a day ago
Trade policies past and present haunt South African industry
South Africa's past export subsidies hurt neighbours; today, global trade and weak infrastructure return the blow to local businesses.
You have to hand it to Donald Trump: his 'Liberation Day' rampage on imposing tariffs on friend and foe alike focused the attention on international trade and its positives and negatives.
If your country has a high-cost or low-productivity labour system – or both – you're always going to be vulnerable to those other nations that can produce the same goods cheaper.
That's where tariffs come in: to protect a country – preserving businesses and jobs. If a company cannot compete with imported goods, then import duties and taxes will raise the prices of its competitors to the point where the playing field will be artificially levelled.
On the other hand, governments can boost their exporters by putting in place subsidies, whether hidden or open. It is widely thought, in the West for example, that Chinese car exporters, particularly, are able to export their vehicles at comparatively low prices because of government support for businesses domestically.
That's the main reason other Chinese products are gradually putting well-known names out of business – the latest being the planned closure of the Goodyear tyre factory in the Nelson Mandela Bay metro in the Eastern Cape. More than 900 workers have been hit with Section 189 retrenchment notices.
Chinese competition is a major threat to local businesses, especially those in manufacturing… but it is hardly the only reason many industrialists are throwing in the towel.
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Nelson Mandela Bay, like many other towns and cities in South Africa, suffers from an ongoing collapse of services and infrastructure. In addition, the backlogs at ports in this country mean exporting is not a quick or simple process.
Ironically, back in the '90s, long before the mainland Chinese exporters got a toehold in Africa, companies in this country help destroy industries in our neighbouring countries, thanks to subsidies introduced by Pretoria.
Under the General Export Incentive Scheme (GEIS) of the early '90s, SA exporters were able to take full advantage of the end of trade restrictions which followed the release of Nelson Mandela.
Subsidised South African exports of tyres, for example, forced the collapse and closure of the Dunlop tyre operation in Bulawayo, Zimbabwe. Battery exports did the same thing to factories in that city.
Zimbabwe's David Whitehead Textiles, one of the biggest clothing makers in sub-Saharan Africa, was similarly affected.
In many cases, Zimbabwean companies were hit by a double South African whammy: subsidised competitors entering their home markets and tariffs on their exports to South Africa.
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Again, ironically, Chinese imports later forced many of our clothing manufacturers to close. And now, a tyre factory has closed, too. I wonder what the jobless people in Bulawayo would say…
Again, the irony is that many South Africans believe Robert Mugabe single-handedly destroyed Zimbabwe's economy and accelerated the flight of economic migrants to a better life south of the Limpopo. But, he had a little help…
The GEIS-fuelled assault on our African neighbours was only the start: businesses, from Checkers to MTN set up shop across Africa, often squeezing out local competition because of their sophistication and financial backing.
SA business did more damage to the countries of the former 'Front-line States' in five years than the apartheid defence force did in a decade.
Trade can be a powerful weapon.
