At a Japanese forum on African development in August, president Cyril Ramaphosa said US tariffs were a blow, but also an opening for South Africa to find“new markets” with other countries “hungry” for its products. 

Trade officials have been at pains to stress that diversification was “not a plan B [but] a plan A for long term resilience and competitiveness”, targeting Asia, including Japan, Vietnam, Thailand; the Middle East and India, and reinforced European markets.

South Africa was already exploring other markets even before US president Donald Trump announced the tariffs, economist Dr Sean Muller, said, directing Africa Check to a South African Reserve Bank paper published in 2021.

The Reserve Bank paper found that between 2001 and 2019, exports started to shift from the US and Western Europe toward China and Africa. However, this trend reversed after 2013.

In 2024, the US took 7.45% of South Africa’s exports, valued at about R157-billion (US$8.5-billion at the average exchange rate). This made it South Africa’s third largest export market, after China and Germany. By contrast, South Africa supplied just 0.25% of US imports, ranking 43rd among the US’s export destinations.

Beyond the US, South Africa benefits from World Trade Organization (WTO) rules and has preferential access to the European Union (EU), some non-EU countries, Russia, Belarus, Kazakhstan and Türkiye, in addition to certain South American countries.

“In the short term, South Africa needs to capitalise on existing agreements,” Dr Marvellous Ngundu of the Institute for Security Studies African Futures programme told Africa Check. The ISS is a pan-African thinktank headquartered in Pretoria.

But it may not be easy to quickly replace the depth of the US, the world’s largest consumer market. 

Diversification should not be used as a generic, catchall phrase, Muller said. “The work of analysing each sector and each good or product it exports needs to be done.” 

Using the example of citrus, of which South Africa is the world’s second-largest exporter, he said “this sector will have to find where alternative demand lies, how the prices in those markets differ from the US, and consider how to redirect export production to those markets”.

“‘Does this new market want orange juice instead of fresh oranges? Can we pivot into that and make it profitable? These are the questions industries should be asking themselves,” Muller said.

Still, experts see new opportunities. Ngundu cited China’s rising demand for macadamia nuts, where South Africa is the world’s largest exporter. The nuts are used across industries, from food and health to cosmetics and pharmaceuticals.

But any losses in the US market would still be a hard pill to swallow.

“In the long run, greater diversification could be achieved, but it would still result in lower revenue – even if we get preferential access, the revenue could be lower,” Muller said.

South Africa is already part of regional blocs such as the Southern African Customs Union and the Southern African Development Community.

On a bigger scale, experts pointed to the Africa Continental Free Trade Area (AfCFTA), which seeks to build a single African market by scrapping most tariffs and easing customs rules. In practice, this should make it easier for goods, services and investments to move across borders, boosting trade and jobs. 

“We are better together as Africans: investing in each other, trading with each other, creating value-chains with each other,” Ngundu said, referring to the networks that connect goods, services, capital and technology together across borders. 

By June 2025, 54 African Union member states – all except Eritrea – had signed the agreement, and 49, including South Africa, had formally agreed to be legally bound by it, according to the University of Cape Town’s Nelson Mandela School of Public Governance.

Ramaphosa described the African trade area as “central to our economic vision”. “We are actively working with the AfCFTA secretariat to finalise value-chain protocols in automotive, agro-processing, pharmaceuticals and textiles,” he said in Japan.

He also backed harmonising “Rules of Origin” – the standards that define where a product is made – to promote African manufacturing and improve border infrastructure for faster trade. Such rules create consistency in trade agreements, cut complexity, close loopholes and streamline customs. 

The World Bank projects that full AfCFTA implementation could raise the continent’s income by 7% by 2035. For South Africa, the ISS estimates the economy could be 11.6% larger by 2043, with exports up $85.2-billion (42.8%). This includes a $35.6-billion (28%) boost to manufacturing and $1.2-billion (11.5%) for agriculture.

Essentially, South Africa hopes to position itself as a key anchor in the continent’s 1.4-billion people-strong market.

But the impact may not be uniform. “On the one hand, each country on the continent has different levels of economic development, buying power and production capabilities, and so the reduction in trade barriers should lower the prices of goods for consumers,” Muller said.

But on the other hand, producers in some countries could find themselves uncompetitive and decline significantly. 

“The last 30 years of experience with the lowering of global trade barriers under the WTO has shown that there are winners and losers from trade, and the consequences depend a lot on the specific context, industries and even products,” he said, adding that it was still too early to know how the free trade area would unfold.

In detailed analysis, the ISS said the biggest barriers to regional trade in Africa were often political, and required strong domestic buy-in.

Even with political will to overcome the short-term pain, the thinktank said that the biggest structural challenge to the AfCFTA’s implementation would be integrating vastly unequal partners, such as middle-income South Africa or Botswana with low-income neighbours, such as Mozambique, Eswatini and Lesotho.

South Africa remains heavily dependent on commodities, which make up more than 60% of its exports. 

Data from the World Bank’s World Integrated Trade Solution, which offers global trade and tariff data, shows this imbalance. 

In 2022, raw materials and intermediate goods – those used to make other goods – together accounted for 70% of exports. By contrast, fully manufactured consumer and capital goods (such as tools, machines and equipment) made up 60% of imports but only 28% of exports.

Beneficiation, or adding value by turning raw materials into more refined or finished products, has been highlighted by bodies such as the United Nations Conference on Trade and Development as a way to cut reliance on commodities.

Lara Hodes, an economist at the wealth management group Investec, told Africa Check that given South Africa’s rich mineral resources and high unemployment, beneficiation could provide a real boost to the economy.

Ngundu agreed. “South Africa could potentially benefit from exporting fully manufactured goods, rather than the heavy focus on trading in raw materials.”

Achieving this, however, means tackling deep structural constraints, such as the skills gap in the labour market. Expanding vocational training, a sector that faces serious hurdles, is seen as vital to building higher-value industries.

Stellenbosch Business School economist Nthabiseng Moleko told news platform Eyewitness News on 25 August 2025 that Africa had to strengthen its processing and manufacturing capacity to stay competitive.

South African trade officials hinted at more localisation, or replacing imports with locally made goods through policies or incentives, so as to strengthen domestic industries and create jobs.

The department of trade, industry and competition argues this approach can shield the economy from external shocks, boost employment and encourage local consumers to buy South African.

But experts said it was not a strategy without risk. “Localisation can work if it is implemented without tariffs and quotas. It also works best when there is rapid growth and we currently don’t have that,” Jannie Rossouw, professor of economics at the Wits Business School, told Africa Check.

He added that localisation should be driven by market forces rather than government intervention, otherwise it “would actually violate WTO policies and impede the full implementation of the AfCFTA”.

The significance is that if South Africa uses localisation in ways that explicitly block imports, it could trigger WTO disputes or weaken the African free trade area, which is meant to cut barriers and promote fair competition.

India, where steep 50% tariffs from the US kicked in on 27 August, offers a cautionary comparison. More than half (55%) of goods shipped to the US, India’s biggest export market, are affected.

But analysts say that because India’s economy is largely driven by domestic demand, the damage may be cushioned. In 2024, exports to the US were $87.4-billion, but this made up only 2% of India’s total gross domestic product.

“Certain industries could benefit from some degree of localisation. However, we don’t have expertise in a number of industries, and the size of the local market is not sufficient in many cases,” Hodes said.

South Africa also aims to tap into domestic buying power – from consumers, companies and government – to boost sales of local products.

This includes using initiatives like Proudly South African, the official “buy local” campaign launched in 2001, to work with corporates and retailers in order to grow local sales while helping producers break into export markets.

Prof Lawrence Edwards, director of the Policy Research in International Services and Manufacturing research unit at the University of Cape Town, directed us to a July 2023 podcast where he touched on domestic markets.

He said the real growth was in external opportunities accessible through exports. “We’re just a small country, so if we just focus on selling to our domestic market, we are forgetting 99% of the world as a global market we can sell to,” he said.

Hodes echoed the point, noting that South Africa lacked sufficient local demand. “In order to increase local demand, we need to improve the ease of doing business in the country by reducing red-tape, and we need stable infrastructure and lower operating costs.”

Muller said that some production by exporters would be redirected to the domestic market. “Companies might convert their products into something that suits the local market. These could be sold to overseas markets as well”, he said.

He added: “But there's no way to know if that's practically feasible without analysing individual cases in the various industries. So it's difficult to say whether this strategy will work or not.”