WANDILE SIHLOBO: Building blocks SA needs for its export diversification drive

The SA government and business are aligned on the need for export diversification. That does not mean abandoning existing markets but building on them. What we now need to do is to initiate, in earnest, trade talks with new export markets. Two critical areas require attention from both government and business.

First, engaging new potential trade partners in various sectors of the economy will require solid technical expertise in the SA government. In the early 2000s, SA had a deep pool of human capital in the area of trade matters, particularly in terms of senior negotiators and technical experts.

However, over the past decade things have changed as the country has gone through a period of maintaining relations rather than a continuous opening of markets, as we witnessed in the early 2000s. Therefore, a review of human capital and ensuring the relevant departments have sufficient resources to enhance their skill set, if needed, are critical if we are to succeed in our attempt at trade diversification.

The expectations have already been set as SA’s political leadership once again highlighted its intention to diversify its export markets during engagements in the US in the last week of September. Sending out such a message at a global level was key to affirming the seriousness of this approach to the domestic audience and to international partners, so they will have SA on their radar.

The department of trade, industry & competition, assisted by the economic diplomacy unit of the department of international relations & co-operation, needs to initiate a review of its technical capacity to address the country’s most pressing economic task: export diversification.

There also needs to be a team that continuously engages existing trade partners, affirming our commitment. In such discussions, the business community must be a major partner, as it is aware of the key markets it has identified in its own strategies.

Second, SA is kick-starting its export diversification drive at a time when other countries are looking to diversify their markets. There is far stronger global competition today than in the 2000s. SA may therefore need to reconsider its traditional approach of reluctance to engage in free trade agreements and its insistence on piecemeal approaches, such as preferential agreements for specific sectors.

The countries we will engage with are likely to require reciprocity, as they too are seeking to diversify their markets. Therefore, a deeper understanding of the SA economy and the most sensitive sectors is one area where the two departments need to focus their efforts.

While it is generally valuable to gather insights from business and other stakeholders in outlining sensitive sectors, government economists may need to map out such trade-offs beforehand, as sector representatives will almost always be defensive of their interests. Trade-offs will be necessary for SA to succeed. However, such trade-offs must be based on solid research that guides the judgment of trade negotiators and representatives.

SA signalling its commitment to export diversification is an essential step. We now need to build the necessary human capital to engage in trade matters with a range of countries. The private sector can contribute resources to enhance the government’s capabilities in areas where gaps exist. Here development partners can also play a role, especially in providing training and technical assistance.

Importantly, SA must embrace free trade agreements and prepare to make trade-offs; these choices must be guided by solid research that considers the broad economic interests of the country.  

• Sihlobo is chief economist at the Agricultural Business Chamber of SA and a senior fellow in Stellenbosch University’s department of agricultural economics.