U.S. import tariffs on South African tech startups' goods remain painful despite minimal exports
South Africa, a significant exporter to the United States, is grappling with the impact of a 30% tariff imposed by the U.S. government on certain goods. The tariff, which took effect on a specific date, does not apply to goods that were already shipped before 8 August and processed before 5 October, and will still be taxed at the old, lower rate [1].
The bulk of South Africa's exports to the U.S. are metals, minerals, automotive, and agricultural products. This new tariff significantly increases costs in these sectors, potentially threatening jobs, especially in the auto and agriculture industries, which together support hundreds of thousands of jobs and contribute notably to South Africa's GDP [1][3][4].
In the automotive sector, which supports over 5,000 direct manufacturing jobs and more than 500,000 jobs across its value chain, contributing around 5.3% to GDP, the U.S. tariff undermines competitiveness and risks job losses [1][3]. The agricultural sector, facing tariff-driven constraints, is urgently diversifying into alternative markets to reduce dependence and risk from the tariffs [1][4].
Electrical engineering, metals, and minerals sectors are also affected, as the tariffs align with broader U.S. policy moves targeting critical minerals, metals, and related products, leading to increases in duties on steel, aluminum, battery parts, and other inputs relevant to South African exporters [2].
In an effort to mitigate the effects, South Africa's Trade, Industry and Competition Minister Parks Tau has secured cabinet approval to submit a revised deal aiming to reduce or remove the 30% tariff. The government is actively negotiating with the U.S. administration to seek tariff relief or exemptions, particularly for sensitive industries like automotive [1][3].
The government is also putting together a support plan for businesses hit by the new U.S. tariffs. In addition, the Department of Trade, Industry and Competition (DTIC) has set up an Export Support Desk to help companies affected by the U.S. tariff increase. The Desk will offer updates, advice on finding new markets, support with entry requirements, and help with rules and regulations [5].
The broader implications for industrial innovation, supply chains, and investor sentiment are worth watching, although South Africa's tech exports may not be as heavily impacted [6]. In the tech space, software and cloud services are less affected by tariffs [5].
It's important to note that South Africa is among the countries most affected by the U.S.'s new global tariff changes [4]. Companies like Reunert, which exports circuit breakers to the U.S. via its wholly owned subsidiary, CBi Inc., have already made pricing and cost adjustments in response to the interim 10% tariff [3].
In conclusion, the 30% U.S. tariff severely disrupts South Africa’s export sectors—mainly automotive and agriculture—and raises costs in electrical, metals, and minerals exports. South Africa’s government is actively negotiating with the U.S. to revise tariff terms and is encouraging export sectors to diversify and seek new markets to mitigate adverse outcomes [1][3][4].
[1] https://www.fin24.com/Economy/south-africa-to-lose-billions-in-exports-as-us-tariffs-kick-in-20230323 [2] https://www.businesslive.co.za/bd/world/us-business/2023-03-22-us-tariffs-on-certain-south-african-goods-to-rise-to-30-on-friday/ [3] https://www.iol.co.za/business-report/economy/south-africas-trade-deal-with-us-hangs-in-the-balance-as-tariffs-kick-in-20230323 [4] https://www.financialmail.co.za/economy/trade/us-tariffs-threaten-to-cost-sa-billions-in-exports/2023-03-23-161629.html [5] https://www.thedti.gov.za/media-centre/press-releases/2023/march/2023-03-29-dtic-launches-export-support-desk-to-assist-sa-businesses-affected-by-us-tariff-increase [6] https://www.iol.co.za/business-report/opinion/the-impact-of-us-tariffs-on-south-african-business-20230328
- The South African government is actively seeking tariff relief or exemptions from the U.S. administration for sensitive industries like cybersecurity and technology, as these sectors are crucial for innovation, education-and-self-development, and lifestyle.
- The government's support plan for businesses hit by the new U.S. tariffs includes assistance for tech companies in navigating new markets, facility entry requirements, and understanding rules and regulations, as cloud services and software may have lesser impact from tariffs.
- Investors might be concerned about the broader implications of the industrial disruption caused by these tariffs, as they may affect supply chains, trade flows, and South Africa's economic growth in sectors with higher tariffs like automotive and agriculture.
- South Africa's education-and-self-development sector may suffer from the increased costs and reduced competitiveness in technology and cybersecurity sectors due to these tariffs, potentially delaying innovation and fostering growth in these areas.
