[Opinion] Global headwinds mean SA must get basics right

In addressing the Africa Continental Free Trade Area (AfCFTA) business forum in Cape Town in April this year, Deputy President Paul Mashatile hit the nail on the head: “The quality of much of the continent’s maritime, road, and railway infrastructure is less than satisfactory. There are road links with generally poor infrastructure throughout the continent’s five regions, yet roads carry 80% of goods and 90% of passengers. Without this infrastructure, rail, and maritime, trade cannot realise its full potential.” Without getting the very basics of trade infrastructure right, the goals of the AfCFTA to facilitate intra-Africa trade will remain largely stillborn.

South Africa’s GDP growth for 2023 is likely to rest between 0.1 and 0.4%. For growth to pick up in 2024 and 2025, much hinges on businesses’ ability to move away from dependence on Eskom (loadshedding is likely to persist for at least the next three years, and likely even longer). One way to boost business growth and job creation would be the lowering of various trade barriers and tariffs and, where government cannot improve its own systems quickly enough (see Transnet and both the railways and the ports), to move out of the way and allow the private sector to implement reforms and improve skills development and the reliability of those systems and infrastructure.

During his April address, Mashatile also said that Africa needed to pay urgent attention to weaknesses such as infrastructure management and inefficiencies at border posts, amongst other issues. It is heartening to hear acknowledgement of shortcomings and areas in dire need of improvement. But even these acknowledgements will mean little without moves on the part of government to depart from the continued desire for more centralised control and its aversion to deep and fundamental private sector participation in the area of trade infrastructure. Without substantive moves here, the rhetoric will remain largely that.

Some countries and regions around the world are leaning more towards protectionist measures. Bodies such as the International Monetary Fund (IMF) estimate global growth to be at lower rates than have been experienced in the last decade. The IMF foresees yet more difficulties for African countries should global conditions continue to become more tense, and over the next 10 years the sub-Saharan African region could experience a 4% decline in GDP. The pro-investment reforms that countries in this region could adopt are therefore all the more urgent, and would help to at least buffer against some of the worst headwinds should these materialise in the global economy.

For its part, the World Trade Organization (WTO) expects goods trade in 2023 to increase 1.7% from last year. The 2024 rate is expected to be 3.2%, which is down from the earlier forecast of 3.5%. Even at the very top end of expectations, these are concerning projections. Amongst the biggest worries for the WTO are Russia’s war in Ukraine, monetary policy tightening, and uncertainty in financial markets. It is in this context that businesses and investors will be increasingly concerned and more risk averse; for emerging markets such as South Africa there is all the more need to become as attractive for trade and investment as possible.

South Africa’s current meagre growth prospects can be significantly boosted by sober and pragmatic pro-growth reforms. There would be no better area in which to really push some of these reforms than the trade infrastructure space. Even the global commodities boom that has benefited South Africa over the last few years would have been greater had at least some aspects of our trade infrastructure functioned better.

Should South Africa take too long to enact reforms, trade and investment flows will probably find easier destinations to which they can flow. We cannot assume that investment will always be a given on our shores, especially if our business and trade environments are more difficult to operate in, relative to other countries and jurisdictions.

Politicians and bureaucrats such as Mashatile are right to identify and acknowledge where the country is falling short in terms of facilitating greater trade flows. Now it remains to be seen whether tangible, measurable actions will follow.

Article originally appeared here.

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