By Prof. Busiswe Mavuso
The partnership announcement was led by DIRCO, not DTIC, which suggests it is politics rather than economics that leads
- South Africa runs a R22bn trade deficit with Brazil and free trade would likely worsen it
- SA’s free trade agreements portfolio is thin, with no agreements in place with many regions from the Middle East to East Asia.
- Business stands ready to partner with government on a coherent trade strategy
Last week’s announcement that South Africa had reaffirmed its strategic partnership with Brazil, with ambitions to deepen economic ties, was presented as a diplomatic win. But the fact that it was led by the Department of International Relations and Cooperation (DIRCO), rather than the Department of Trade, Industry and Competition (DTIC), told you something important: this was a political conversation, not an economic one. That matters. South Africa needs a serious trade strategy – one built on analysis of where we can actually compete, not on the optics of summits. Brazil is a case study in why getting this wrong might be costly.
I have written before about the importance of diversifying our trading relationships, particularly since US tariffs policy dramatically increased uncertainty for our economy. International trade is important in our economic growth outlook – we need our goods to be able to reach diverse markets where they can be competitive.
The work we are doing to improve the performance of our logistics system is one part of the competitiveness equation. Being able to get our goods onto ships at low cost makes us more competitive, but that must be complemented by a trade strategy that strikes agreements with suitable markets to remove trade barriers. Without that, markets are closed to us even if we get everything right in our domestic supply chain.
However, any trade agreement involves reciprocity. An agreement can backfire if the reciprocal access arrangements mean our domestic industry is negatively affected by a flood of cheap imports. A trade strategy must focus on markets that offer the right balance – a good market for our goods, without a reciprocal flooding of our market with their goods. Before we rush into a new trade agreement, we must assess the net effect on our economy. South Africa runs a significant trade deficit with Brazil. In 2025, we exported R5.2bn-worth to Brazil, but we imported R27.3bn-worth. Currently, trade is governed by the SACU-Mercosur Preferential Trade Agreement (PTA), which provides tariff relief on specified products, but many goods fall outside the preference rules.
The two countries’ economies have significant overlaps. We both have sizeable automotive, mining, agro-processing, renewable energy, chemicals and pharmaceuticals industries. The risk we face is that Brazil is a much larger producer of several sensitive goods, particularly poultry, sugar and certain manufactured goods such as vehicles. A free trade agreement would remove barriers to those goods flooding our market, threatening domestic production. Poultry is one area that has historically garnered headlines, with cheap chicken imports from Brazil severely affecting local production. Sugar production is also highly sensitive to cheap imports.
On the face of it, the current trade deficit indicates that Brazil would likely benefit more than SA would from free trade between the two countries, assuming both sides increase trade in proportion to the existing ratios. But we don’t know what the supply response would be to free trade. No serious modelling of the bilateral supply response has been published. Before any agreement is advanced, that analysis must be commissioned and made public.
In general, we should want free trade with countries that have quite different economies to our own. For example, many of the countries in the Middle East do not have our manufacturing base and need goods like our agricultural exports. We tend to import oil and other petrochemicals, which we don’t produce much of domestically. So, there is potentially a high payoff to both parties to free trade. Our existing economic partnership agreement with the United Kingdom is an example of a positive trade agreement – we imported R117.8bn from the UK but exported R179.1bn, a healthy trade surplus of R61.3bn. That agreement is not symmetric – SA enjoys preferential access to the UK market but is not required to reciprocate in the short run. This allows SA to protect sensitive domestic industries within the framework of the agreement.
South Africa’s list of free trade agreements is currently rather short. Indeed, we have not signed a new agreement since the UK’s, which arose because Brexit meant it had to strike new agreements outside of the European Union. Negotiations with India have dragged on for many years but not led to anything.
We actually have a poor set of free trade agreements. There are none with key markets like China, India, Japan, Korea or blocs like the Association of South East Asian Nations (ASEAN). Japan in particular is worth examining. It is one of four regions along with Europe, the US, and Southern Africa with which we consistently enjoy healthy surpluses, suggesting competitiveness and scope for leveraging existing strengths, relationships and investment. Our immediate region in SADC is well covered and the African Continental Free Trade Agreement has potential, but is some way off being fully effective. Even our SADC arrangements can be improved – we have been sitting with a surtax in place on many SA goods imported into Zimbabwe since 2012, which adds 25% in taxes on goods going into the country. This has recently been more stringently enforced, resulting in a significant burden on SA-based manufacturers who export to Zimbabwe. This asymmetric treatment clearly harms SA’s trade and government should be using its diplomatic engagements to work with Zimbabwean counterparts to ensure greater balance.
Trade deals can be hugely beneficial. The economic partnership agreement we have with the European Union is a good example of how trade can spur growth. But there are so many more we could be striking if we had a coherent policy and strategy, founded on a clear logic and analysis of what is actually in our economic interests.
SA’s trade agreement portfolio is one of the thinnest for an economy of our size. Fixing that is not complicated – it requires effort by both government and business, and a clear methodology for assessing where we can compete. BLSA has offered to support the building out of a trade strategy and that offer stands. Our exporters deserve more than announcements of intended deals, dressed up as progress, while the underlying work hasn’t been done.
