South Africa should shift export focus from US trade to diversification

Diversification is not the same as replacement; rather, it should be viewed as building upon or expanding into other markets

In the wake of the trade friction presented by US President Donald Trump’s latest adjustment to his “Liberation Day” import tariffs, which are now at about 30% and pose profound challenges for SA exporting businesses, the government has signalled that work will soon begin on an export diversification strategy for the country. This would be a way to spread the risk, given that trade fragmentation remains a persistent global theme.

However, since May, much of the effort by the SA authorities has been focused on US issues, with limited work on the export diversification approach. This should not have been the case; the ideal approach is a simultaneous process, where export diversification continues while other teams manage US trade relations.

One could argue that export diversification is where the government should be directing most of its energies. There are always risks associated with being overconcentrated in a few markets, as disruption in those markets could have effects on growth and employment.

SA must therefore diversify its exports away from the US. To be clear, diversification is not the same as replacement; rather, it should be viewed as building upon or expanding into other markets.

In the case of SA’s agriculture, while accounting for just 4% of exports of $13.7bn from 2024, the US remains vital and concentrated in a few critical industries, including citrus, nuts, table grapes, wine and ostrich products. Given the existing relationships and logistical arrangements, the US relationship cannot be replaced overnight. The market must be nurtured, navigating the friction and advocating for lower tariffs, ultimately leading to a trade agreement.

Export diversification will take time to materialise. The Department of Trade, Industry & Competition, which leads the effort to expand exports, will need to begin this process.

It is unavoidable in gaining a market advantage vis-à-vis competitors to negotiate bilateral trade agreements. These create better market access opportunities while also exposing different sectors to international competition, thereby forcing them to be competitive.

Countries build better when they can uncover their comparative advantage and create a competitive edge, something that is only possible through competition and essential government support. This pivot will require increased human capital at the department, a shift in incentives to allocate resources towards market development and export promotion initiatives, and a change in the template from ideologically driven frameworks to more pragmatic approaches to trade in a changing global landscape.

With clarity on the export diversification strategy, the industry can also rise to the challenge and provide support. Though the government stated its intention to work on export diversification in May, there has been minimal progress, as the energy has primarily been devoted to US matters. We need to start laying the foundations for SA’s long-term resilience, and diversification is a key instrument in achieving it.

When the export diversification process finally gains momentum, China, India, and the broader Middle East are some of the markets SA’s agriculture would benefit immensely from in terms of deepening trade. China has recently signalled its willingness to lower tariffs for goods imported from African countries.

However, China’s decision to exclude Eswatini from potential trade benefits also complicates SA’s standing, as the government would normally negotiate trade matters as part of the Southern African Customs Union, which involves Eswatini.

Ultimately, SA must also enhance its human capital in trade matters and expedite its efforts on export diversification, while consistently engaging with the US. Trade is crucial to the country’s long-term agricultural growth and broader economic development.

Written for and first published in the Business Day.