Belinda Beresford
South Africa is steadily clocking up trade surpluses with the European Union two years after the deal that concluded the long and winding battle of its trade agreement with the northern bloc.
In the first 10 months of last year South Africa recorded a R25-billion trade surplus with the EU, up from R6-billion in 1999. South Africa has become the EU’s 15th most important trading partner overtaking the former Asian tigers of Malaysia and Singapore.
The Trade, Development and Cooperation Agreement was signed in October 1999, and has been rolling out since the beginning of 2000.
According to figures from the EU delegation to South Africa, the first year of the agreement saw a 35% increase in South African exports to the EU and a 20% increase in EU exports to South Africa. From January to last October South African exports rose by 21%, while EU imports climbed only 7%. For technical reasons trade statistics can vary widely depending on which party is compiling them.
But Willem Smalberger of the Department of Trade and Industry confirms that there is a positive trend for South African exports already covered by the EU trade agreement.
Smalberger says that there are also less measurable implications of the trade agreement. Even though the agreement is being phased in over 10 years, the certainty about tariffs that it gives exporters helps them in making investment decisions.
Accounting for about 40% of South Africa’s international trade, the EU is by far its biggest trading partner. Because such a large chunk of its export market has been disciplined, exporters can not only develop, they can plan to ensure the maintenance of existing markets, he said. The quantity of trade also facilitates the inflow of development aid monies from the EU.
The boom in South African exports is being helped by a slide in the rand. A sudden drop in the value of the currency, such as the one at the end of last year, can act as an effective export subsidy, by making South African goods relatively cheaper on the world markets.
However Tradek economist Mike Schussler says that even before the rand collapsed at the end of last year South African exports had enjoyed 28 uninterrupted months of growth.
The EU trade is just part of a general increase in South Africa’s exports, which are becoming high added value rather than commodity. Although precious stones and minerals are still the biggest export category, manufacturing is expanding. For example, Schussler estimates that exports of cars and related equipment last year brought in about R20-billion. He says that one in four Jettas in the United Kingdom originate in South Africa, and that local manufacturers now supply 10% of the world catalytic converter market.
Prepared foodstuffs including beverages are also a small but rapidly growing export market. A small example is olive oil: exports of this staple of the salad classes have risen from zero in 1997 to R25-million in 2000. South African olive oils have won two gold prizes for quality in Italy.
The surging exports will also affect the geography of business and industry in South Africa. The rise in container business means that the port cities of Cape Town and Durban are booming to the extent that the latter is congested.
Meanwhile the development of the Maputo Corridor, and the eventual accompanying rail links and development of the Maputo Port will also help South African manufacturers. Goods produced in Gauteng and exported through Maputo will face a shorter trip to the coast and therefore a reduction in costs although Durban may not regard this as an ideal situation.