Home » Sri Lanka and South Africa to recalibrate its trade and investment strategy

Sri Lanka and South Africa to recalibrate its trade and investment strategy


South African President Cyril Ramaphosa arrived in Sri Lanka for a short visit yesterday (16) after attending the G20 Summit. He met with President Ranil Wickremesinghe at the Katunayake Air Force base for discussions on bilateral issues.

The discussions were focused on further strengthening the bilateral relationship aiming at economic cooperation and investment, expanding tourism in Sri Lanka, and receiving South African assistance, guidance and counseling in setting up a credible truth-seeking mechanism to achieve a lasting reconciliation amongst communities.

The two state leaders exchanged mementoes. Minister of Foreign Affairs Ali Sabry, President’s Secretary Mr. Saman Ekanayake, Senior Advisor to the President on National Security and Chief of Staff to the President Sagala Ratnayake and senior officials from both countries were present on the occasion

South Africa has been able to expand its trade footprint in Sri Lanka and that overall trade stood hugely in favour of that country

South Africa is Sri Lanka’s largest source of imports and the second-largest export destination in the African region. Imports from South Africa largely consist of coal and Sri Lankan exports comprise of bulk tea, apparel, and rubber products.

The two leaders underscored the need to in Sri Lanka and the desire for a more balanced trade relationship between the two countries.

“In terms of investment, the international retail brand, SPAR, through a joint venture between SPAR Group Ltd South Africa and Ceylon Biscuits Limited has opened four outlets in Sri Lanka with plans to expand up to 20 retail stores.

There was high potential of boosting fish exports to South Africa from Sri Lanka , value addition and knowledge sharing in the gem and jewellery industry, opportunities in the renewable energy sector, and sharing expertise in food preservation in the canning industry.

Economic ties between the two countries have been based on apparel, tourism and maritime connectivity.

However, bilateral trade between the countries leans in favour of South Africa.This trade imbalance can be mainly attributed to the relatively high tariffs imposed on Sri Lankan goods entering South Africa.

In order to overcome this negative trade balance the government is exploring new avenues for favourable access to the South African market and to promote Sri Lankan businesses in the Southern African nations.

Bilateral trade between the two nations could however be improved if South Africa could adopt lower tariffs and increase incentives for its imports from Sri Lanka.

Sri Lanka and South Africa are member states of regional intergovernmental unions namely the South Asian Association for Regional Cooperation (SAARC) and the Southern African Development Community (SADC) respectively. Of late there have been many deliberations on the possible cooperation between the common markets of SAARC and SADC for enhanced trading opportunities between South Asia and Africa. There are however, implications that influence the collaboration of these markets.

For instance, the average tariff rate imposed on goods from SAARC nations entering the South African market is higher than the corresponding rate imposed for non SAARC nations. In contrast however, the trend in South Asia has been towards lower taxes when engaging in international trade. Furthermore, intra-regional trade among SAARC nations is at a low of 5% which is predicted to climb to 10% in the next 10 years. In order to overcome such economic disadvantages, SAARC member countries such as Sri Lanka have entered into the South Asian Free Trade Area (SAFTA) agreement in 2004.

The structural question of binding the two economically important common markets of South Asia and Africa is central for understanding the future prospects of bilateral relations between Sri Lanka and South Africa. On the one hand, South Africa has been one of the main engines of growth among the 15 Southern African states In the SADC economic area.

On the other hand, Sri Lanka’s geostrategic position in the Indian Ocean connecting east and west on the new Maritime Silk Road and its possibility of accessing South Asia’s 1.5 billion consumer market offers the opportunity for the country to be a logistic hub for the two large common markets.

In addition, liberalised markets like Sri Lanka make it easier for big nations like South Africa to compete with globally competitive markets. From an economic stand point the ties between South Africa and Sri Lanka can be taken to whole new level if the two nations can succeed in binding SAARC and SADC.

Nevertheless, it is still early to determine the tendencies of these two economically viable common markets in Africa and Asia as little has been done to tap into these economies. To begin with South Africa could consider lowering its tariffs for SAARC nations to initiate mutually beneficial cooperation between SAARC and SADC.

The next great shift in the Island nation’s relations with South Africa is within sight. It is the task of the foreign policy makers of both nations to deal with this special phase in accessing SAARC and SADC consumer markets utilising bilateral or multilateral channels. Such opportunities would have positive effects in advancing initiatives to build beneficial ties to achieve full potentials in economic growth for Sri Lanka and South Africa


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