Rob Davies, Minister of Trade and Industry: Interview

Interview: Rob Davies

How can South Africa balance the need to liberalise trade while ensuring that local and regional industries are not unduly or negatively impacted?

ROB DAVIES: Our goal is to industrialise the country while at the same time improving trade competitiveness. South Africa adopts a developmental approach to tariff policy, which means that we make a case-by-case assessment based on the analysis of the state of the sector concerned when an application is made. There is no a priori view as to whether the tariff should go up or down, but we are obliged by international rules, and the World Trade Organisation has set bound rates that we have to comply with.

We think this is clearly aligned with the approach of the National Development Plan, which calls for a nuanced approach to tariff setting. The goal is to achieve a balanced approach that supports both local and regional industrial development.

When we do engage in tariff liberalisation, we do so within a context of existing trade agreements. The most important ones are linked very much to our vision of industrialisation as a process that needs to take place not just in South Africa but also in the rest of the continent. Our priorities are the continental Tripartite Free Trade Area (TFTA), and we are creating processes on the African continent starting with the TFTA negotiations in which we have been engaged in for some years now. The official agreement document was launched in Egypt in 2015 along with the launch of the African Union summit of a continental TFTA in South Africa. Those are our priorities in so far as negotiations for trade liberalisation are concerned.

How do you respond to concerns that some national policies are not improving competitiveness?

DAVIES: The reality is that the commodities super-cycle that we benefited from as producers and exporters of primary products in South Africa and other African and developing countries has definitely passed its peak. We are not just sitting idly by hoping for it to come back. We are taking steps to move forward into a more developed and beneficial place in the global division of labour; we plan to move up the value chain and shift into the space of higher value-added products, which means industrialisation. That is a common endeavour for both South Africa, under the national Industrial Policy Action Plan, and the African continent more widely. As Africa itself industrialises, it will be better off and will create a larger market, meaning South Africa will need to reposition itself within the continent. We’ll have to move up the value chain. Because places lower down the value chain that we currently occupy will be taken by other countries that are beginning to industrialise. Intra- and inter-regional trade are also key priorities.

As a result we are seeing increased investment in manufacturing, particularly in automotive and fast-moving consumer goods, as well as green energy and mineral beneficiation. Manufacturing will support sustainable high-quality service sectors that will experience growth in tandem, as they tend to perform better in economies with a diversified industrial base. That is the direction to move in, as these developments will not only improve competitiveness but also drive higher levels of inclusive economic growth.

What will be the impact of the amendments to the Black Economic Empowerment (BEE) codes?

DAVIES: The amended codes look to spur growth in enterprise development while addressing any loopholes. The BEE has mitigated false or superficial empowerment while imposing minimum requirements on ownership as well as skills and supplier development. The Black Industrialists programme is a good example of enterprise development that can be linked with manufacturing, in one of the least-transformed sectors. An 18-month time frame is in place to ensure a smooth transition for businesses.