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Speaking Notes for the Deputy Minister of Trade and Industry, Mr. Mzwandile Masina, on the Occasion of the 1st Annual USA-Africa Trade Symposium, 16 February 2016
Thank you Programme Director Mr. Bradley Jackson.
Thank you for the opportunity to address the first Annual USA-Africa Trade Symposium. The topic “Vision for Increased Trade between the United States and South Africa” is quite timely given that the US Government through the Office of the United Stated Trade Representative is currently seized with the work of developing a report of “Deepening and Broadening Trade and Investment Relationship Between Africa and the United States”.
At the outset, allow me to provide a brief background on the status of the bilateral trade and investment relations between South Africa and the United States as well as an update on the regional integration efforts in Africa.
Over the years, United States has been one of South Africa’s key trading partners. Such relations were supported by a number of government-to-government platforms of engagement which gave the opportunity annually for the two governments to meet and discuss a broad range of issues around which our two countries cooperated. Perhaps the one platform that is important to mention is the Binational Commission between South Africa and the United States which was launched during the Presidency of President Nelson Mandela. This commission was led by the Deputy President of South Africa and the Vice-President of the United States. This arrangement with the United States was important in that, it came during the early days of our democracy, as well as, the end of the sanctions campaign and thus provided us with a practical way of conveying the message that South Africa was open for Business.
Total two-way trade between South Africa and the United States increased from R57 billion in 2001 to more than R141 billion in 2014. The bilateral trade has surpassed the pre-crisis figure of R127 billion in 2008, which had declined to R83 billion in 2009. In 2014, for the U.S., South Africa ranked as the 2nd largest market after Egypt in Africa, accounting for about 17% of US exports to Africa.
The African Growth and Opportunities Act (AGOA) has contributed to boost trade and investment relations between the US and South Africa. The Brooking Institute has stated that it has created 100 000 jobs in the US and 62 000 jobs in South Africa.
Our exports to the United States are largely commodities, approximately 52 percent of South Africa exports to the United States are mineral products, and base and precious metals. This does not take away the fact the the United States provides generous market access for exports from South Africa such as automobiles, wines, citrus, macadamia nuts, live animals and chemicals that account for more than 36% of total exports. South Africa exporters have used it to expand their exports to the US market and also build cooperative business networks and technological linkages, that has benefitted both countries. We therefore welcome the extension of AGOA for the next 10 years until 2025.
The concern has really been about how we maximise the benefits of AGOA to change the structure of our trade with the US. This is a challenge for not only South Africa but for all the AGOA beneficiary countries. In the latest statistics, US Chamber indicated that 86% of exports by African countries to the US are still petroleum. Even for South Africa, a significant portion of our exports (40%) are still commodities. Therefore, there exist an asymmetrical relationship between Africa and the United States.
There is therefore a lot of scope to enhance the utilisation of AGOA. In 2014, of the 1 835 tariff lines under AGOA, SA utilised only 141 tariff lines, which is equivalent to 8 percent. Similarly, South Africa utilises 459 of the 3400 tariff lines under GSP, which translated to 14%. Sub-Saharan African (SSA) countries utilised 367 tariff lines from possible 1 835 under AGOA and 819 tariff lines from possible 4 850 under GSP. This translated to utilisation rate of 20% under AGOA and 17% under GSP for SSA.
The key areas to improve utilization of AGOA as a way of enhancing the US-Africa trade and investment relation includes include, amongst others, the following: (i) increased US investments to assist with creating productive capacity in the continent; (ii) increased US investment in infrastructure; (iii) capacity building to meet the US standards; and (iv) the expansion of the product coverage under AGOA to include products to export interest to African countries.
For its part, South Africa has worked with the United States to ensure safe trade in exports of pork, beef and poultry from the United States into the South African market. We expect to receive the first shipment of US chicken any time from now.
Similarly, total bilateral investments between South Africa and the United States increased from R1.2 trillion in 2012 to about R1.8 trillion in 2013. There are over 600 United States companies that have invested in South Africa. Equally, there is a growing number of South African companies that are investing in the United States, with one of the largest investments coming from South African company, SASOL, investing in coal to liquid facility in Lousiana.
In order to strengthen bilateral trade and invesment relations between our two countries, South Africa and the United States meet annually at a Ministerial level under the Trade and Investment Framework Agreement (TIFA) to discuss any issue of mutual bilateral interest or concern. There is also a need for collaboration to enhance regional integration efforts in Africa. The Heads of State and Government launched the Tripartite Free Trade Area (TFTA) negotiations between the Southern Africa Development Community, East Africa Community and the Common Market of Eastern and Southern Africa in June 2011 in Johannesburg, South Africa. It paved the way for the establishment of the grand free trade agreement (TFTA) within Eastern and Southern African regions covering 26 countries with a combined population of nearly 600 million people, and a total Gross Domestic Product (GDP) of approximately US$1.0 trillion.
The Tripartite initiative is based on a development integration model premised on three pillars: market integration through the TFTA; integration on the supply side of the economy through integrated industrial development; and coordinated infrastructure development. This is essential to enhance productive capacity and the development of regional value-chains. The development integration approach recognizes that the lack of existing industrial capacity and infrastructure in many African countries limit the capacity of these countries to benefit from market integration, and that therefore all three of these issues should be addressed at the same time. The negotiationson the legal text to facilitate Trade in Goods were concluded within three years. Subsequent to the endorsement of the Continental Free Trade Area (CFTA) in January 2012, the African Union (AU) Assembly launched the CFTA negotiations during the 25th Ordinary Summit of Head of States and Governments on the 15th of June 2015 in Johannesburg, South Africa. The officials are expected to have a first round of negotiation later this month. These initiatives will offer market access opportunities for US investments in Africa.
In my view the discussion on the vision for increased trade between South Africa and the US necessitates broader stakeholder consultations both within South Africa and with the rest of the Continent. These should assist to highlight the key constraints to better utilisation of AGOA, collaborative initiatives towards contributing to Africa’s development integration agenda that promotes industrial and infrastructure development and identify activities that promote win-win for both parties.
I thank you!