The Draft Block Exemption for the Promotion of Exports under the Competition Act aims to enable exporters to collaborate legally. Photo: File
On 2 April, the United States administration issued an executive order imposing a baseline 10% import duty on nearly all goods entering the US. Higher country specific tariff rates were also applied, with South Africa subject to a 30% duty.
The US tariffs exclude only a few strategic commodities, such as platinum group metals, gold, chrome and coal. These tariffs have significant implications for South Africa’s agricultural and manufacturing sectors. As of 2024, manufacturing contributes 13% to South Africa’s GDP, down from 18% in 2004. The tariffs threaten to reduce exports, particularly for those industries which are heavily exposed to the US market.
South Africa’s export footprint is stronger in Africa, China, Europe and the United Kingdom than in the US, offering room to shift market focus. The imposition of the US tariffs calls for strategic collaboration, not just among firms but across sectors and borders. The challenge is co-ordinating export strategies in the national interest without violating competition law.
Draft block exemption for exporters
On 12 August, The department of trade, industry and competition published a Draft Block Exemption for the Promotion of Exports under the Competition Act. The draft export exemption aims to enable exporters to collaborate legally, especially in the face of global trade disruptions.
The Competition Act empowers the minister to exempt categories of agreements or practices that serve public interest objectives, such as economic development, international competitiveness and transformation and inclusion.
The draft export exemption exempts the following categories of agreements or practices in the export markets from the application of sections 4(1)(a), 4(1)(b)(i), 4(1)(b)(ii) and 5(1) of the Competition Act:
- Joint marketing and branding: Exporters may collaborate on marketing campaigns and brand development for foreign markets. This includes joint advertising, promotional events, and shared branding strategies.
- Shared infrastructure: Exporters can share infrastructure such as warehousing, transport, and distribution facilities to reduce costs and improve efficiency in reaching export markets.
- Collaborative tendering: Exporters may jointly bid for foreign contracts or tenders, especially where scale or combined capacity is necessary to meet foreign demand.
- Information sharing: Exporters are allowed to share market intelligence, regulatory information, and technical standards relevant to foreign markets to improve compliance and competitiveness.
- Joint training and capacity building: Exporters can co-ordinate training programmes, workshops and skills development initiatives aimed at improving export readiness and operational standards.
- Export financing collaboration: Exporters may jointly work with financial institutions or government programmes to secure export financing, insurance, or guarantees.
- Co-ordination of export logistics: Exporters can co-ordinate shipping schedules, container usage, and customs procedures to streamline export operations and reduce duplication.
Why this is important for South Africa
With a 30% tariff, South African exporters face a dual problem:
- Outbound goods to the US will become significantly less competitive, probably reducing export volumes and triggering production cuts.
- The economic effect on some firms could be severe, especially in sectors reliant on US trade.
The exemption offers a legal framework for exporters to pool resources, co-ordinate strategies and diversify markets, especially in Africa, where consumption is growing and trade integration is advancing.
The draft export exemption is open for public comment until 2 September. Interested parties may also request an extension. This is a critical opportunity for:
- Industry bodies to advocate for sector-specific needs.
- Small and medium enterprises to push for inclusive provisions.
- Alignment of the exemption with broader industrial policy.
The draft export exemption outlines that exporters seeking to rely on the exemption must submit a request for confirmation to the commission, including details of the arrangement and supporting documentation to demonstrate compliance. The commission will assess the submission and issue a confirmation if the arrangement qualifies for an exemption. The confirmation granted may be revoked by the commission if there is a breach of the safeguards outlined in the confirmation; the collaboration among firms exceeds the scope of the exemption; the confirmation was based on false information; or the original reason for granting the confirmation no longer applies. The exemption is enforceable for a period of five years from the date of publication or confirmation, unless extended or revoked earlier by the commission.
South Africa’s response to the US tariffs is strategic. South Africa is positioning itself to build a more resilient export economy by leveraging minerals, shifting markets and enabling legal collaboration. The draft export exemption is a key instrument in this effort, offering a pathway for lawful, co-ordinated and competitive export growth.
South Africa would also do well to invest in a baseline infrastructure such as rail, ports, energy, water and roads to unlock efficiencies that will enhance the competitiveness of South African producers.
Meluleki Nzimande is a partner at Webber Wentzel and Shandré Smith an associate.