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07 April 2025 Photo Supplied
Dr Calvin Mudzingiri
Dr Calvin Mudzingiri, Assistant Dean: Faculty of Economic and Management Sciences, University of the Free State, Qwaqwa Campus.

Opinion article by Dr Calvin Mudzingiri, Assistant Dean: Economic and Management Sciences, University of the Free State, Qwaqwa Campus 


The sudden hike of import tariffs by US President Donald Trump and his administration to countries across the world is set to reduce the volume of goods traded and affect citizen welfare across the globe. The Trump administration implemented a global 10% import tariff and a varying targeted reciprocal tariff to a host of countries, including South Africa. The reciprocal import tariff to be levied on South African export goods to the US is set at 30%. Historical data show that yearly trade between SA and US amounts to $23 billion and the US is SA’s the second biggest trading partner after China. The high tariff will reduce the competitiveness of South African export goods to American markets, leading to reduced demand of SA exports in US markets, low income to firms, job losses, low income to households and ultimately lower South African economic growth.

 

SA and US trade

South Africa exports platinum, locally assembled cars, raw aluminium, ferroalloys and agriculture products, among other goods, to the US. The implication of the US administration’s 30% tariff hike could result in job losses in the mining, automobile, agriculture and many other industries. More income losses to SA agricultural exports can also be experienced if the African Growth Opportunity Act (AGOA) expires in September 2025, if the US congressmen decide not to renew the agreement. Given the low economic growth rate in South Africa in 2024, which is estimated at 0.6%, the tariff hike by the US will exacerbate sluggish economic growth and recovery from the COVID 19 pandemic. 

Statistics also show that SA imports energy products, machinery, vehicle, industrial and other consumer goods. The goods and services SA imports from the US play a critical role in developing and sustaining local industry. SA can decide to source the goods from other markets and if this happens with all economies where tariffs were imposed, the US will be worse off. There is a possibility that economies which received a tariff hike from the US will implement a reciprocal tariff hike to the US reducing the volume of global trade. The reduced trade volumes have dire implications for job creation, income generation by firms and households, making citizens worse off.


US current trade policy

It is important to note that President Trump administration’s trade policies are premised on a trade notion synonymous to ‘mercantilism’, which was practised in Europe between the 16th to 18th centuries. Under mercantilism, an economy aims to maintain a trade surplus, the government regulate the economy, discourage imports (in the case of the US using tariff hikes) and promote growth of home industries among other initiatives. Conventional economics wisdom has proved that policies pursued by the Trump administration of protectionism are a breeding ground for trade wars. There is great potential of fellow trading partners retaliating and if that happens, global citizens will be made worse off as they will be forced to pay high prices for goods due to additional costs driven by tariff hikes. In addition, US industry relies on raw materials from other countries. If the suppliers of raw material resources retaliate, the production cost model of US firms will rise, reducing export competitiveness of US exports.

Trump’s administration is calling for firms across the world to move and produce goods in the US to avoid tariff levies. The action works against the benefits of free trade and can affect firms’ comparative advantages. The production cost structure in the US can be higher than in other countries leading to firms realising low profits if they move to the US. It is essential to note that free trade with absolutely no trade barriers will enhance the welfare of citizens at large, since goods and services will be purchased at low prices. The US government’s act of over-regulating trade can limit economic growth not only of other countries but even that of the US economy.

 

Options for the SA government

In the face of trade adversity, the SA government must not fold its hands and do nothing. It is enlightening to note that the authorities have already initiated diplomatic and trade negotiations. Negotiations can possibly focus on tariff reduction, maintaining the AGOA, and delving deep in the logic used to arrive at the 30% tariff hike. The diplomatic initiatives must encompass improving perceptions and clarity of SA policies such as the Expropriation Act which is one of the reasons cited by the US administration in ratcheting the tariff trade war.

South Africa must re-orient its trading patterns and partnerships. The aggregate world gross domestic product (GDP) is greater than the US total production for goods and services. There is need for SA to improve trade relations with other economies to broaden its trade base. The current frosty trade relationship between SA and the US presents a window to strengthen trade with the EU, Asia, BRICS plus, Africa, and any other economy willing to get into trade partnerships. SA must explore other markets where the export goods still enjoy competitiveness.

To ensure economic resilience to trade wars in the long run, SA needs to seriously invest in research and development that promote value addition of local production, enhancing local production and technology advancement that can stimulate economies of scale, which can boost competitiveness of export goods. Competitiveness can be further enhanced by improving energy production efficiency, which is a crucial input of goods and services production. Developing a powerful and skilled human capital base can lead to labour productivity efficiency, further enhancing competitiveness. SA has a dilapidated infrastructure ranging from roads, rail, buildings and industry among others. Improving the infrastructure will go a long way in improving local production, leading to creation of jobs and improved incomes for households.

Boosting local economic activity can stimulate local consumption of goods as household income improves. If the incomes of SA citizens improve, there is a potential to increase local consumption. Goods meant for export markets can end up being consumed in the domestic markets, providing a homemade solution to dwindling export goods markets. The SA government must consider developing and supporting new industries that can compete in the local and international markets. In this way, the trade challenges posed by unfriendly US administration trade policies can present opportunities to the SA economy in the long run.

News Archive

DF Malherbe Memorial Lecture
2005-05-19

DF Malherbe Memorial Lecture: Language and language activism in a time of transformation (summary)
Proff Hennie van Coller and Jaap Steyn

Language activism necessary for multilingualism
The awareness is growing that language activism will be needed to bring about a truly democratic multi-lingual society. What is quite clear is that a firm resolve must continuously resist the concentrated pressure on Afrikaans-medium schools (and universities) to allow themselves to be anglicised through becoming first parallel medium, then dual medium, and finally English medium institutions.

Proff Hennie van Coller and Jaap Steyn said this last night (Wednesday night) in the 24th DF Malherbe Memorial Lecture at the University of the Free State. Prof van Coller is head of the Department Afrikaans, Dutch, German and French at the UFS. Both are widely honoured for their contributions to Afrikaans and the promotion of Afrikaans.

They discussed three periods of transformation since 1902, and said about the current phase, which started in 1994:  “Besides all institutions and councils having to be representative of South Africa’s racial composition, places of education were required to open their doors. Quite rapidly this policy has had the result that schools and universities may be solely English medium, but not solely Afrikaans medium. Afrikaans medium institutions — if they claim the right to remain Afrikaans — are quickly branded racist, even though their student body may include all races.

“Education departments are presently exerting great pressure on Afrikaans medium schools to become double or parallel medium schools.  Parallel medium education is an equitable solution provided it can be sustained. Established parallel medium schools, such as Grey College in Bloemfontein, have catered even-handedly for English and Afrikaans speakers for decades. But the situation is different in the parallel medium (and still worse in the double medium) schools that spring up usually at the behest of a department of education.

“Afrikaans schools are converted almost over-night into parallel or dual medium schools without any additional personnel being provided. Depending on the social environment, a parallel medium school becomes reconstituted as a dual medium school on average in five to eight years, and dual medium school becomes an English-only school in two to three years. Some Afrikaans medium schools have become English medium in just three years.

“Though the Constitution recognises mono-lingual schools, officials in the provinces insist that Afrikaans schools become dual or parallel medium; English medium schools are left undisturbed. One must conclude that the tacit aim of the state is English as the sole official language, despite the lip-service paid to multi-lingualism, and the optimistic references to post-apartheid South Africa as a ‘rainbow’ nation.”

They said a recent study has shown that the 1 396 Afrikaans schools in the six provinces in 1993 have dwindled to 844. The fall off in the Free State is from 153 to 97; in the Western Cape from 759 to 564; in Gauteng from 274 to 155; in Mapumalanga from 90 to 3; in the North West from 82 to 13; and in Limpopo Province from 38 to 12.

They said the changes at universities, too, have been severe, as university staffs well know. Ten years ago there were five Afrikaans universities. Today there are none. The government demanded that all universities be open to all, which has meant that all universities have had to become English medium. And no additional funding was forthcoming for the changes. The government policy amounts to a language “tax” imposed on the Afrikaans community for using Afrikaans.

“Only when all schools (and universities) are English will the clamor cease. Academics and educationists are beginning to speak openly of forming pressure groups to save Afrikaans schools, and of using litigation as one of their methods. 59% of Afrikaans parents have said they would support strong action if Afrikaans were no longer a medium of instruction at schools.”

 

 


 

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