THE STATE OF SOUTH AFRICA’s TRADE POLICIES

steel tariffs and economic stagnation

by Gerhard Papenfus

The recent increase in steel import duties highlights yet another instance of restrictive policies that impact growth and limit consumer choice in South Africa.

In The Daily Friend, Martin van Staden references Dr. Morné Malan from the Free Market Foundation (FMF), who explains that South Africa’s emphasising of “localisation” over competition has created a system where local industries operate with “significantly elevated levels of effective protection both from international as well as domestic competitors.” According to Malan, this situation allows businesses to rely on rent-seeking privileges from the state rather than on their own ability to introduce value into the market.

Malan goes on to make a strong point, calling it “an uncomfortable truth that few people want to hear,” that “uncompetitive local industries should be allowed to die.” Without state support, he argues, these companies lack the market incentives to improve quality and value. Many consumers would still prioritise quality, and the best products would prevail even without the government’s enforced loyalty to local goods.

In this environment, Malan suggests that consumers are essentially forced to purchase specific products under the guise of supporting local industry, even as disposable income levels are already constrained by “decades of anti-growth policy.” He questions whether government efforts should instead focus on “slave labour or subsidies that foreign governments provide…to make them artificially competitive.” Without addressing these global imbalances, local businesses will continue to face challenges in competing on the international stage.

A Government of National Unity (GNU) with limited impact

The formation of the Government of National Unity (GNU) brought some hope for fresh economic reforms, yet van Staden reflects that “the first 100 days of the Government of National Unity (GNU) have been good for sentiment, but on the whole fruitless for fundamental policy reform.”

He observes that “the first four months of the GNU has signaled…that fundamental policy change is not on the new government’s agenda. ‘Not rocking the boat’ appears to be the name of the game.”

Without a clear shift in policy direction, protectionist measures like these steel import duties will continue to restrict economic progress, leaving millions unemployed and perpetuating economic stagnation.

For South Africa’s economy to advance, the GNU must consider trade policy reforms that genuinely support competition, allowing industries to grow, innovate, and succeed on their own merits.

Gerhard Papenfus is the Chief Executive of the National Employers' Association of South Africa (NEASA).

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