Migration and cheap Chinese goods worry South Africa's largest trade union group over pan-African free trade

  • A free trade agreement across Africa is "great in principle," Matthew Parks, parliamentary deputy co-ordinator for the Congress of South African Trade Unions (COSATU), told CNBC via telephone Tuesday.
  • COSATU represents more than 2 million workers in South Africa.
  • Attending a summit in Kigali, Rwanda, last week, South Africa's President Cyril Ramaphosa did not immediately sign the African Union's proposed free trade agreement.
  • The agreement posits a free trade area between its 55 member states.
African heads of state and government pose during the African Union summit on establishing an African Continental Free Trade Area in Kigali, Rwanda, on March 21, 2018.
STR | AFP | Getty Images
African heads of state and government pose during the African Union summit on establishing an African Continental Free Trade Area in Kigali, Rwanda, on March 21, 2018.

Safeguarding jobs and cheap Chinese goods flooding the market are hurdles the South African government must clear before it signs up to a pan-African free trade agreement, the country's largest trade union group told CNBC.

A free trade agreement across Africa is "great in principle," Matthew Parks, parliamentary deputy co-ordinator for the Congress of South African Trade Unions (COSATU), told CNBC via telephone Tuesday. COSATU represents more than 2 million workers in South Africa.

But, "we need to see some kind of plan," he added.

Attending a summit in Kigali, Rwanda, last week, South Africa's President Cyril Ramaphosa did not immediately sign the African Union's proposed free trade agreement, which posits a free trade area between its 55 member states. Ramaphosa instead signed the Kigali Declaration, a precursor to the deal.

"We are part of this process of opening up Africa for trade. All that is holding us back from signing the actual agreement is our own consultation process," Ramaphosa was quoted as saying by South African broadcaster eNCA.

Forty-four African nations signed on to the free trade agreement last week, though another notable exception was Nigeria, by some metrics the continent's largest economy.

"Complete freedom of movement of people would mean that our economy would collapse," Parks said.

South Africa's economy, despite being sub-Saharan Africa's most developed, has foundered in recent years. Sluggish growth and unemployment at nearly 27 percent — though recent data has shown improving fundamentals — mean that the country could struggle to accommodate an influx of new workers.

"We already have Zimbabweans fleeing Zimbabwe, taking up low paid jobs here," Parks explained.

Borderless trade

He also cited fears of cheap Chinese goods flooding the market due to decreased trading restrictions between African countries, saying that these would particularly affect South Africa's clothing, sugar and poultry manufacturing. Parks added that car manufacturing could be another area hit hard by borderless trade.

Greater regional cooperation, before such a trade deal is made continent-wide, was necessary, Parks suggested.

Geographical trading blocs already exist in Africa, such as the Economic Community of West African States (ECOWAS), East African Community (EAC) and Southern African Customs Union (SACU). But, currently less than 20 percent of Africa's trade is internal.

The trade agreement, if signed, would establish the largest free trade area in terms of participating countries since the formation of the World Trade Organisation. It is intended to encourage trade among African nations which is focussed on manufacturing, rather than exporting commodities to overseas markets.

"We're pleased with Ramaphosa's exercising of caution," Parks said, adding that trade unions could enter into discussion with the president in the coming weeks.

"Economically (the deal) will benefit South Africa if it is done incrementally and in a way based upon integrated regional economic development, taking into account different countries' economic vulnerabilities and needs, and that measures to protect Africa from a flood of cheap subsidized goods from China and elsewhere is included," he added.

Speaking on last week's summit in Kigali, Francois Conradie, the head of research at South Africa-based NKC African Economics, said that all the governments that attended are going to have to ratify those signatures by parliamentary process.

"Ramaphosa was just clearer about it, I think he didn't want to open himself up to accusations from the protectionist left and the unions that he was acting unilaterally," Conradie told CNBC via e-mail.

"South Africa probably has more to gain than other countries, but there needs to be a cautious and sensitive process," Conradie said.

Other means of economic integration in Africa have been proposed by the African Union, including a pan-African passport, a single-air transport market and even a common currency.

"We must rid ourselves of this colonial mentality that demands we rely on other people's currency. Perhaps the day, the hour and the moment could have arrived for us to create a single African currency," Ramaphosa was quoted as saying by eNCA in Kigali last week.