Impact of International Business Environment on South African Economy

This economics report examines the impact of the current international business environment on South Africa, particularly focusing on the effects of the China-US trade wars and the rise of protectionism. The report highlights how tariffs imposed by the United States on steel and aluminum imports have negatively affected South African exports, leading to reduced revenue and potential GDP decline. It also discusses the challenges faced by the South African steel and aluminum industries due to global competition, technological inefficiencies, and overproduction. Furthermore, the report analyzes the impact of protectionist measures on South Africa's labor market, emphasizing potential job losses, reduced foreign investment, and the weakening of the South African rand. The study uses multiple sources to support the analysis, underscoring the interconnectedness of global trade and its effects on national economies.

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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.

South Africa 3
Alongside the decline of foreign investment, higher tariffs, the South African rand is
weak owing to the economic downturn in the country.Due to the ongoing China-Us trade wars, it
is anticipated that the South African economy gross domestic product would go down by 0.4
percent in the years 2019(Smith 2019). This goes on to show that the current wars affects
economic growth.The fact that global trade thrives of liberalized trade means that revenue from
global trade will reduce due to higher tariffs as opposed to free trade. It is important that
protectionist measures be eliminated to increase global trade volume and revenue. Imperatively,
exportation of steel and aluminum has been key in the growth of the South African gross
domestic product. Overall, protectionism curtails the growth of liberalized trade. The fact that the
United States is protecting it local industries makes it hard for its trading partners to freely gain
from the ongoing tariff reshuffle. Basically, tariffs reduce the profit levels for exporting
countries.

South Africa 4
References
Citizen reporter. (2018).SA Economy caught in the crossfire of trumps trade war with China.
Citizen.co.Za.[Online].September 2018.Available at
https://citizen.co.za/news/south-africa/2010878/sa-economy-caught-in-crossfire-of-trumps-trade-
war-with-china/[Accessed 31 March 2019[Accessed 31 March 2019[Accessed 31 March 2019]
Devarajan, S., GO, S.D., Lakatos, C., Robinson, S & Thierfelder, K.(2018).Trader’s Dilemma.
[online].Policy Research working paper 8640,[Online].Available at
http://documents.worldbank.org/curated/en/115171541615454756/pdf/WPS8640.pdf[Accessed
31 March 2019]
Kohnert, D. (2018).Just Peanuts? Trump’s protective tariffs and their impact on Africa.
[Online].Available at
https://www.researchgate.net/profile/Dirk_Kohnert/publication/324476346_Trump
%27s_Protective_Tariffs_and_Their_Impact_on_Africa/links/5ae4adeba6fdcc3bea95d2fe/
Trumps-Protective-Tariffs-and-Their-Impact-on-Africa.pdf[Accessed 31 March 2019]
Phakisi, T. (2018).Trade Wars: History’s warning for the US and SA. [Online].Available
fromhttps://www.fin24.com/Finweek/Opinion/trade-wars-historys-warning-for-the-us-and-sa-
20181010 [Accessed 31 March 2019]
Weiss, B.A. J & Wauh, J.B. (2019). Business environmental factors affecting South Africa’s
supply chains and economic growth and development. [Online].Available at

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https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/
6139/PPM_2014_04_spec.issue_Weiss.pdf[Accessed31 March 2019]
Smith, C.(2018).Trade war escalation to negatively impact SA GDP growth –Fitch.
[online].Available at https://www.fin24.com/Economy/South-Africa/trade-war-escalation-to-
negatively-impact-sas-gdp-growth-fitch-20180725[Accessed31 March 2019]