OPINION | Export exemption could be game-changer for our economy

On April 2, the US administration issued an executive order imposing a baseline 10% import duty on nearly all goods entering the US. Higher country-specific tariff rates were also applied, with SA subject to a 30% duty. These country-specific rates were suspended on April 10 when a 90-day suspension came into effect, lasting until July 9.

However, the situation escalated again when, on July 7, the US administration announced the resumption of the 30% increased tariff on all South African products entering the US, which became effective on August 7. The US tariffs exclude only a few strategic commodities, such as platinum group metals, gold, chrome and coal.

These tariffs have big implications for SA’s agricultural and manufacturing sectors. From 2024, manufacturing contributes 13% to SA's GDP, down from 18% in 2004. The tariffs threaten to reduce exports, particularly for those industries that are heavily exposed to the US market.

SA's export footprint is stronger in Africa, China, Europe and the UK than in the US, offering room to shift market focus. The imposition of the US tariffs calls for strategic collaboration, not just among firms but across sectors and borders. The challenge is co-ordinating export strategies in the national interest without violating competition law.

On August 12, the department of trade, industry and competition published a Draft Block Exemption for the Promotion of Exports (Draft Export Exemption) under the Competition Act 89 of 1998. It aims to enable exporters to collaborate legally, especially in the face of global trade disruptions.

The Competition Act empowers the minister to exempt categories of agreements or practices that serve public interest objectives, such as economic development, international competitiveness and transformation and inclusion.

With a 30% tariff, South African exporters face a dual challenge:

Outbound goods to the US will become less competitive, likely reducing export volumes and triggering production cuts.
The economic impact on some firms could be severe, especially in sectors reliant on US trade.
The exemption offers a legal framework for exporters to pool resources, co-ordinate strategies, and diversify markets, especially within Africa, where consumption is growing and trade integration is advancing.

The Draft Export Exemption outlines that exporters seeking to rely on the exemption must submit a request for confirmation to the commission, including details of the arrangement and supporting documentation to demonstrate compliance. The commission will assess the submission and issue a confirmation if the arrangement qualifies for an exemption.

The confirmation granted may be revoked by the commission if there is a breach of the safeguards outlined in the confirmation; the collaboration among firms exceeds the scope of the exemption; the confirmation was based on false information or the original reason for granting the confirmation no longer applies.

The exemption is enforceable for a period of five years from the date of publication or confirmation, unless extended or revoked earlier by the commission.

SA is positioning itself to build a more resilient export economy by leveraging minerals, shifting markets, and enabling legal collaboration. The Draft Export Exemption is a key instrument in this effort, offering a pathway for lawful, co-ordinated and competitive export growth for SA.

The country would also do well to invest in a baseline infrastructure such as rail, ports, energy, water and roads to unlock efficiencies which will enhance the competitiveness of South African producers.