The World Bank suggests key trade policy reforms for South Africa in a new report, saying international trade can be a powerful force for economic growth and poverty reduction, while also strengthening the economy’s resilience to shocks.
In a report titled Unlocking South Africa’s Potential: Leveraging Trade for Inclusive Growth and Resilience, the World Bank says the report aims to support trade policy dialogue with the government.
It explores reforms to promote trade that can support robust, inclusive, and green economic growth after years of unprecedented supply-chain disruptions during the Covid-19 pandemic and ongoing uncertainties related to increasing geopolitical tensions and climate change.
Over the past 15 years, South Africa has lost its economic growth momentum, systematically underperforming other middle-income economies, according to the World Bank. The bank says trade can play a key role in supporting higher and more inclusive growth as South Africa needs to raise its economic potential.
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The researchers from the World Bank identified seven key findings, including South Africa’s export performance and areas for increased export potential:
The report also contains pointers on how to implement an ambitious reform agenda, emphasising that achieving better results will require a willingness to do things differently and support experimentation.
The researchers point out that In recent years, the DTIC (Department of Trade, Industry and Competition), and, in turn, trade policy, increasingly focused on localisation and increased domestic value addition. However, the report and other recent studies indicate the potential net gains from localisation remain limited in the context of low growth and especially constrained domestic demand over the medium term in South Africa and other SACU members and of the costs on consumers associated with restricting competitive imports.
According to the report, South Africa can increase its regional and global exports by modernising the policy framework, reviewing the appropriateness of the current institutional structure and identifying cross-government priorities for integration into Operation Vulindlela.
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The researchers say there is an urgent need to review the overall trade policy framework dating from 2010, incorporating the state of the art in evidence, analysis and international best practices. The global political, economic and trade landscape has changed significantly over the past four years and needs an anchoring document to inform policies.
For example, they say, the current trade policy hardly touches on trade in services, let alone issues such as climate change. Moreover, most policymaking was done through sectoral master plans, while export constraints are often not sector-specific and require an institutional framework to address crosscutting issues that affect firms.
The definition of priorities through a new trade strategy in turn can inform an assessment of potential institutional changes and reforms that could improve outcomes, the researchers say. For example, there may be merit in broadening the National Trade Facilitation Committee and more actively integrating the private sector.
Another example is to strengthen the DTIC export promotion division and the industry export councils to identify market opportunities and to identify and mobilise to remove export constraints.
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The researchers argue that major targeted interventions could be spearheaded within the context of Operation Vulindlela, which would provide additional visibility and ensure a cross-government mechanism with top-level government support.
The researchers concluded by saying as shown in the report, the foundations for trade to drive inclusive growth are in place. “South Africa has enormous potential to drive Africa’s integration and industrialisation forward, but the cost of inaction is high. Realising this potential will require a shared and coordinated effort by the country’s leadership, government departments and agencies, the private sector and workers.”
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