LETTER: AfCFTA opportunity is paramount

Trade, industry & competition minister Ebrahim Patel would do well to heed the call of his department’s lead negotiator on the African Continental Free Trade Agreement (AfCFTA), Morgenie Pillay, who penned a sterling rebuke of his localisation fervour last week (“SA is dancing the tango at the ballet with its localisation plan”, August 25).

Pillay joins an expanding list of commentators and opposition politicians who have voiced their opposition to this ill-conceived attempt to take SA back to Cold-War era Sino-Soviet economic policy.

In an interview with the Financial Mail in May Peter Attard Montalto of Intellidex stated that: “If you don’t have capacity, you’ll produce [goods of] lower quality, or prices will shoot up or, more likely, there will be some combination of the two”.

In his Business Day column Peter Bruce opined in June that: “Patel’s approach is ideological, not practical, which is why he is ultimately a threat to his boss. He wants to control industry from the top down and the bottom up. If it is technically possible to make something here then we should, even if that means distorting the market and prices” (“Screw it, let’s jump left, and do the time warp”, June 2).

Most recently Peter Leon, Africa chair at Herbert Smith Freehills, highlighted the possibility that the government’s plans may be in contravention of several international trade law obligations emanating from the World Trade Organization’s General Agreement on Tariffs & Trade and the General Agreement on Trade in Services (“Localisation is no panacea for SA’s economic woes”, August 16).

In her piece Dr Pillay raises critical questions related to the government’s plan that warrant a considered response from Patel. Whether that will be forthcoming remains to be seen. The most fundamental is: does government’s pursuit of localisation not undermine the entire purpose of the AfCFTA, which is to liberalise trade and deepen and expand continental value-chains?

While domestic economic pressures are at a record high, with SA holding the unenviable title of world leader in unemployment (44.4% as per the expanded definition), R50bn in GDP was wiped from the economy during the failed insurrection in July. Not to mention the 17-month lockdown South Africans have had to endure, which has cost many both their lives and livelihoods.

As Pillay rightly points out, the knee-jerk reaction under the guise of the Economic Reconstruction & Recovery Plan (ERRP), and its mooted attempt to generate R200bn in value, pales by comparison to the AfCFTA, which gives SA businesses access to a $3.4-trillion market.

Considering her proximity to the negotiations as well as the department, it is telling that she identifies short-term populist thinking as the current zeitgeist within the department. Many have said it, but now it has been confirmed. This appears to explain why, as much as economic reform is touted in spoken word, it is unlikely that it will ever come to be.

Surely, 73 years of state-led economic policy under the National Party and the ANC (albeit to a lesser extent between 1996 and 2007) has taught us that each time we close ourselves off to the world and pursue protectionist policies South Africans lose.

Not only do we lose out on markets to export our goods and services and attract foreign direct investment, we also lose jobs. Moreover, there is this strange belief that we can do what we like and there we will be no consequences. How can we expect other member states to fully co-operate with measures envisioned by the AfCFTA when our government undermines them?

Consider a scenario in which other member states decide to pursue similar localisation policies. The AfCFTA and all the time and effort put into the negotiations will be rendered moot as member states retreat into their own economic laagers.

I suspect there is a more nefarious agenda at play here, something I have previously warned about: the government’s intention to pursue some warped version of neomercantilist trade policy that aims to leverage our superior industrial advantage to use the rest of Africa as a dumping ground for our goods and services. It seems the cosiness with the Chinese government is bearing rotten ideological fruit.

I will be submitting parliamentary questions to Patel to ascertain whether he has consulted Dr Pillay and whether he has considered the myriad socioeconomic consequences cited by her. The DA strongly agrees that the plan should be withdrawn until all of these questions have been answered.

SA can ill afford to compromise all the hard work that has gone into these negotiations and forgo the opportunity the AfCFTA presents to us.

Mat Cuthbert, MP 
DA shadow deputy trade, industry & competition minister

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