks to conclude deals that promote value addition and industrialisation, rather than extractive relations that deprive the country of the ability to beneficiate our mineral wealth by mimicking extractive colonial era trade relations.”
A block exemption from aspects of competition law will allow export companies to collaborate in search of new opportunities or possibly combine inventories to create economies of scale and sell at a discount.
Such a collusion would ordinarily not be possible.
A working capital facility pays back a portion of working capital while a capital and equipment facility allows for tax write off.
These measures, on their own, may prove inadequate.
The cost of a tariff is ultimately borne by the US consumer, who pays a higher price for SA imported goods.
SA companies suffer from decreased export volumes.
A DTI source confirmed that there are consultations “with other department and government agencies” on devising further support.
The ministers accused the US of negotiating in bad faith and may have a point.
Since May, South Africa submitted a trade offer that was initially dismissed as lacking ambition by the United States.
South Africa has since improved the offer, starting with importing $ 12 billion worth of Liquefied Natural Gas over the next ten years.
That offer was supposed to be met with a confidentiality agreement and a template for a trade deal used for Sub Saharan countries.
None of those two were delivered by the US.
Tau said according to their consultation with affected industries and sectors, the tariff will cost about 30 000 jobs.
Other measures that are being explored include using the Unemployment Insurance Fund (UIF), but those measures would assist workers who have actually lost their jobs.
UIF was used to put in place a Temporary Employment Relief Scheme (TERS) in the wake of the Covid 19 pandemic.
Lamola dismissed speculation that the tariffs are due to political reasons such as South Africa’s transformation and expropriation laws and policies.
“We prefer to deal with what is in front of us at these negotiations and we separate facts and other things that we hear on the streets.” Lamola said.
“So that is what we are currently dealing with and that’s why we remain open to engage with the US. And we will keep our eyes on the ball and focus on these discussions.”
Lamola cautioned political parties and civil society organisations who he accused of scoring cheap political points by going outside the country and talking negatively about the country.
The minister said it was concerning that even political parties who were part of Government of National Unity were doing this.
“We must speak in one voice to promote the national interest of South Africa because if there are any implications all South Africans will be impacted. So, we all have a responsibility and a duty to protect and promote the national interest of the country,” said Lamola.
The Economic Freedom Fighters (EFF), ironically one of the players accused of tarnishing the country’s image with their Kill the Boer chant, called the ministers statement “weak, impotent, and inconsequential.” and accused the government of simply being ill-prepared for the crisis.
The EFF offered no immediate resolution to the impasse, calling instead for fundamental restructuring of South Africa’s economy and realignment of the economic relations with developing countries.
Another question is what the World Trade Organisation (WTO) given that this affects 185 countries and United States President Donald Trump continues to upend the global order as has done by withdrawing the US from the Word Health Organisation (WHO) and cut aid funding to developing countries.
The DTI source confirmed that the WTO intervention is being explored and will likely be contained in the cabinet announcement.
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