US President Donald Trump’s imposing of “reciprocal” tariffs worldwide, ostensibly to promote domestic manufacturing and reduce the trade deficit, has had the unintended consequence of forcing South Africa to look more closely at not only whom we trade with, but also the actual nature of our trade relationships.
The upheaval created by the uncertainty about the US tariffs – and the impact on export orders and industrial activity that is already being seen – is a clear signal that we need to diversify our trade partners and become more skilful and more ambitious in securing new trading relationships.
As a relatively small economy in world terms, highly reliant on exports of raw materials and certain manufactured goods, South Africa is not in a strong position to call the shots, and needs to navigate the massive geopolitical shifts carefully. We also can’t afford to limit our trading partners and should rather hedge risk by diversifying the pool.
What we most need is to deepen existing trade relationships that add value through foreign direct investment that generates employment, contributes to taxes and municipal rates and enables skills development and technology transfer. In addition, we need to do everything possible to improve our competitiveness to retain existing investors, and this starts with ensuring that basic municipal services are delivered.
New trade and investment relationships need to be mutually beneficial, rather than merely extractive of our natural resources with little benefit to local industrial development and employment.
The long-standing trade relationship between South Africa and Europe is a case in point.
The European Union is not only our largest trading partner but also our leading foreign investor. Nearly half of all foreign direct investment in South Africa originates from the EU and cuts across sectors, from manufacturing to financial services, contributing directly to job creation and economic growth. Valued at €38.2-billion in 2023, this represents 25% of all EU investment in sub-Saharan Africa.
At least 2,000 EU companies operate in South Africa, supporting more than 500,000 direct and indirect jobs. The relationship is not merely transactional; it is also a comprehensive strategic partnership that includes cooperation on a broad spectrum of issues, including human rights, economic and trade relations, energy, environment and good governance. The EU is also South Africa’s largest development partner, accounting for 70% of official development assistance.
The EU’s support for South Africa’s just energy transition is a prime example of this collaboration, demonstrating a shared vision for a sustainable and equitable future.
This deep, multi-faceted relationship of preferential trade, economic cooperation and development assistance, which has facilitated investment and substantial job creation, has been made possible by long-standing agreements – the EU-SADC Economic Partnership Agreement (EPA), reinforced by a separate free trade agreement between the European Free Trade Association (EFTA) and the Southern African Customs Union.
The EPA supports improved entry to EU markets, offering preferential access and flexible rules of origin. A key provision is the EU’s removal of customs duties on 97.8% of imports from South Africa in 2022, ensuring nearly full free access for the country’s goods.
The EFTA agreement also included asymmetrical concessions, with EFTA states immediately dropping all tariffs for SACU states, while SACU members were granted a longer period to dismantle their own tariffs, reflecting the disparity in economic development between the parties.
These agreements illustrate a broader European policy of using trade liberalisation as a tool for economic integration and social development, providing a strong model for future collaborations.
An ongoing positive trajectory of growth in trade in both directions, with South Africa recording a trade surplus of R93-billion with the EU by 2021, demonstrates the effectiveness of these agreements and the stable, predictable trade environment they have created.
There has also been a clear trend of diversification from a historic emphasis on raw materials to a balance today of primary commodities, agricultural products and manufactured goods, and deepening of integrated value chains between South Africa and European countries, reflecting growing sophistication of the local economy and capacity for manufacturing high-value products.
Our largest EU trading partner, Germany, serves as a prime example of deep value chain integration and reciprocal trade, particularly in the automotive sector.
Cars, trucks and vehicle parts and accessories top both imports from, and exports to, Germany. South African manufacturing facilities, many of which are German-owned, produce vehicles for the European market while simultaneously relying on German expertise, components and machinery for their operations. This industrial symbiosis has created a stable and robust trade corridor that is a model for what can be achieved with other EU member states. The export of raw materials such as platinum and precious metal ore also underscores South Africa’s role as a supplier of critical inputs for Germany’s industrial base.
The Netherlands, meanwhile, is a primary hub for South Africa’s agricultural exports in particular, while delivery trucks and diamonds dominate exports to Belgium.
The composition of trade with France is distinct. South Africa exports high-tech products such as aircraft and ships, while importing pharmaceuticals and aircraft parts.
French investment in South Africa illustrates the direct link between the growth of specific, high-value trade sectors and targeted foreign direct investment. France is a major foreign investor, with more than 370 French company subsidiaries operating in South Africa, employing at least 65,000 people in a range of sectors, including financial services, chemicals, renewable energy and rail.
The diversity of South Africa’s trade mix with Europe reflects our strong global position in key sectors – strategic minerals and precious metals, manufacturing especially in automotive and heavy industries, and agriculture, particularly fruit.
In terms of economic complexity rankings, South Africa’s overall trade complexity is low, while we rank significantly higher in technology and research complexity. This points to a significant disparity – South Africa possesses the intellectual and technical capacity to produce complex, knowledge-intensive goods, but its current trade mix does not yet fully reflect this.
The strategic imperative is to bridge this gap by transitioning from a commodity-based economy to one driven by value-added products and technological expertise.
The EU partnership offers a direct pathway to achieve this objective.
The most immediate opportunities for South Africa involve strengthening and expanding existing export sectors by moving up the value chain.
The automotive sector is a core strength and a prime example of a successful value chain with Germany. To capitalise on this, South Africa can deepen its integration with EU manufacturers by moving beyond vehicle assembly to the production of high-tech and low-carbon components, electric vehicle parts and related technologies. This would transform South Africa into a key node in the EU’s global automotive supply chain, ensuring long-term stability and growth.
Our abundant reserves of platinum, vanadium and manganese are critical for the EU’s clean energy and green transition ambitions. The EU’s push for green value chains and a just energy transition provides a direct policy alignment with South Africa’s mineral wealth. The strategic opportunity lies in moving beyond the export of raw ores to processing them into battery components, catalysts and other materials required for renewable energy technologies.
By establishing a domestic processing industry, South Africa can capture a greater share of the value chain and solidify its position as an indispensable partner in the EU’s climate strategy.
South Africa’s agricultural exports face significant ongoing challenges, most notably the phytosanitary regulations imposed by the EU to prevent the introduction of citrus black spot and false codling moth. These regulations have resulted in substantial costs for South African citrus growers and a decline in export volumes to the EU.
While South Africa has challenged the regulations at the World Trade Organization, this is likely to be drawn out, and direct bilateral negotiations should be pursued with the EU, coupled with technological collaboration and knowledge-sharing to develop a mutually acceptable, science-based solution.
This would not only resolve the immediate trade hurdle but also build a more resilient and transparent system for future agricultural trade, turning a point of conflict into a model of cooperation on phytosanitary standards.
Beyond our traditional strengths, there is immense potential in emerging sectors that align with the EU’s strategic priorities for a sustainable and digital future.
Collaboration on green hydrogen and renewable energy is a substantial, long-term opportunity. Africa has 60% of the world’s best solar resources, making it an ideal location for the production of green hydrogen at a cost that is competitive with fossil fuels. The EU is already a partner in South Africa’s just energy transition and has identified southern Africa as a key hub for green hydrogen production. The EU has committed significant grant funding and investment packages to support renewable energy and green value chains in Africa.
The strategic challenge is to ensure that these partnerships are structured to foster local value addition and energy sovereignty. South African policymakers must focus on partnerships that balance export potential with the urgent need for domestic development, ensuring that new energy infrastructure benefits its own population.
Our high rankings in technology and research complexity position us well to seize the opportunity in the EU’s global leadership in digital trade, actively negotiating agreements to create legal certainty and promote e-commerce. The focus should not be on simply selling digital products, but rather on integrating South Africa’s technology and research sectors into European supply chains. This could involve developing and exporting embedded services in manufactured goods, providing sophisticated digital logistics solutions for international trade, or engaging in joint research on AI and data-driven technologies.
This would fundamentally transform the trade relationship, moving it from an exchange of physical goods to an exchange of intellectual and technological capital.
The message is not to abandon the US or BRICS, nor Africa or other potential new partners – but rather to use the Europe relationship as a model for negotiating free trade agreements and seeking strategic cooperation that goes beyond commerce to stimulating investment, economic integration and social development.
A focus not only on diversifying but, crucially, on leveraging and deepening existing trade relationships that deliver substantive local benefits, is key to South Africa’s long-term, sustainable economic growth. DM
Denise van Huyssteen is the chief executive officer of the Nelson Mandela Bay Business Chamber.
[SRC] https://www.dailymaverick.co.za/opinionista/2025-10-05-sas-biggest-trading-partner-offers-opportunities-to-deepen-relationships/
