In a decisive move to cushion its economy from the impact of new 30% tariffs imposed by the United States, South Africa has unveiled a comprehensive, multi-pronged strategy. The Departments of International Relations and Cooperation (DIRCO) and Trade, Industry, and Competition (DTIC) issued a joint statement today, outlining a detailed response that combines diplomatic engagement with a robust package of domestic support measures for affected businesses. This proactive stance signals Pretoria’s commitment to protecting its industries and jobs while aggressively diversifying its global trade footprint.

The tariffs, which came into effect on August 8, 2025, represent a significant challenge for South African exporters. While President Cyril Ramaphosa had previously hinted at government initiatives, the latest announcement provides clearer insights into the “Economic Response Package” designed to mitigate the immediate blow and foster long-term resilience.

The Tariff Tangle: Understanding the US Stance

The imposition of a 30% unilateral tariff on most South African imports by the United States marks a notable shift in trade relations between the two nations. This move, which also includes a specific 25% tariff on vehicles and car parts, has raised concerns across various South African industries. While certain critical mineral exports, such as platinum group metals (PGMs), coal, gold, manganese, and chrome, have been explicitly excluded, the automotive sector, a cornerstone of South Africa’s export portfolio, faces significant disruption. In 2023, South Africa’s automotive exports to the US alone were valued at over US$1.34 billion, with the sector accounting for 53% of South Africa’s total trade surplus with the US.

The US administration has justified these tariffs as punitive measures aimed at addressing trade imbalances and supporting American manufacturing. However, for South Africa, the move appears to carry political undertones. Analysts suggest it could be a response to South Africa’s stance on various geopolitical issues, including the Israeli–Palestinian conflict, its alignment with the BRICS+ currency initiative, and its proposed land expropriation legislation. Despite South Africa’s minimal 0.25% share of total US imports, making the tariffs seem disproportionate, the impact on key South African industries and potential job losses is a serious concern. Initial modeling indicates that up to 30,000 workers could be negatively affected.

The tariffs also mark a departure from the previously favorable trade environment under the African Growth and Opportunity Act (AGOA), which provides eligible sub-Saharan African countries with duty-free access to the US market for over 1,800 products. While AGOA is currently in effect through September 30, 2025, the new tariffs introduce a layer of uncertainty that undermines the predictability vital for trade and investment.

Diplomatic Offensive: Engaging Washington and Beyond

At the forefront of South Africa’s response is a robust diplomatic offensive, led by DIRCO Minister Ronald Lamola. The government remains committed to a “principled approach,” emphasizing ongoing negotiations with the United States to secure a mutually beneficial trade deal. This includes efforts to modify a comprehensive and ambitious Framework Deal submitted in May 2025, which aimed to address the US trade deficit, reduce tariffs, promote digital trade, enhance commercial relations, and eliminate non-tariff barriers.

Despite multiple attempts, South Africa has yet to secure a reduction in the 30% tariff. The government is actively working with local industries to identify aspects of the Framework Deal that can be adjusted to promote trade predictability and protect national interests, while also preserving regional integration through the Southern African Customs Union (SACU).

Beyond direct engagement with the US, South Africa is intensifying its outreach to other trading partners. This strategy of export market diversification is a long-term goal, but its urgency has been amplified by the US tariffs. The government is actively targeting markets across Africa, Asia, Europe, the Middle East, and the Americas.

Significant progress has already been made on several fronts:

• European Union (EU): Earlier this year, South Africa signed a substantial R90 billion (approximately €4.7 billion) investment package with the EU. This initiative, part of the EU’s Global Gateway initiative, focuses on accelerating clean energy, trade, and infrastructure development. It prioritizes renewable energy projects, including green hydrogen and battery production, and aims to enhance connectivity through railway and port upgrades. This partnership also seeks to unlock new market access opportunities for South Africa, including the export of sustainable aviation fuel by Sasol and the export of hybrids and electric vehicles, aligning with the Just Energy Transition Partnership (JETP).
• China: South Africa views China as a significant $200 billion market with immense potential for expansion. Inroads are being made, particularly through securing vital protocols for agricultural products like citrus. A new citrus protocol with China, brokered by Agriculture Minister Thoko Didiza, allows for more flexible cold treatment requirements for lemons (3°C for up to 18 days), benefiting Eastern Cape farmers, the largest lemon producers in South Africa. This is expected to generate an additional R325 million and create 800 new jobs. Efforts are also underway to gain market access for other stone fruits and apples to China.
• Middle East (UAE, Qatar, Saudi Arabia): South Africa is actively strengthening trade and investment partnerships with countries in the Middle East. The United Arab Emirates (UAE), Saudi Arabia, and Qatar have been increasingly investing in sub-Saharan Africa, focusing on energy, climate, and infrastructure. South Africa is leveraging these relationships to unlock new market access opportunities, particularly for its agricultural and manufactured goods.
• Japan and Other Countries: The government has also developed a number of Trade and Investment Packages with various countries, including Japan, signaling a broad-based approach to opening new markets and reducing reliance on any single trading partner.

Immediate Relief: The Economic Response Package for Businesses

While long-term market diversification is crucial, the government recognizes the immediate need to cushion the blow for businesses directly affected by the US tariffs. The “Economic Response Package” includes several key initiatives:

1. Export Support Desk

This newly launched desk serves as a direct point of contact for all companies impacted by the US tariff. Its primary aim is to support the diversification of export markets, enhance resilience, and facilitate entry into alternative markets for affected exporters. The desk will provide:

• Updates on developments: Keeping businesses informed about the evolving trade landscape.
• Tailored advisory services: Guidance on alternative export destinations.
• Market entry processes: Assistance with navigating the complexities of new markets.
• Compliance requirements: Insights into regulatory and quality standards in target markets.
• Linkages to South African Embassies and High Commissions abroad: Connecting exporters with diplomatic missions for on-the-ground support.

This initiative is already operational, providing a crucial lifeline for businesses scrambling to adjust their export strategies.

2. Company Assistance

Details of direct company assistance are still being finalized, but the departments have promised communication “shortly.” The measures are intended to help companies absorb the tariff’s impact and facilitate long-term resilience and growth strategies to protect jobs and productive capacity. This could involve direct financial aid, subsidies, or other forms of support to offset the increased cost of exporting to the US. The specific mechanisms for this assistance are currently being determined.

3. Localisation Fund Support (LSF)

This measure is part of a broader national effort to support South African companies affected by the tariffs. The Localisation Support Fund (LSF), in collaboration with the Department of Trade, Industry and Competition (DTIC) and the Industrial Development Corporation (IDC), will issue an open call for firms operating in affected value chains. The LSF’s mandate is to accelerate industrialization by unlocking competitive localization opportunities through research, technical resources, and expertise. While the LSF does not directly fund operational or capital expenditures, it aims to provide competitiveness and efficiency support to help businesses adapt and thrive. This could involve identifying local alternatives for imported components or helping firms streamline their production processes to reduce costs. The specifics of this support are still being determined.

4. Export and Competitiveness Support Programme (ECSP)

The government is developing an Export and Competitiveness Support Programme (ECSP) to address short- to medium-term needs across all industries. This program is expected to include:

• Working capital facility: To provide immediate liquidity to businesses facing cash flow challenges due to reduced exports or increased costs.
• Plant and equipment facility: To help companies invest in new machinery and technology, enhancing their competitiveness and efficiency in a changing global market.

The details of this program are still being finalized.

5. Job Protections

Recognizing the potential for significant job losses, the departments are collaborating with the Department of Labour on measures to mitigate this impact. They plan to use existing instruments within the Labour Department’s entities, which can be adjusted to respond to the current challenges. Business lobbies have suggested initiating programs similar to the Temporary Employer/Employee Relief Scheme (TERS) that was successfully used during the COVID-19 pandemic. TERS provided a limited portion of salaries to employees whose employers had to cease or reduce operations due to lockdown restrictions. Such a program could offer a crucial safety net for workers in industries heavily impacted by the tariffs. The specific details of these job protection measures are still being determined.

6. Competition Block Exemptions for Exporters

A unique and significant measure is the introduction of Block Exemptions for Exporters under the Competition Act. The government acknowledges that diversifying markets and navigating new trade barriers may require South African exporters to coordinate their activities. This could involve:

• Developing joint infrastructure for exports: Such as shared logistics or warehousing facilities.
• Sharing market information: Allowing companies to collectively identify and penetrate new markets.
• Coordination of activities: To achieve economies of scale and efficiencies that enable them to remain competitive globally.

Normally, such collaboration among competitors might contravene the provisions of the Competition Act, which aims to prevent anti-competitive practices. By introducing a draft Block Exemption, the Minister aims to provide a legal framework that allows for this necessary collaboration without fear of prosecution. A draft Block Exemption is expected to be published by the end of the week, signaling the government’s intent to expedite this process.

Broader Economic Strategy: Industrialization and Diversification

These immediate and medium-term responses are firmly embedded within South Africa’s broader industrial policy and economic diversification strategy. The government’s “Reimagined Industrial Strategy” aims to unleash private investment, boost economic growth, and foster inclusion. Key elements include:

• Masterplans: Multi-stakeholder approaches where government, the private sector, and labor collectively develop and implement plans for specific industries (e.g., poultry, retail, clothing, textiles, footwear, and leather). These masterplans focus on protecting local producers, scaling up production, and enhancing competitiveness.
• Special Economic Zones (SEZs): Such as the Tshwane Automotive Special Economic Zone (TASEZ), which have set new models for rapid and coordinated development, attracting anchor firms like Ford and pooling resources from various government entities.
• African Continental Free Trade Area (AfCFTA): South Africa views the AfCFTA as a landmark for its trade policy and a statement of intent for future growth. African countries already account for over 25% of South Africa’s total goods exports and 40% of its manufactured products exports, highlighting the immense potential for deepening intra-African trade.

The current tariff challenges underscore the imperative for South Africa to accelerate these diversification efforts, reducing its vulnerability to unilateral trade actions from any single partner. The focus on local content, industrial competitiveness, and new export markets is not just a reactive measure but a core component of the nation’s long-term economic vision.

Challenges and the Path Forward

While South Africa’s response plan is comprehensive, its implementation will face significant challenges. The global trade environment remains volatile, and securing new market access, particularly for complex products like automotive components, requires sustained effort and intricate negotiations. The effectiveness of the new support programs will depend on their timely finalization, adequate funding, and efficient administration.

Furthermore, the issue of government pending bills remains a critical systemic challenge that impacts the liquidity of many businesses, especially in the construction sector. Addressing this fundamental issue is crucial for the long-term health and investment capacity of South African companies.

Despite these hurdles, the unified approach from DIRCO and DTIC, coupled with the detailed economic response package, demonstrates a strong commitment from the South African government to protect its economy and navigate these turbulent trade waters. The coming months will be critical in assessing the impact of these measures and South Africa’s success in forging a more resilient and diversified trade future.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

5th August, 2025