Impact of International Business Environment on South African Business

ECONOMICS ASSIGNMENT
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South Africa 1
How does the current international business environment impact South African business?
Owing to the current Chines-American trade wars, the United States of America
introduced tariffs on the steel and aluminum industry. Notably, South Africa is considered
Africa’s largest exporter of steel and aluminum to the United States(Kohnert 2018). Due to the
25% tariff imposition on imports to the United States of America, South Africa exports have
been affected by the move. This has led to a reduction in revenue on the exportation of steel and
aluminum to the United States hence a reduction in the gross domestic product. Of South Africa.
In addition, due to technological, efficiency, productivity challenges South Africa steel and
aluminum industry faces stiff competition from other global industries. Also, due to
overproduction and cheaper global prices, there is a threat to employment opportunities for South
Africans employed in the steel and aluminum sector of the economy. Owing to higher tariffs, the
production of steel will lead to reduced production and loss of employment opportunities
(Kohnert 2018). The reduction in the production of steel is influenced by low profit due to higher
tariffs in the U.S import market.
The current trade wars are a discouragement to multinational trading (Citizen Reporter
2018). The fact that most of the South African economy flourishes on foreign investment, the
trade wars have shifted investor perceptive (Devarajan 2018). Due to the global competitiveness
of various sectors of the economy, the South African supply chain is facing stiff competition
from other countries, labor participation challenges and in. Unfortunately, the current
protectionist tendencies are not helping the situation in South Africa. Due to the current
economic downturn in South Africa will continue due to the current Chinese-American trade
wars. Currently, the wars have affected investor confidence which can be evidenced with the
outcome of the Turkish Lira in the year 2018 (Phakisi 2018). The fact that countries are

South Africa 2
implementing protectionist measures to protect their domestic industries, might affect the gross
domestic product of the South African economy. Basically, higher tariffs imply lesser profits for
the exporting country. Also, protectionism, discourage the development of multinationals due to
lesser profits associated with higher tariffs and other trade barriers hence encouraging
unemployment.
Explain the impact of the current increasing trend towards protectionism on South
Africa’s labor market developments
Due to investor confidence shakedown, there will be reduced labor participation due to
the decline of multinationals which provide additional employment opportunities for the South
African labor market. The fact that most multinationals will prefer to avoid the tariffs rise in the
steel and aluminum industry might lead to job losses and reduced revenue for corporate bodies,
government, and individuals. Due to these protectionist measures by the U.S, the rate of
unemployment in the South African economy might increase due to higher tariffs rates, company
profits might reduce hence some workers might be laid off. The shift in foreign investor
perceptions owing to the ongoing wars has reduced the level of investment in the
country..Essentially, the South African economy thrives on the inflow of foreign investment
through multinationals. However, due to higher tariffs in the steel industry, most multinationals
will choose not to invest in the South African steel, aluminum industries due to lower profit
margin hence raising unemployment levels in South Africa.