Global trade has operated within a rules-based framework, with at its pinnacle the 164-membership World Trade Organisation’s (WTO) multilateral trading system, established in 1994. It creates space for developed and developing countries alike to participate in negotiating binding and enforceable rules, and remains in the interest of small, open economies. Many countries, including South Africa with its open economy, have accepted that a multilateral rules-based system is desirable.
South Africa’s trade negotiations are conducted alongside the country’s partners in the Southern African Customs Union (SACU), comprising Botswana, eSwatini (formerly Swaziland), Lesotho, and Namibia, following the renewed SACU Agreement in 2004 that requires SACU to negotiate all trade agreements as a bloc. Access to global markets has been enhanced through bilateral agreements with most of South Africa’s major trading partners. SACU, at present, enjoys free trade agreements (FTAs) with the 27-country European Union, the UK as well as the European Free Trade Association (EFTA) comprising Iceland, Lichtenstein, Norway and Switzerland. SACU is also part of the 15-country Southern African Development Community (SADC) free trade area, has a preferential trade agreement (PTA) with Mercosur, comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela, while South Africa also enjoys duty-free and quota free entry into the US market under the African Growth and Opportunity Act (AGOA), a unilateral trade preference programme.
The COVID-19 pandemic brought significant disruptions to South African trade and saw a strong decline in the export and import of automotive products. The automotive industry’s export value under the APDP in 2020 amounted to R175,7 billion, which comprised a substantial 13,9% (15,5% in 2019) of total South African exports of R1 262,8 billion, while the industry’s imports of R127,5 billion under the APDP comprised 11,8% (13,7% in 2019) of total South African imports of R1 080,0 billion.
As an export-oriented industry, it remains essential for the domestic automotive industry to continue diversifying risk by pursuing wider geographical exposure to mitigate the impact of country or regional cyclical economic conditions. Following the sound upward momentum in vehicle exports under the Automotive Production Development Programme (APDP), and consecutive export records in 2018 and 2019, the total automotive export value declined by a substantial R26 billion, or 12,9%, from the R201,7 billion in 2019 to R175,7 billion in 2020. Vehicle exports declined by a massive 115 804 units to 271 288 units in 2020, from the record 387 092 vehicles exported in 2019, and the export value declined by a significant R26,8 billion from the R148,0 billion in 2019 to R121,2 billion in 2020. On the upside, automotive component exports reflected an increase of R0,8 billion to a record R54,5 billion in 2020 from the R53,7 billion in 2019. However, the domestic automotive industry’s export destinations decreased to 147 countries in 2020 from the 151 destinations in 2019.