India-SACU Trade Talks: New Delhi Eyes Southern Africa Markets And Critical Mineral Security
India’s proposed SACU trade pact could expand market access, diversify supply chains and strengthen access to Southern Africa’s critical minerals.
A woman uses a pick axe to dig in search for what she believes to be diamonds after the discovery of unidentified stones at KwaHlathi village near Ladysmith, South Africa, on June 15, 2021. (AFP)
New Delhi: India’s decision to formally launch negotiations for a preferential trade agreement (PTA) with the five-member Southern African Customs Union (SACU) — South Africa, Namibia, Botswana, Lesotho and Eswatini — marks an important shift in New Delhi’s economic engagement with Southern Africa, taking it beyond conventional trade towards supply-chain resilience, industrial partnerships and access to strategic re
While the immediate objective is to secure preferential market access for Indian exports, the larger significance of the negotiations lies in the potential to build a deeper India-Southern Africa economic corridor at a time when critical minerals and resilient supply chains are becoming increasingly important to national security and economic competitiveness.
According to a statement issued by the Ministry of Commerce and Industry on Wednesday, India and SACU signed the terms of reference (ToR) for negotiations towards a PTA.
“The signing marks an important step towards strengthening trade and economic engagement between India and the SACU member states,” the statement reads.
Speaking on the occasion, Commerce and Industry Minister Piyush Goyal called for a balanced, fair and equitable trade agreement between India and SACU, emphasising that the partnership can help diversify markets and create opportunities for both sides to prosper. He said that India can play an important role in supplying affordable medicines and supporting the development of new talent in the IT sector in the SACU region.
Goyal added that India can also help integrate SACU countries into global supply chains in areas where their businesses are competitive and where skills and talent can be developed or are already available.
According to Commerce and Industry Secretary Rajesh Agarwal, the PTA is envisaged to cover eight important chapters, including trade in goods and market access for goods; rules of origin and origin procedures; customs procedures and trade facilitation; trade remedies, including a bilateral safeguard mechanism; sanitary and phytosanitary measures; technical barriers to trade; dispute settlement; and legal and horizontal provisions.
The India-SACU PTA is not a completely new idea. India and SACU began negotiations in 2002 and held five rounds before the process stalled in 2010. The two sides subsequently agreed in 2020 to resume engagement.
According to a report in Business Insider Africa, negotiations are expected to start from September and conclude within a year.
“South Africa is the largest economy in the group, but the smaller members have distinct export interests,” the report stated. “Botswana and Namibia rely heavily on minerals, Lesotho and Eswatini depend on a narrower group of manufactured and agricultural exports, while South Africa has a broader industrial base.”
The ToR provide the negotiating architecture for an agreement that could give Indian companies greater access to a reian market further to SACU economies. South Africa’s reserves of platinum-group metals and manganese, Namibia’s uranium and emerging mineral potential, and Botswana’s mineral wealth give the proposed pact a dimension that goes well beyond tariffs
If New Delhi can combine preferential trade with investment, technology transfer, mineral offtake arrangements and local processing, the PTA could become an important instrument in India’s strategy to secure critical mineral supply chains while simultaneously deepening its economic footprint in Africa.
According to the Commerce and Industry Ministry, this is the first ToR signed by India with an African region. This makes the development significant for India’s Africa policy. Rather than negotiating separately with individual African countries, New Delhi is seeking to build an economic relationship with a customs union that operates with a common external tariff and facilitates trade among its members.
SACU is also historically important. Established in 1910, it is regarded as the world’s oldest functioning customs union.
The bloc therefore provides India with an entry point into a highly interconnected Southern African market while also creating opportunities to develop country-specific economic partnerships within a common regional framework.
The immediate commercial logic for the proposed PTA is clear. India’s exports to SACU have substantial room for expansion, particularly in sectors where Indian companies are already internationally competitive.
The architecture of the PTA, as described by Secretary Agarwal, is important because market access is not determined by tariffs alone. Rules of origin can determine whether an Indian product actually qualifies for preferential treatment, customs procedures can determine the cost and speed of moving goods, and technical and sanitary standards can sometimes become as significant a barrier as tariffs.
For India, sectors with considerable potential include automobiles and auto components, pharmaceuticals and medical products, engineering goods and machinery, chemicals, textiles and apparel, agricultural and processed food products, and other manufactured goods.
The PTA could therefore help Indian manufacturers use Southern Africa not merely as an export destination but as a platform for wider African market expansion. That is particularly relevant at a time when India is attempting to diversify export markets amid increasing trade fragmentation and protectionism.
Perhaps the most strategically important element of the India-SACU relationship over the longer term will be critical minerals.
India’s energy transition, electric mobility, renewable-energy expansion, advanced electronics, telecommunications and defence industries will require secure access to a range of minerals whose global production and processing are highly concentrated.
The Indian government has already recognised this vulnerability through the National Critical Mineral Mission, which covers exploration, mining, beneficiation, processing and recycling and seeks to encourage Indian companies to acquire mineral assets overseas. The programme has also set a target of Indian companies acquiring 50 overseas mining assets.
Southern Africa is consequently becoming increasingly important in India’s critical-minerals strategy.
The proposed PTA also fits into India’s broader Africa and Global South strategy.
India has traditionally emphasised development partnership, capacity building, pharmaceuticals, digital public infrastructure, education and training in its engagement with Africa. A trade agreement with SACU could add a stronger commercial and industrial pillar to that relationship.
It also comes at a time when major powers are competing for access to African markets and strategic resence across Africa, while the US, EU, Gulf states, Japan and others are increasingly focused on critical minerals and resilient supply chains
Ruchita Beri, Senior Fellow at the Vivekananda International Foundation think tank and an expert on Africa, described the signing of the ToR as a big step forward in terms of India’s relations with the African countries.
“This is the first time that we are going to sign a preferential trade agreement with any African country or region,” Beri told ETV Bharat. “So, this signifies an important landmark in India’s relations with the African countries, particularly those with the Southern African Customs Union.”
She explained that India initially wanted to sign such an PTA with South Africa but Pretoria said that such an agreement should be signed with SACU as a bloc.
“So, this will definitely improve our trade relations with these countries, given the fact that a large number of these countries are rich in critical minerals, which are definitely the need of the hour for countries like India,” Beri said. “This will definitely help in improving our energy security in terms of getting those critical minerals for our energy resilience in future. And the fact that our trade with these countries would also improve. These are countries from the Global South.”
Beri pointed out to the fact that India has been signing free trade agreements in recent times with countries of the developed north.
“This is the first region after a long time that we’ve signed a ToR within the Global South,” she said. “This would also help in regenerating India’s relations with the Global South.”
The ToR signed should therefore be seen as a framework for a much broader strategic economic relationship.
The immediate objective is preferential market access. The medium-term objective should be greater trade and investment. But the long-term prize could be the creation of interconnected India-Southern Africa value chains in manufacturing, pharmaceuticals, automobiles, engineering, agriculture, digital technology and critical minerals.
