Company A, a South African-based business has identified an opportunity to expand into international trade. Though their budget is not large, they believe there is an opportunity to supply other countries in Africa. Research has revealed several new markets that appear to hold potential for their products. However, as they begin exploring these countries further, the financial viability of these export prospects begins to wane. They discover that high duties apply to their products on entry into these markets. Furthermore, the countries concerned also impose a number of non-tariff barriers to trade which further complicates trading with them. They also realise that the export process will require considerable financial resources, and their return on the investment may be less favourable than anticipated.
Now if Company A had been aware of SACU, their venture into exports may have gone considerably smoother. To understand why, let’s clarify what SACU is.
SACU or Southern African Customs Union is a Southern African trading bloc that is made up of South Africa, Namibia, Botswana, Lesotho and Eswatini. All members of this customs union share the same benefits, namely the removal of tariff and non-tariff barriers to trade. Additionally, the customs union also imposes a common set of trade restrictions on non-member countries to further incentivise trade within the SACU region. One of the main reasons for this trading bloc is to create trade opportunities for its member countries and provide local industries with some protection from external competitors. This form of protectionism allows these countries to benefit from regional trade without the risk of established markets taking over their local economies by creating potential monopolies. Belonging to this trading bloc has the added benefit of simplifying the international trade process amongst its member countries.
Had Company A had been aware of all this from the beginning, their market research could have been focused on expanding into a fellow SACU member country where few barriers to trade exist, rather than into less familiar markets further afield. This would have saved them valuable time and resources and put them one step closer to successfully taking on the rest of the world!
Clearly Company A would have benefited from prior knowledge about SACU and the various other trade agreements to which its country is a party. To ensure you do not make the same mistake, we have developed a free and comprehensive course on all facets of exports. This course was developed by Trade Forward Southern Africa, in collaboration with the International Trade Institute of Southern Africa. Click the link below to sign up for free, and get ahead on your export knowledge journey.
To sign up to the School of Export CLICK HERE.
If you already have a profile, CLICK HERE to login to begin the module.