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Protectionist policies or trade wars? 

Trade

South Africa’s decision not to allow foreign nationals to drive a South African registered truck using a foreign professional driving permit has further put into question the commitment of SADC countries to the regional and African integration agenda. Some in the region are of the view that South Africa may indulging in some economic espionage disguised as protectionist trade policy or law.  

Protectionist approaches by many African countries make many doubt statements like these: “The African Continental Free Trade Area (AfCFTA) presents a major opportunity for African countries to bring 30 million people out of extreme poverty and to raise the incomes of 68 million others who live on less than $5.50 per day”. This is expressed in a recent report by the AfCFTA, of which many African countries, including Botswana and South Africa, are party to. Do these beautiful statements mean anything to African leaders, or the very institutions that sponsor such statements?  

Whilst South Africa’s Minister of Transport, Fikile Mbalula made it clear that the foreign permits for truck drivers is the main issue that truck drivers in South Africa are actually raising and lobbying government, the decision has sparked economic and social debate. 

As things stand, the law barring foreigners is before the South African Parliament for comments and should be passed before the end of November. According to media reports from South Africa, tankers fall under this category, this will affect transportation of fuel to other SADC countries such as Botswana. “Currently most of the trucks in the region are South African registered. Botswana has very few locally registered trucks and it will take time to build capacity in time. If not properly managed, the move by South Africa could cripple Botswana when it comes to fuel supply,” observed a truck owner based in Botswana. 

Nevertheless, countries such as Botswana and Zimbabwe have some of the most pronounced protectionist policies meant to ring-fence certain industries for locals. Consequently, the policy direction of other SADC countries are said to be playing a significant role in the attitude adopted by South Africans. However, high unemployment rate and economic competition among SADC countries are said to be other factors that could be pushing the nationalist policies. In South Africa, some politicians blame (illegal) migration, mostly from Zimbabwe, as the source of their problem.

Botswana has a protectionist policy or law seeks to ring-fence business activities reserved for locals, and “perpetrators” can be prosecuted. A statement, dated 3 November 2021, issued by that country’s Ministry of Investment, Trade and Industry highlighted some of the businesses that include wholesale retail and filling stations (petroleum). The protected list has 21 business crafts, ranging from bread and confectionery to furniture.

Furthermore, in South Africa, President Cyril Ramaphosa signed the Private Security Industry Regulation Amendment Act last month. Part of its provisions is that all security companies should retain 51% South African ownership. The act also gives the police minister the power to change the ownership percentage if he deems it a national security issue.

“If foreigners interested in these so-called sub-sectors of the economy reserved for locals are taxed more than the locals that could work. It means that foreigners would have to be exceptionally good at their craft to compete with locals instead of shutting them out, at the same time risking poor service delivery,” Minister Dhlamini said.

Inward looking and narrow policy decisions by some SADC countries, including Botswana, South Africa, and Zimbabwe seriously undermine the regional integration agenda. In addition, they spit on the face of the AfCFTA. For the AfCFTA, it has been observed: “The African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans.

The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers—women and men, skilled and unskilled—across all countries and sectors, ensuring the agreement’s full benefit,” said Albert Zeufack, Chief Economist, Africa. It is evident from the actions of many African countries through their protectionist policies that are not aligned to the regional and continental trade agenda that theirs is just lip service when it comes to institutions such as AfCFTA and others.

Meanwhile, in the case of South Africa’s latest decision, there is another view from countries such as Botswana. While South Africa may from the surface be doing what her SADC counterparts are doing to shield her citizens, the latest actions are viewed as a ploy to take control of the fuel supply situation in the region. Some SADC countries, including Botswana are said to be looking into the idea of improving fuel security by ramping up stock and building more storage facilities. South Africa is said to be cognisant of these developments and is aware that it could affect her trade balance.  

Protectionists usually couch their claims in terms of saving particular industries from imports, the facts show, however, that tariffs and quotas seldom save jobs for long or preserve the competitiveness of the industry to be “saved.” Meanwhile, of course, the consumer suffers through higher prices.

Proponents of protection often claim that it is needed to preserve jobs in particular industries. But this is a very expensive means of saving jobs—it raises consumers’ costs for both imported goods and the domestically produced goods with which they compete. The consumer cost in 1980 per job saved for quotas on imported TV sets was estimated at $74,155; for tariffs and quotas on footwear, $77,155; and for tariffs and quotas on carbon steel, $85,272. In 1984, American consumers paid an estimated $53 billion in higher prices because of the import restrictions levied that year.3

John M. Culbertson (1990), writing in the “The Folly of Free Trade”, says “As high as they are, estimates of the costs for each job saved actually exaggerate the efficacy of protectionist measures in achieving employment objectives. Protection advocates are usually more interested in saving the jobs of those already working in a certain industry than in preserving industrywide employment generally. But quotas do not save specific jobs.

Protectionists tend to believe that by diverting demand to domestic corporations, quotas will improve their profitability and prevent plant closures. Better prospects for profitability that attract investment, however, may induce a change in plant location or the purchase of more automated machinery. To the extent that protection encourages such a response, it can exacerbate dislocation and reduce employment”.

According to the SADC website, “the main objectives of SADC are to achieve development, peace and security, and economic growth, to alleviate poverty, enhance the standard and quality of life of the peoples of Southern Africa, and support the socially disadvantaged through regional integration, built on democratic principles and equitable and sustainable development”.

The former Executive Secretary of SADC, Dr Tax, prefacing a SADC commemoratory publication  noted that a total of 33 regional protocols covering various areas of cooperation have been signed since the transformation of SADC from a Coordination Conference to a Community in 1992. “Following the signing of the SADC Declaration and Treaty in 1992, the Region has shown commitment to deeper integration through strategic plans such as the Regional Indicative Strategic Development Plan 2010- 2020; Strategic Indicative Plan for the Organ on Politics, Defence and Security Cooperation 2010-2020; SADC Industrialisation Strategy and Roadmap 2015-2063; SADC Regional Agricultural Policy 2015; and SADC Regional Infrastructure Development Master Plan 2012”.  However, some argue that SADC leaders are good at presenting ideas on paper but implementation is always a challenge. The protectionist approaches to trade by SADC countries undermines the sentiments carried in a host of SADC literature. 

In conclusion, proponents of protectionist policies claim the unlevel playing field argument, evidently appealing to self-interest.  It is evident that if not guarded, protectionist policies, if implemented by powerful economic players could hurt smaller economies and or sabotage their efforts to even their trade balance. The world is dominated by nationalistic economic policies; the competitive, open environment assumed by international trade economists simply doesn’t exist.  

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