13. 03. 2025
AUTHOR: Sara Benedetti Michelangeli
Current geopolitics are confrontational. Conflicts spread in the EU’s Eastern and Southern neighbourhoods, inflamed tones inform international affairs, and trade disputes remind us of the profound geoeconomic challenges to tackle. Therefore, strengthening diplomatic and economic ties with countries with mutual interests, such as South Africa, has become a priority. Today’s EU-South Africa Summit is the occasion to cooperate on an equal footing with a relevant G20 ally, Africa’s largest economy and a leading voice in the Global South.
By signing its first Clean Trade and Investment Partnership (CTIPs) with South Africa, the EU is committed to strengthening trade, critical raw materials, and clean partnerships while attracting new investments under President Von der Leyen’s announced Global Gateway Investment Package.
Why forming a CTIP with South Africa?
A CTIP has the potential to serve as a cooperation framework for clean industrial collaboration on critical raw materials, net-zero technologies, and clean energy investments. This could enhance competitiveness, support resilient supply chains, and contribute to the just transition in South Africa. Potential for cooperation with a key G20 country is substantial: South Africa relies for 47% on EU foreign direct investments, and the Southern African economic partnership agreement of 2016 made the EU either entirely or partially eliminate customs duties on 98.7% of imports from South Africa. Therefore, conditions for further trade cooperation are encouraging.
A CTIP can be faster than a full-fledged Foreign Trade Agreement, and can be tailored to reciprocal interests of the parties, which are here complementary in many ways: South Africa is the EU’s largest trading partner in Sub-Saharan Africa, with €49 billion worth of trade in goods in 2023, and the countries are signatories to the Just Energy Transition-Partnership. Therefore, a CTIP can be a step forward to steer bilateral cooperation.
For South Africa, it could be helpful to develop its strong industrial base and its willingness to play as a political and diplomatic powerhouse in the Global South and within Brazil, Russia, India, China, and South Africa (BRICS). This is relevant also in light of their G20 Presidency under the banner of Solidarity, Equality, and Sustainability. The EU seeks stronger alliances in the Global South, and South Africa could be the gateway to EU politics in the Sub-Saharan region. Moreover, South Africa is home to mining and manufacturing capacity and tries to secure investments and opportunities for further downstream processing and fostering clean tech industries like battery manufacturing. The EU could, therefore, access these markets by signing a CTIP.
What structure would be fit for purpose?
An ideal CTIP balances trade, industry and socioeconomics considerations other than incorporating lessons learnt from the past and complementary to existing initiatives. The EU and South Africa can be successful if perspectives converge on:
- Scaling up of finance: Europe can support South Africa in increasing the effectiveness of vertical climate funds (centralised structures giving funds for climate change) by enhancing access to finance. Moreover, steering the Global Green Bonds Initiative from the European Investment Bank could help develop the South African Green Bond market, building on the strategic partnership with the African Development Bank to promote green bond markets in Africa.
- Regulatory cooperation: The EU and South Africa can jointly shape industrial standards and common policies addressing concerns over EU policies, including the Carbon Border Adjustment Mechanism (CBAM). They can also jointly assess companies’ reciprocal exposure to EU or South African market decisions and act accordingly to limit the negative impacts.
- Investments and supply chain integration: They can identify key industrial value chains to develop between the 2 economies, for example in the fields of manufacturing of batteries, green hydrogen projects and process and refining of critical minerals, and promote investments in the same strategic sectors. This can generate added-value production processes, green growth and jobs.
By finding synergies and mutually beneficial positioning in the abovementioned areas of collaboration, an EU-South Africa CTIP can enhance competitiveness and build integrated supply chains while jointly advancing an energy transition agenda attentive to socio-economic needs and quests.
