BEE certainty should spur inbound investment Trans-regional market the focus

CLIVE EMDON THE TRANS-regional export market will be the likely focus of considerable new interest by US companies in trade with South Africa, says Craig Allen, director of the US Commercial Services in Johannesburg. “Southern Africa is at the start of economic take-off, and growth in the region is sustainable despite pockets of disorder and economic weakness,” says Allen. “One has to take the time to articulate where the opportunities are and where the risks lie and to differentiate between countries.” He says South Africa’s economic growth is highly dependent on its external sector where trade, portfolio investment and foreign direct investment are important engines of growth. New interest in South Africa is based on the information that black economic empowerment (BEE) codes are now available to investors. He says the release of the BEE codes has reduced uncertainty and thus should spur inbound investment. Allen describes South Africa’s trade relationship with the US as healthy and robust – the US is South Africa’s 2nd biggest export partner and 3rd largest supplier. South African exports rose by 27.5% in 2006 to R49.2 billion (US$6.9bn) and imports from the US by R12 % to R28.8bn (US$4.03bn) in the 11 months January to November. In the first 10 months of 2006 South Africa’s net surplus was of the order of US$3 billion (R21.4bn) – more than 1% of its GDP. Allen said that as a result of the US African Growth and Opportunity Act (Agoa), 99.4% of all South African exports to the US were duty free. Describing this as a huge bonus he said: “Not many countries have open trade without reciprocity.” The first attempt by the US to secure a free-trade agreement with South Africa failed but more narrow negotiations are currently being pursued again. Of the US$6.9bn in exports to the US some 40% was precious stones and gold while another 10% constitute iron and steel. Commenting on the competitive edge with the EU, he said the US had not lived up to its potential investment in South Africa. Allen referred to the “excessive European domination” that had resulted from EU companies taking the place of US companies that left South Africa during the years of apartheid. “They consolidated their position over 20 years or more – with high prices, poor quality and insufficient investment. We can do a lot better that that.” Agoa is a United States Trade Act that significantly enhances US market access for 38 Sub-Saharan African (SSA) countries. The Act originally covered the 8-year period from October 2000 to September 2008, but amendments signed into law by US President George Bush in July 2004 further extend Agoa to 2015.