India and the five-nation Southern African Customs Union is set to take a key step towards a proposed preferential trade agreement, even as South Africa weighs a sharp increase in automobile import duties. The pact could open wider market access for Indian exporters while securing critical mineral supplies for domestic manufacturing.
India is moving to revive long-pending trade negotiations with the five-member Southern African Customs Union (Sacu), seeking preferential market access for key export sectors including automobiles, auto components, pharmaceuticals, machinery, electrical equipment, chemicals and textiles.
The two sides are expected to sign the Terms of Reference (ToR) for negotiations on the proposed India-SACU Preferential Trade Agreement (PTA) on August 12 in New Delhi, marking a significant step towards restarting talks that began nearly two decades ago.
The proposed agreement assumes added significance as South Africa—the largest economy in the bloc—is considering raising import duties on automobiles from India and China to 50 per cent from the existing 25 per cent. Such a move could increase costs for Indian vehicle exporters and potentially undermine their competitiveness in one of Africa’s largest automotive markets.
Why the India-SACU trade pact matters
SACU comprises South Africa, Botswana, Namibia, Lesotho and Eswatini. South Africa accounts for around 91 per cent of the bloc’s total economic output and is India’s largest trading partner within the grouping.
For India, the proposed PTA is not simply about increasing exports. New Delhi is also looking to secure access to strategically important raw materials from the resource-rich southern African region.
India wants greater and more stable supplies of diamonds, platinum group metals, manganese, vanadium and copper from SACU countries. These minerals are increasingly important for manufacturing, infrastructure and India’s broader green-transition ambitions.
More from BusinessThe negotiations therefore have a dual objective: expand Indian exports while strengthening India’s access to critical industrial inputs.
Automobiles at the centre of the tariff battle
Automobiles are among India’s biggest exports to the SACU region, making the proposed South African tariff hike particularly significant.
India exported around $1.7 billion worth of automobiles to SACU in 2025-26. Overall, Indian exports to the bloc stood at $7.5 billion during the year. A rise in automobile tariffs from 25 per cent to 50 per cent could substantially increase the landed cost of Indian vehicles and make them less competitive against locally produced or alternatively sourced vehicles.
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This is why tariff concessions for automobiles and auto components are expected to be an important part of India’s negotiating position.
The proposed PTA could provide Indian exporters with a mechanism to seek lower duties on a selected list of products, potentially cushioning the impact of higher tariffs and improving long-term market access.
Pharma, engineering and manufacturing also in focus
Automobiles are not the only sector where India is seeking greater access.
Pharmaceuticals are another major area of interest. India exported around $763 million worth of pharmaceutical products to SACU in 2025-26. New Delhi is also seeking concessions for machinery, electrical equipment, organic chemicals, textiles and engineering products.
The push reflects India’s broader strategy of expanding its manufacturing and value-added exports into African markets, rather than relying predominantly on commodity or petroleum-product trade.
India’s exports to SACU currently include petroleum products worth about $2.1 billion, making them the largest export category. Automobiles, pharmaceuticals and engineering goods form other important components of the export basket.
India-SACU trade remains tilted towards imports
Despite India’s push for greater exports, bilateral trade with SACU currently shows a sizeable trade deficit for India. In FY26, India exported goods worth approximately $7.5 billion to the bloc, while imports stood at $9.2 billion.
South Africa dominates this trade relationship. India exported about $7 billion worth of goods to South Africa and imported around $8.5 billion.
The composition of imports highlights the strategic importance of the region for India’s resource requirements. India imported around $3 billion worth of gold, $2.8 billion of coal and coke, $887 million of precious and semi-precious stones, $638 million of minerals and ores, and $376 million of copper from SACU.
This makes the proposed trade pact potentially important on both sides of the trade equation: Indian businesses could gain better access to African markets, while Indian manufacturers could benefit from more predictable supplies of key raw materials.
Why critical minerals have become a strategic priority
Critical minerals are increasingly central to India’s industrial policy, particularly as the country expands clean-energy technologies, advanced manufacturing and electric mobility.
The SACU region offers access to several minerals that are strategically important for these sectors. India’s interest in platinum group metals, manganese, vanadium and copper, alongside diamonds and other mineral resources, could therefore become a major pillar of the negotiations.
The discussions between Commerce and Industry Minister Piyush Goyal and South Africa’s Trade, Industry and Competition Minister Parks Tau have already highlighted cooperation in critical minerals, pharmaceuticals and manufacturing. The focus suggests that the proposed PTA is being viewed as more than a conventional tariff agreement. It could become part of a broader economic partnership linking India’s manufacturing ambitions with Africa’s mineral resources.
A trade pact nearly two decades in the making
The India-SACU PTA negotiations have a long history. Talks began in 2008, but progress stalled amid disagreements over sensitive products and market access. The renewed push comes against a dramatically different global trade backdrop. Supply-chain disruptions, geopolitical tensions and the race to secure critical minerals have encouraged countries to diversify trading partners and establish more resilient supply chains.
For India, deeper economic engagement with southern Africa could help diversify sources of critical raw materials while opening additional markets for Indian manufactured goods.
What the terms of reference mean
The signing of the ToR would establish the broad framework for the negotiations, including their scope, objectives, procedures and boundaries.
Unlike a comprehensive free trade agreement, a preferential trade agreement is generally narrower. It typically provides lower tariffs on a specified list of products rather than eliminating duties across most traded goods. That makes the proposed India-SACU agreement potentially more targeted.
India can seek tariff concessions in sectors where its exporters have strong potential while negotiating safeguards around particularly sensitive products. For New Delhi, the challenge will be to balance the demand for greater market access with the need to secure affordable and reliable supplies of minerals and other commodities.
The road ahead
The August 12 signing of the ToR would represent an important political and procedural milestone, but it would not mean that the trade agreement is immediately concluded.
Actual negotiations will determine which products receive preferential treatment, the extent of tariff reductions and the timelines for implementation.
The automobile issue could make those negotiations particularly sensitive. South Africa’s proposal to increase automobile duties to 50 per cent means Indian exporters face a potentially higher tariff barrier even as both sides attempt to deepen trade ties.
The success of the proposed PTA will therefore depend on whether India and SACU can reconcile market-access demands with domestic sensitivities.
For India, the stakes extend beyond the $7.5 billion export relationship. The agreement could become a strategic bridge between Indian manufacturing and African markets on one side and India’s growing demand for critical minerals on the other. If negotiations move forward smoothly, the India-SACU PTA could eventually help expand India’s presence in southern Africa while giving New Delhi greater security over critical industrial inputs. But the automobile tariff question—and the broader debate over market access—will remain a key test of how quickly the two sides can convert renewed political momentum into a meaningful trade agreement.
