Africa is being forced to look towards itself in the current global “chaotic” trade environment, with the US introducing punitive measures against countries that do not toe the line the American way.
The South African government failed to secure a more favourable trade deal with officials from US President Donald Trump’s administration by Friday, 1 August. As such, South African exports are now burdened with a 30% tariff.
Rob Davies, former minister of trade and industry and member of the African Continental Free Trade Area’s (AfCFTA’s) trade and industrial development advisory council, said the current global conjuncture is adding to the imperative for collaboration and coordination within the African trade area.
Policy tools
“Many of the rules preventing us from using policy tools to increase our value chains are being weakened and in fact being jettisoned by the developed world for their own reasons. The US has completely upended the system,” said Davies in the closing session of the 2025 Trade and Industrial Policy Strategies (Tips) Forum in Sandton last week.
Countries such as Indonesia have taken advantage of the weakened enforcement of trade rules. The country insisted on export taxes on the export of nickel as a raw material. It also insisted on some levels of beneficiation before export.
Davies said information at his disposal suggested that Indonesia saw a 30-fold increase in value from its nickel value chain just from smelting the raw material.
The incentives for integration and collaboration in Africa will have to be in the design of the policies and programmes of the AfCFTA agreement.
“The incentive that is not available is someone playing Father Christmas. There is no one (who) is going to throw money around and mobilise everyone that way,” said Davies.
Benefits of collaboration
Davies said Africa’s combined gross domestic product makes it the world’s eighth-largest economy.
China and India, the Asian countries leading the charge in terms of industrialising, have been relying on their large domestic market and the growing prosperity of their populations as the key drivers for industrialisation.
African countries must be able to see the benefits of industrialisation and that it’s worth pursuing rather than continuing in the fragmented way the continent has been doing up to now, said Davies.
Professor Faizel Ismail, chair of the AfCFTA trade and industrial development advisory council, said it will be a challenge to implement a free trade agreement at a time when there is more scepticism about free trade agreements than ever before.
“We must take the scepticism seriously, because trade did not always increase wealth and prosperity. Trade always carries costs and benefits.”
Ismail said implementation must be driven through industrial value chains. As industries build cooperation and connections across the continent, they will identify the barriers that need to be addressed.
These may be non-tariff barriers such as standards, hard infrastructure challenges such as roads or ports or soft infrastructure such as issues relating to customs.
Push-back
Neva Makgetla, senior economist at Tips, said experience has shown that if the main aim is to expand trade, countries which are already more advanced in terms of industrialisation will benefit at the cost of other countries.
It can even increase inequalities within the region. A country such as South Africa could benefit in the short term, but it could also face push-back that could result in the end of the free trade agreement.
This happened in East Africa where there was push-back against the role of Kenya, and even in the Southern African Customs Union. Countries like Botswana and Namibia introduced tariffs on SA exports because they felt they could not compete and they never would compete if they were unable to protect their own industries.
SA needs to realise that the African market is relatively poor. SA’s GDP per person ratio to that of our neighbours is around 6:1. In the Brics region it is around 2:1.
“That means that if it comes to supporting infrastructure or suppliers, we must bear a bigger burden. The region does not have other partners that we can work with to achieve our mutual aims,” said Makgetla.
The development of value chains will require trade-offs, and the continent will have to deal with them in terms of our longer-term aim of developing the region. “Otherwise, we will never achieve the levels of growth we hope to achieve or the levels of development that we need,” she added. – Amanda Visser
