INTERNATIONAL TRADE LAW

South Africa and Germany in terms of trading relationship

South Africa is Germany’s largest trading partner in Africa. Trade between the two countries is very sizable and worth a total of EUR 12.6 billion (2008). In 2010, Germany was South Africa’s fourth largest trading partner after China, the United States and Japan, with trade totaling 35.478 million rand (3.718 million Euro). South Africa continues to report massive trade deficits with Germany and recently South Africa’s department of trade and industry brought this to the attention of the European union pending renegotiation of trade between the two nations.

South Africa remains a market offering substantial opportunities for German companies, particularly in the renewable energy, water and infrastructure sectors.

In 2012, bilateral trade was worth some EUR 14 billion. South Africa exported to Germany goods worth EUR 5.1 billion and imported from there goods worth EUR 8.8 billion, making Germany South Africa’s second biggest trading partner in 2012. Conversely, South Africa ranked 27th among Germany’s principal trading partners, ahead of South Korea and Canada.

In 2012, trade between South Africa and the European Union (EU) grew slightly, by 2.15 per cent to EUR 34.12 billion. The EU thus remains South Africa’s most important trading partner by far, ahead of China and the United States, but there was an unexpectedly large increase (38.43 per cent) in the country’s balance of trade deficit with the EU.

The approximately 600 German companies operating in South Africa employ a workforce of some 90,000. They are the so called ”bridge to Africa”. From these, many German businesses have established offices and manufacturing facilities in South Africa, for example, BASF, Bayer, Bilfinger Berger, BMW, DB international, DHL, German Bank, Hitachi Power Europe, Lanxess, Mercedes Benz, MTU, SAP, Siemens, ThyssenKrupp and Volkswagen. In addition, there are numerous small and medium-sized enterprises.

Among these are companies that utilize some of the most modern production facilities in the country. While nearly all major German companies are represented in South Africa, there are many German medium-sized enterprises established in the country.A number of German businesses were involved in the many infrastructure projects in preparation for the 2010 FIFA World Cup. In particular, they took part in the construction of the stadiums and in the supply of vehicles (cars and buses) at the stadiums and other facilities

Besides the important role of German companies in South Africa for employment, vocational training and technological development, many companies engage in acitvities which benefit the communities where their facilities are located. This is Corporate Social Responsibility (CSR) and it is especially directed at improving the living standards of employees and their families in the areas of health, education and welfare.Among other commitments, many German companies provide or support a wide range of programs for youth and thus foster sustainable development and support the country.The high HIV/AIDS rate in South Africa (2010: 10.9%) plays a predominant role in the area of health, and in response, many German enterprises have programmes running to assist employees and their families. Among others, Mercedes-Benz South Africa runs a program of education and prevention of HIV/AIDS and supports of those affected.In addition to the Embassy, the Southern African-German Chamber of Commerce and Industry serves as a representative of the German economy and German companies in South Africa.

The Southern African-German Chamber of Commerce and Industry in Johannesburg and the Germany Trade & Invest (GTAI) office there are strongly committed to helping German businesses in the country with their extensive expertise.

South Africa accounts for a tremendous amount of mineral reserves worldwide and is Africa’s largest power producer. Many German car companies have production facilities in South Africa and a broad spectrum of suppliers has emerged in the vicinity of the plants. Next to mining and a world-class financial sector, a wide variety of services is a key of the South African industry.

 

South Africa’s automotive industry has approximately 36,000 employees and a GDP share of 7.3 percent, which makes it one of the country’s major industries. Most of the large German vehicle manufacturers are represented in South Africa with their own production facilities in whose wake a broad local network of suppliers has emerged. Many German companies have established plants in South Africa; in particular Volkswagen, Mercedes-Benz, BMW and MAN have been in the country for several decades.Volkswagen has had a factory in Uitenhage (Eastern Cape) since 1951 and currently employs approximately 6,000 people. Of 120,000 vehicles produced  annually, a total of 40,000 are exported to other African countries. In the passenger car segment, the VW Group has a market share of roughly 22.1 percent in South Africa.

The 5,000 employees of BMW in South Africa produce about 55,000 vehicles a year. Founded in 1968, BMW’s Rosslyn plant (Gauteng province) has produced more than 300,000 vehicles of the current 3-series and also plays an important role in the production of vehicle equipment.Mercedes-Benz has been in South Africa since 1954 and produces the C-Class, among other vehicles, in East London (also in the Eastern Cape). Overall, Mercedes-Benz produced 55,900 vehicles in South Africa in 2010. During the same year Mercedes-Benz sold 25,400 cars and 6,100 trucks on the local market.MAN is present with a factory in South Africa since 1968 and is well positioned in the market. The company today maintains two plants and a spare parts depot. The 393 employees produce approximately 2,500 vehicles annually that are sold almost entirely on the markets of southern Africa.There are also many small and medium-sized German enterprises producing vehicle parts and equipment in South Africa, which account for a significant share of growth and output of the South African automotive industry.

 

The year 2010 was one of recovery for the South African motor industry. After a massive decline in numbers the previous year, an increase of 24.7 percent to 492,956 units was registered for 2010. Exports grew to about 239,000 vehicles and the industry expects to cross the 300,000 mark for 2011. The industry  recognizes the favourable situation in South Africa, a reflection of which are the plans of almost all the local car manufacturers to invest there in the near future (together totalling approximately 1.5 billion Euro).South Africa is a valuable and distinct location for the automotive sector, not only because of the sales market, but also as a stepping stone to other markets in Africa. In addition to the unique role of the entire automotive industry as an employer providing skilled jobs in the most advanced factories, many German companies place a high priority on corporate social responsibility and are active in supporting the communities where they operate as well as their employees.The industry is awarded particular attention by the South African government, which supports the industry through the Motor Industry Development Programme (MIDP). The successor to the MIDP, the Automotive Production and Development Programme (APDP), will launch in 2013.

 

The Federal Government views South Africa as a “global development partner” with whom it seeks to closely coordinate its policies in international bodies such as the United Nations and the World Bank. Bilateral development cooperation focuses on energy and climate, governance and public administration and HIV/ AIDS prevention and control. Germany is one of South Africa’s major bilateral donors, though all international donors combined contribute less than 1 per cent to South Africa’s national budget.

Since 1994, the Federal Government has made available more than EUR 1 billion in bilateral development cooperation with South Africa. The most recent intergovernmental negotiations on development cooperation were held in Berlin in May 2012 in the framework of the Binational Commission. At this meeting, the Federal Government made new commitments worth EUR 286.9 million to South Africa for 2012 and 2013: EUR 251.4 million in Financial Cooperation and EUR 35.5 million in Technical Cooperation. German and South African cooperation with various third countries, which began in 2006, is becoming increasingly important. The next intergovernmental negotiations on development cooperation.

South African – European trade relations are of utmost importance to the South African economy. 38,5 % of SA’s global trade volume is generated with the EU (40.4% including the rest of Europe). Within the EU, the United Kingdom and Germany are South Africa’s most important trading partners.

Since the Trade and Development Cooperation Agreement (TDCA) took effect in the beginning of 2000, the trade relations between South Africa and Germany have undergone a very positive development in the past years. In 1999, Germany imported goods worth EUR 2,5 billion from the Cape and the volume increased by 63% until 2006. By 2001 it had already increased by 33,5% but then developed horizontally due to the revaluation of the Rand and the weak German economic situation and reached the volume of 2001 – EUR 3,2 billion – only in 2004 again. In 2006, South Africa exported goods worth EUR 4.126 billion to Germany. With an increase in exports to Germany of 10,2%, the first half of 2007 again shows a clear upward trend.Besides traditional export commodities such as gold, coal and minerals, many manufactured goods are making a growing contribution to South Africa’s exports to Germany. These include automotive components and spare parts,  pumps and aircraft parts.