Will Mozambique Become Southern Africa's Equivalent Of China's Vietnam

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With the AGOA Trade deal with the US looking unlikely to be renewed in September those countries that benefitted from duty free access to the US markets they are in for a rough ride.

South Africa's second biggest export partner was the US and this is a proper FAFO moment. You cannot sit on the fence and have an anti American stance yet still expect freebies.

From a personal view point I think this is actually positive news for Africa in general as it is about time they got off their back sides and made some economic changes within their countries and not always looking for hand outs. This has been too easy for Africa up until now and now they need to earn their bread by stepping up and doing something to fix their ways.

What stood out on this list for me from a South African view point and knowing how people think is Mozambique is basically half the tariff SA has 31% vs 16%. Remember China had those trade tariffs imposed a few years ago and China pivoted by shipping their goods out of Vietnam which caused the container shortages world wide. I can see something similar happening with Mozambique as Mozambique's Port in Maputo is the same distance from Johannesburg as the Port of Durban being 550 Kilometers.

All one would have to do to side step to gain a 15% saving would be to register a company in Mozambique and truck the goods made in SA via Maputo to the US. Both countries are corrupt as hell so this should be an easy quick fix. This is what I would do and was one of my first thoughts so I guess others are already contemplating this move.

What will the car manufacturers do in SA is the bigger question as they export roughly $2 billion annually in cars and car parts to the US market? Most of the manufacturers are EU companies with plants in SA and the difference between their tariffs (20%) and those in SA for the auto industry is 25% so a gap of 5% which is worth $100 million they are now tossing away. This may be a saving grace for SA as any higher and they may have been forced to move elsewhere. I think next year January with the introduction of CBAM taxes will be the telling point whether they stay or go.

Land locked Lesotho is screwed and any manufacturer who set up a plant here to dodge SA business taxes, cheaper import duties and cheaper labor is going to have to rethink their strategy moving forward. 50% makes you uncompetitive right from the outset no matter how much you might be saving on all the other parts of the business. Again they could use the Maputo loop hole and my guess is Maputo is going to grow and will ultimately benefit from all of this.

Apparently Kenya is rather happy with only a 10% tariff and expect their textile clothing businesses to boom as they will be more competitive than their competition in the Far East. I know a textile factory owner in Kenya and he must be rubbing his hands with the opportunity he now has. You would expect foreign investment to pour into this country as 10% is nothing.

Posted Using INLEO