Country Listing

South Africa Table of Contents

South Africa

Foreign Trade and Investment

South Africa's foreign trade and investment were affected by sanctions and boycotts, especially during the 1980s and early 1990s. These measures included a voluntary arms embargo instituted by the United Nations (UN) in 1963, which was declared mandatory in 1977; the 1978 prohibition of loans from the United States Export-Import Bank; an oil embargo first instituted by OPEC in 1973 and strengthened in a similar move by Iran in 1979; a 1983 prohibition on IMF loans; a 1985 cutoff of most foreign loans by private banks; the United States 1986 Comprehensive Antiapartheid Act, which limited trade and discouraged United States investors; and the 1986 European Economic Community (EEC) ban on trade and investment. The Organization of African Unity (OAU) also discouraged trade with South Africa, although observers estimated that Africa's officially unreported trade with South Africa exceeded R10 billion per year in the late 1980s.

The most effective sanctions measure was the withdrawal of short-term credits in 1985 by a group of international banks. Immediate loan repayments took a heavy toll on the economy (see External Debt, this ch.). More than 350 foreign corporations, at least 200 of which were United States owned, sold off their South African investments. In 1991 both the EEC and the United States lifted many official sanctions in view of measures taken by Pretoria to begin dismantling apartheid. Foreign investors were slow to return to South Africa, however; most banking institutions considered the country too unstable, and foreign corporations faced high labor costs and unrest if they tried to operate there.

In 1994 and 1995, many of the United States companies that had sold off shares or operations in South Africa in the past decade returned to do business there. By early 1996, at least 225 United States companies employed more than 45,000 South African workers.

Foreign Trade

Throughout the twentieth century, South Africa's economy has depended heavily on foreign trade--a trend that continued even under pressure from international sanctions and recession. Gold dominated its exports to the point that the government occasionally intervened to promote nongold exports. During the 1970s and the 1980s, the price of gold directly affected the value of the rand and, therefore, the prices at which exports were sold overseas. As the gold price fluctuated, the exchange rate of the rand rose and fell, and export revenues responded accordingly. Under these uncertain conditions, few manufacturers were willing to risk large investments to increase their export capacity.

One of the 1970s programs that promoted nongold mineral exports was the development of new harbor facilities, railway lines, and mines, which helped to increase revenues from the export of metal ores at the impressive rate of nearly 18 percent per year, on average, during the 1980s. Also during the 1980s, the Board of Trade and Industry implemented structural adjustment programs for various industries and a General Export Incentive Scheme, which reduced import tariffs on raw materials to be used to manufacture goods for export, in proportion to their value and local content. One effect of these programs was to reduce the importance of gold in South African exports from 56 percent of revenues in 1980 to 36 percent in 1992, according to government statistics. Gold exports increased slightly in 1993 and 1994, as a fraction of export revenues, but remained below 40 percent of the total.

The government also took direct action to limit imports, in part to protect local industries. The government has the power to do so through tariffs, surcharges, and import licenses. Import tariffs provided some protection against dumping by foreign manufacturers. Import surcharges helped reduce import demand and raise government revenues. In August 1988, the surcharge on some items was raised as high as 60 percent in a bid to hold down imports, but in May 1989 the surcharge on capital goods was eased from 20 percent to 15 percent, and most import tariffs were being phased out in the 1990s.

Government pressures in the 1970s and the 1980s succeeded in reducing South Africa's import levels but did not succeed in changing the pattern of imports. By 1987, when total imports were down about 30 percent from their peak 1974 volume, industrial inputs continued to dominate imports. Machinery was the most important among these, followed by vehicles and transportation equipment, a variety of chemicals, and oil. After the OPEC boycott of 1973 and Iran's cutoff of oil to South Africa in 1979, however, official figures on oil trade were not available. Observers estimated that 1987 oil import costs reached US$1.75 billion.

The pattern of trade dominated by gold exports and industrial imports continued in the early 1990s (see table 9; table 10, Appendix). The government continued to promote exports and to limit imports in an effort to create the trade surplus (and foreign exchange reserve surplus) necessary for debt repayment. In 1993 exports were valued at roughly R79.5 billion (almost 35 percent of GDP) according to official estimates, and imports were valued at approximately R59 billion. In 1994 exports were valued at an estimated R89.1 billion, and imports, at R75.9 billion. In early 1995, imports began to outstrip exports, and South Africa's trade surplus declined at an uneven pace for the rest of the year. South African Reserve Bank estimates in early 1996 placed the value of exports in the previous year at R81 billion in merchandise and R20.2 billion in gold. Merchandise imports were about R98.5 billion, leading officials to predict that the trade balance could lapse into deficit. In early 1996, however, exporters took advantage of the sharp depreciation of the rand, and the trade surplus rose sharply. In dollar values, however, the trade balance remained almost flat as the benefits of the lower rand were offset by lower commodity prices

Foreign trade delegations began arriving in South Africa as international sanctions were being lifted in the early 1990s. Among its most dramatic turnabouts, South Africa sent a delegation to Moscow in mid-1991 to discuss strengthening trade ties, and for the first time, South African companies participated in a trade fair there.

South Africa's main trading partners in the mid-1990s are West European countries, the United States, and Japan. Members of the European Union (EU--see Glossary) receive roughly 40 percent of South African exports and provide one-third of South Africa's imports. In 1994 Switzerland, an important destination of South African diamonds, purchased the largest share of South African exports. Other markets for South African goods are the United Kingdom, the United States, Japan, and Germany, in that order. Leading sources of South African imports are Germany, the United States, the United Kingdom, Japan, and Italy.

The EU accorded South Africa duty-free entry on most of its industrial exports in early 1995, and the two were negotiating terms for the purchase of South Africa's agricultural products. In 1996 the EU granted South Africa a qualified membership in the Lomé Convention, to take effect in 1997. The Lomé Convention gives African, Pacific, and Caribbean countries preferential access to European markets.

South Africa's trade with the United States increased rapidly after 1994. In 1995 South Africa imported roughly US$2.75 billion worth of United States exports, mostly manufactured goods. This represented more than half of all United States exports to Africa. South Africa exported roughly US$2.21 billion worth of metals, alloys, and precious stones to the United States in that year, representing the only significant source of African products other than petroleum.

South Africa's trade with the rest of Africa, the natural market for its manufactured goods and agricultural products, was carried on both openly and clandestinely until the early 1990s, because of the OAU's long-standing trade ban. As commercial ties expanded in the 1990s, African countries purchased about 10 percent of South Africa's exports; Zimbabwe, Zambia, and Mozambique were the largest African markets. Only Zimbabwe supplied significant exports (primarily tobacco) to South Africa.

Official South African trade statistics include all members of the Southern African Customs Union (SACU). SACU arose out of a customs agreement between South Africa and the territories that became Botswana, Lesotho, and Swaziland, dating back even before the Union of South Africa was formed in 1910. SACU was formally established when the agreement was renegotiated in 1969, and Namibia joined the customs union when it became independent in 1990. Goods move freely among SACU member states, which share a common accounting procedure and impose a common tariff structure. Each country contributes to a shared fund and receives a fixed portion of revenues based on its approximate share of production and consumption. In the mid-1990s, South Africa was considering either dismantling SACU or restructuring its participation in the alliance.

Data as of May 1996

Country Listing

South Africa Table of Contents