Stefan Kritzinger
South Africa’s current relations with the US finds itself at a crossroads.
Triggered by the signing of the Expropriation Amendment Act into law by President Ramaphosa in January, the fallout hastily exploded when US President Donald Trump accused the South African government of confiscating private property. This was followed through with a pledge to initiate a refugee programme for Afrikaners to relocate to the US, as well as the cutting of all USAID to the country, including the PEPFAR programme, which has been instrumental in fighting the HIV/AIDS pandemic since the early 2000s.
Within a few weeks, South Africa’s friendship with the US hopped from the frying pan into the fire, when The US Secretary of State expelled South Africa’s ambassador to the US, following the ambassador’s characterization of Trump’s MAGA movement as a white supremacist outfit.
Tensions have only simmered further, with much debate now around South Africa’s future participation in the African Growth and Opportunity Act (AGOA).
South Africa cannot afford to make adversaries of any global economic power. Our economy has stagnated over the past 10 years, with the government essentially having run out of money. Over the last financial year, our debt-service costs amounted to R389 billion, with our debt-to-GDP projected to reach 76.2 per cent in this financial year.
AGOA, our largest trade agreement with the US, remains at risk. Several US political leaders have already called for South Africa to be removed from the programme, which would result in devastating consequences for our economy.
Since AGOA’s enactment in 2000, South Africa’s exports to the US grew at an average annual rate of 12.98% between 2002-22, while 70% of South Africa’s agricultural products to the US have been possible through the programme. The trading relationship has made the US South Africa’s top source market for inward foreign direct investment. Additionally, there are more than 600 US companies in South Africa, many with regional headquarters, creating critical job opportunities and softening the current unemployment crisis caused by devastating domestic economic policy. South Africa is also in a lucky position to trade at a surplus with the US, demonstrating how vital AGOA is.
South Africa is rich in natural resources and quality agricultural products. The opportunities for economic expansion through more trade are plentiful. With the right pro-growth economic strategies and maintaining good relations with key trade partners, South Africa can reap the rewards.
However, for businesses to enjoy the financial benefits of imports and exports business, there are several regulatory boxes they must tick.
For starters, one cannot just buy and sell across borders with the right paperwork, customs approvals and licenses. One of the biggest mistakes new importers and exporters make is starting out without an import or export license.
There are nonetheless customs rules, tax laws and strict regulations to adhere to, and failure to follow the proper steps could result in a business losing their shipment or pay expensive penalties.
A business needs to be registered with the CIPC to legally trade. The basic requirements for registering include a company name, a business registration number, as well as tax number from SARS.
This should be followed by applying for an import and export license, bearing in mind that the license is only officially required when the total imported or exported cargo is R150 000 or more within a year, that there are more than three imports and exports in one calendar year, and that the business is import for resale or business purposes and not for personal use.
Without this license, a business cannot clear goods at customs, legally cannot trade across borders, especially because SARS tracks imported and exported goods for tax and compliance.
To apply for a license, a business would need to complete a DA 185 application form and submit its CIPC company registration certificate, tax clearance certificate, bank confirmation letter, as well as a certified copy of the applicant’s ID or passport with the completed form to SARS.
Upon approval, SARS will provide the company with an import and export code that will be used every time a business moves goods across the border.
Understanding import duties, VAT and customs fees is also equally important. When importing goods into South Africa, VAT is charged on all imported goods before they are released by customs, while customs duties vary depending on the type of product. On the other side, most exports are zero-rated for VAT, meaning there is no charge, but businesses are encouraged to keep clear records of exports to qualify for tax exemptions.
Finding a reliable shipping and logistics partner is also crucial, especially one that can handle transportation by air, sea or land, can manage customs clearance and documentation, and can provide warehousing or distribution if needed. Choosing the mode of transport is also a balancing act – air freight is faster but more expensive, while sea freight is cheaper but slower.
Lastly, businesses must remain cognisant of any product restrictions and trade agreements. For example, alcohol and tobacco require additional import permits, while fresh food and agricultural products require health and safety certificates. Trade agreements may also qualify certain products for lower custom duties.
Despite the current rocky diplomatic dispute with the US, South Africa still enjoys trade relations with the country, as well as many other lucrative markets around the world. It is important for businesses to get the compliance correct so they avoid missing out on the benefits.
BUSINESS REPORT